issue-1996-09-06•Federal Register final rules — 1996-09-06
Federal Register final rules — 1996-09-06
issue-1996-09-06Federal Register final rules — 1996-09-06Regulation
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FR Doc. 96-23081 Office of the Assistant Secretary for Community Planning and Development; Loan Guarantee Recovery Fund
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47404-47408]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-23081]
[[Page 47403]]
_______________________________________________________________________
Part VIII
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Part 573
Loan Guarantee Recovery Fund; Final Rule
Federal Register / Vol. 61, No. 174 / Friday, September 6, 1996 /
Rules and Regulations
[[Page 47404]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 573
[Docket No. FR-4108-F-01]
RIN 2506-AB87
Office of the Assistant Secretary for Community Planning and
Development; Loan Guarantee Recovery Fund
AGENCY: Office of the Assistant Secretary for Community Planning and
Development, HUD.
ACTION: Final rule.
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SUMMARY: The Church Arson Prevention Act of 1996 (the Act) authorizes
certain Federal departments to implement procedures to address the
destructive consequences of acts of arson and terrorism carried out
against places of worship. Section 4 of the Act directs HUD to publish
regulations governing the provision of loan guarantees to financial
institutions that make loans to certain nonprofit organizations
adversely affected by such acts. This final rule implements section 4
of the Act. Specifically, this rule establishes the procedures, terms,
and conditions by which HUD will guarantee loans to assist nonprofit
organizations in financing activities designed to rebuild and
rehabilitate structures, to replace and restore personal property, and
to finance other eligible activities as provided for in this final
rule. In addition, HUD anticipates forming a cooperative venture and
participating with other entities in the pooling of funds so as to
better achieve the objectives of the Act and this final rule.
EFFECTIVE DATE: These regulations take effect on October 7, 1996,
unless prior to this date HUD publishes a notice in the Federal
Register announcing an earlier effective date. Affected parties do not
have to comply with the information collection requirements in
Secs. 573.6, 573.7, 573.8, and 573.11 until HUD publishes in the
Federal Register the control numbers assigned by the Office of
Management and Budget (OMB) to these information collection
requirements. Publication of the control numbers notifies the public
that OMB has approved these information requirements under the
Paperwork Reduction Act of 1995.
FOR FURTHER INFORMATION CONTACT: Tony Johnston, Deputy Director,
Financial Management Division, Office of Block Grant Assistance, Room
7180, Department of Housing and Urban Development, 451 Seventh Street,
SW., Washington, DC 20410, telephone number (202) 708-1871. Hearing- or
speech-impaired individuals may access this number via TTY by calling
the Federal Information Relay Service at 1-800-877-8399. FAX inquiries
may be sent to Mr. Johnston at (202) 708-1798. (Other than the ``800''
number, the telephone numbers are not toll-free.)
SUPPLEMENTARY INFORMATION:
I. Background
On July 3, 1996, President Clinton signed into law the ``Church
Arson Prevention Act of 1996'' (Pub. L. 104-155) (the Act). In passing
this legislation, the Congress made the following findings:
The Congress finds the following:
(1) The incidence of arson or other destruction of vandalism of
places of religious worship, and the incidence of violent
interference with an individual's lawful exercise or attempted
exercise of the right of religious freedom at a place of religious
worship pose a serious national problem.
(2) The incidence of arson of places of religious worship has
recently increased, especially in the context of places of religious
worship that serve predominantly African-American congregations.
(3) Changes in Federal law are necessary to deal properly with
this problem.
(4) Although local jurisdictions have attempted to respond to
the challenges posed by such acts of destruction or damage to
religious property, the problem is sufficiently serious, widespread,
and interstate in scope to warrant Federal intervention to assist
State and local jurisdictions.
(5) Congress has authority, pursuant to the Commerce Clause of
the Constitution, to make acts of destruction or damage to religious
property a violation of Federal law.
(6) Congress has authority, pursuant to section 2 of the 13th
amendment to the Constitution, to make actions of private citizens
motivated by race, color, or ethnicity that interfere with the
ability of citizens to hold or use religious property without fear
of attack, violations of Federal criminal law.
The Act provides Federal, State and local law-enforcement agencies
with the needed additional tools to address violent crimes against
places of worship, strengthens the penalties for these crimes, and
authorizes Federal assistance for rebuilding efforts. Section 4 of the
Act, entitled ``Loan Guarantee Recovery Fund,'' authorizes the
Secretary of HUD to guarantee loans made by financial institutions to
assist certain nonprofit organizations (organizations described in
section 501(c)(3) of the Internal Revenue Code of 1986) that have been
damaged as a result of acts of arson or terrorism. The Act provides
that loans shall be guaranteed in accordance with procedures that the
Secretary shall establish by regulation.
This final rule implements section 4 of the Act by establishing a
new 24 CFR part 573. Part 573 describes the procedures, terms, and
conditions by which HUD will guarantee loans to assist eligible
nonprofit organizations. Under Sec. 573.3 of this final rule, eligible
borrowers may use guaranteed loan funds for a wide range of activities,
including: (1) the acquisition of real or personal property; (2) the
rehabilitation of real property; (3) the construction, reconstruction
or replacement of real property improvement; (4) clearance, demolition,
and removal of structures, fixtures, and improvements; (5) site
preparation; (6) architectural, engineering, and security expenses; and
(7) refinancing existing indebtedness. The term of a loan guaranteed by
HUD under new 24 CFR part 573 may not exceed 20 years.
II. Justification for Final Rulemaking
HUD generally publishes a rule for public comment before issuing a
rule for effect, in accordance with its own regulations on rulemaking
in 24 CFR part 10. Part 10 provides for exceptions to the general rule
if the agency finds good cause to omit advance notice and public
participation. The good cause requirement is satisfied when prior
public procedure is ``impracticable, unnecessary, or contrary to the
public interest'' (24 CFR 10.1). HUD finds that good cause exists to
publish this rule for effect without first soliciting public comment.
The purpose of this rule is to implement the authority provided by
the Congress for HUD to guarantee loans made by financial institutions
to certain nonprofit organizations that suffer damage to their property
as a result of acts of arson or terrorism. The Department of Justice
has identified more than 40 eligible organizations that have had
property damaged or destroyed through acts of arson or terrorism within
the last few months. These organizations are in immediate need of
assistance to rebuild and restore their properties. Financial
institutions are willing to assist these organizations in their
rebuilding efforts, provided a certain level of assurance exists with
respect to the repayment of the loans to be made. The loan guarantee
recovery fund established by this final rule provides the necessary
assurance. Accordingly, HUD believes that it would be contrary to the
public interest to delay the effectiveness of the rule to solicit
comment.
Before issuance of this rule, HUD held meetings with
representatives of 501(c)(3) organizations that have been damaged by
arson or terrorism, as well
[[Page 47405]]
as with financial institutions, State and local organizations, and
other public agencies. This rule incorporates many of the comments and
suggestions offered by these organizations and entities. Although this
rule is being issued in final form, additional public comments on this
regulation are welcome on a continuing basis. These additional comments
will be beneficial to any future loan guarantee authority provided to
HUD. Interested persons are invited to submit comments regarding the
final rule to the Office of the General Counsel, Rules Docket Clerk,
Room 10276, Department of Housing and Urban Development, 451 Seventh
Street, SW, Washington, DC 20410-0500. Communications should refer to
the above docket number and title. Facsimile (FAX) comments are not
acceptable. A copy of each communication submitted will be available
for public inspection and copying during regular business hours (7:30
a.m. to 5:30 p.m. Eastern Time) at the above address.
III. Findings and Certifications.
Paperwork Reduction Act Statement. The information collection
requirements contained in Secs. 573.6, 573.7, 573.8, and 573.11 have
been submitted to the Office of Management and Budget (OMB) for
emergency review and approval under the Paperwork Reduction Act of 1995
(44 U.S.C. 3501-3520). An agency may not conduct or sponsor, and a
person is not required to respond to, a collection of information
unless the collection displays a valid control number. The OMB control
number, when assigned, will be announced by separate notice in the
Federal Register.
Executive Order 12866, Regulatory Planning and Review. This final
rule was reviewed by the Office of Management and Budget (OMB) under
Executive Order 12866, Regulatory Planning and Review. OMB determined
that this rule is a ``significant regulatory action,'' as defined in
section 3(f) of the Order (although not economically significant under
section (3)(f)(1) of the Order). Any changes made to the final rule
subsequent to its submission to OMB are clearly identified in the
docket file, which is available for public inspection in the office of
the Department's Rules Docket Clerk, Room 10276, 451 Seventh Street SW,
Washington Dc, 20410.
Unfunded Mandates Reform Act. The Secretary has reviewed this rule
before publication and by approving it certified, in accordance with
the Unfunded Mandates Reform Act of 199 (2 U.S.C. 1532), that this rule
does not impose a Federal mandate that will 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.
Regulatory Flexibility Act. The Secretary, in accordance with the
Regulatory Flexibility Act (5 U.S.C. 605(b)), has reviewed and approved
this final rule, and in so doing certifies that this final rule will
not have a significant economic impact on a substantial number of small
entities. The purpose of this rule is to assist certain nonprofit
organizations that experience damage to their real and personal
property as a result of acts of arson or terrorism. All qualified
financial institution, are eligible to apply for loan guarantees under
this rule.
Environmental Impact. A Finding of No Significant Impact with
respect to the environment was made in accordance with HUD's
regulations at 24 CFR part 50, which implement section 102(2)(C) of the
National Environmental Policy Act of 1969. The Finding of No
Significant Impact is available for public inspection between 7:30 a.m.
and 5:30 p.m. weekdays in the Office of General Counsel, the Rules
Docket Clerk, Room 10276, 451 Seventh Street, SW, Washington, DC 20410.
Executive Order 12612, Federalism. The General Counsel, as the
Designated Official under section 6(a) of Executive Order 12612,
Federalism, has determined that this rule will not have substantial
direct effects on States or their political subdivisions, or the
relationship between the Federal Government and the States, or on the
distribution of power and responsibilities among the various levels of
Government. No programmatic or policy changes will result from this
document's promulgation that would affect the relationship between the
Federal Government and State and local governments.
Executive Order 12606, The Family. The General Counsel, as the
Designated Official under section 6(a) of Executive Order 12606, The
Family, has determined that this rule will not have potential for
significant impact on family formation, maintenance, or general well-
being, and thus is not subject to review under the Order. No
significant change in existing HUD policies or programs, as those
policies relate to the family, will result from promulgation of this
final rule.
List of Subjects in 24 CFR Part 573
Loan programs--housing and community development, Nonprofit
organizations, Reporting and recordkeeping requirements.
Accordingly, title 24 of the Code of Federal Regulations is amended
as follows:
1. A new part 573 is added to read as follows:
PART 573--LOAN GUARANTEE RECOVERY FUND
Sec.
573.1 Authority and purpose.
573.2 Definitions.
573.3 Eligible activities.
573.4 Loan term.
573.5 Underwriting standards and availability of loan guarantee
assistance.
573.6 Submission requirements.
573.7 Loan guarantee agreement.
573.8 Environmental procedures and standards.
573.9 Other requirements.
573.10 Fees for guaranteed loans.
573.11 Record access and recordkeeping.
Authority: Pub. L. 104-155, 110 Stat. 1392, 18 U.S.C. 241 note;
42 U.S.C. 3535(d).
Sec. 573.1 Authority and purpose.
Section 4 of the Church Arson Prevention Act of 1996 (Pub. L. 104-
155, approved July 3, 1996) authorizes HUD to guarantee loans made by
financial institutions to certain nonprofit organizations to finance
activities designed to remedy the damage and destruction to real and
personal property caused by acts of arson or terrorism. This part
establishes the general procedures and requirements that apply to HUD's
guarantee of these loans.
Sec. 573.2 Definitions.
The following definitions are only applicable to loan guarantees
under this part, and are not criminal definitions.
Act means ``The Church Arson Prevention Act of 1996'' (Pub. L. 104-
155, approved July 3, 1996).
Arson means a fire or explosion causing damage to (or destruction
of) real or personal property that a Qualified Certification Official
determines, or reasonably believes, to be deliberately set.
Borrower means an organization described in section 501(c)(3) of
the Internal Revenue Code of 1986, as amended, whose property has been
damaged or destroyed as a result of an act of arson or terrorism and
that incurs a debt obligation to a financial institution for the
purpose of carrying out activities eligible under his part.
Financial Institution means a lender which may be a bank, trust
company, savings and loan association, credit union, mortgage company,
or other issuer regulated by the Federal Deposit Insurance Corporation,
the Office of Thrift Supervision, the Credit Union Administration, or
the U.S. Comptroller
[[Page 47406]]
of the Currency. A Financial Institution may also be a Pension Fund.
Guarantee means an obligation of the United States Government
guaranteeing payment of the outstanding principal loan amount, in whole
or in part, plus interest thereon, on a debt obligation of the Borrower
to a Financial Institution upon failure of the Borrower to repay the
debt.
Guaranteed Loan Funds means funds received by the borrower from the
Financial Institution to finance eligible activities under this part,
the repayment of which is guaranteed by HUD.
Loan Guarantee Agreement means an agreement between a Financial
Institution and the Secretary detailing the rights, responsibilities,
procedures, terms, and conditions under which a loan provided by a
Financial Institution to a Borrower may be guaranteed under section 4
of the Act.
Qualified Certification Official (QCO). (1) For the purpose of
certifying an act of arson. A State or local official authorized to
investigate possible acts of arson. For the purposes of this
definition, such an official is authorized to execute an Official
Incident Report or its equivalent and may be an official or employee of
such agencies as the local fire department, the local police
department, or the State Fire Marshall Office or its equivalent. The
term ``Qualified Certification Official'' also includes HUD, which will
consult with the Bureau of Alcohol, Tobacco, and Firearms of the
Department of the Treasury in making its determinations.
(2) For the purpose of certifying an act of terrorism. The
Secretary or his designee, in consultation with the Federal Bureau of
Investigation, shall determine whether an act of violence is a
terrorist act or is reasonably believed to be a terrorist act.
Section 4 Guaranteed Loan means a HUD guaranteed loan made by a
Financial Institution to a Borrower for the purpose of carrying out
eligible activities to address damage or destruction caused by acts of
arson or terrorism.
Terrorism means an act of violence causing damage to (or
destruction of) real or personal property that the Secretary or his
designee, in consultation with the Federal Bureau of Investigation,
determines to be, or reasonably believes to be, a terrorist act, as
defined by applicable Federal law or guidelines.
Sec. 573.3 Eligible activities.
Guaranteed Loan Funds may be used by a Borrower for the following
activities when it is certified in accordance with Sec. 573.6(e) that
the activity is necessary to address damage caused by an act or acts of
arson or terrorism as certified in accordance with Sec. 573.6(f):
(a) Acquisition of improved or unimproved real property in fee or
under long term lease.
(b) Acquisition and installation of personal property.
(c) Rehabilitation of real property owner, acquired, or leased by
the Borrower.
(d) Construction, reconstruction, or replacement of real property
improvement.
(e) Clearance, demolition, and removal, including movement of
structures to other sites, of buildings, fixtures and improvements on
real property.
(f) Site preparation, including construction, reconstruction, or
installation of site improvements, utilities, or facilities, which is
related to the activities described in paragraphs (a), (c), or (d) of
this section.
(g) Architectural, engineering, and similar services necessary to
develop plans in connection with activities financed under paragraphs
(a), (b), (c), or (d) of this section.
(h) Acquisition, installation and restoration of security systems.
(i) Loans for refinancing existing indebtedness secured by a
property to be constructed, rehabilitated, or reconstructed, if such
financing is determined to be appropriate to achieve the objectives of
the Act and this part.
(j) Other necessary project costs such as insurance, bonding, legal
fees, appraisals, surveys, relocation, closing costs, etc., paid or
incurred by the Borrower in connection with the completion of the above
activities.
Sec. 573.4 Loan term.
The term of the loan to be guaranteed by HUD under this part may
not exceed 20 years.
Sec. 573.5 Underwriting standards and availability of loan guarantee
assistance.
(a) HUD may, in its discretion, accept the underwriting standards
of the Financial Institution making a loan to a Borrower.
(b) HUD will not make the loan guarantee unless it determines that
the guaranteed loan is an acceptable financial risk under HUD's
generally applicable loan underwriting standards based on the
following:
(1) The Borrower's ability to pay debt service; and
(2) The value of the collateral assigned or pledged as security for
the repayment of the loan.
(c) The provision of a loan guarantee to a Financial Institution
and the amount of the guarantee do not depend in any way on the
purpose, function, or identity of the organization to which the
Financial Institution has made, or intends to make, a Section 4
Guaranteed Loan.
(d) HUD may disapprove a request for loan guarantee assistance
based on the availability of funding.
(e) HUD may decline any Financial Institution's participation if
its underwriting criteria are insufficient to make the guarantee an
acceptable financial risk, or if the proposed interest rates or fees
are unacceptable. HUD expects the proposed interest rates to take into
account the value of the Federal guarantee.
(f) HUD may limit the availability of Guaranteed Loan Funds to
geographic areas having the greatest need, as determined by a needs
analysis of the most current available date conducted by HUD.
(g) Other requirements associated with the underwriting standards
and guidelines shall be contained in the Loan Guarantee Agreement.
Sec. 573.6 Submission requirements.
A Financial Institution seeking a Section 4 Guaranteed Loan must
submit to HUD the following documentation:
(a) A statement that the institution is a Financial Institution as
defined at Sec. 573.2.
(b) A statement that the Borrower is eligible as defined at
Sec. 573.2.
(c) A description of each eligible activity for which the loan is
requested.
(d) A statement of other available funds to be used to finance the
eligible activities (e.g., insurance proceeds).
(e) A certification by the Borrower that the activities to be
assisted resulted from an act of arson or terrorism which is the
subject of the certification described in paragraph (f) of this
section.
(f) A certification by a QCO that the damage or destruction to be
remedied by the use of the Guaranteed Loan Funds resulted from an act
of arson or terrorism.
(g) The environmental documentation required by Sec. 573.8.
(h) A narrative of the institution's underwriting standards used in
reviewing the Borrower's loan request.
(i) The interest rate on the loan and fees the lender intends to
use in connection with the loan; and
(j) The percentage of the loan for which a guarantee is requested.
Sec. 573.7 Loan guarantee agreement.
(a) The rights and responsibilities with respect to the guaranteed
loan shall be substantially described in an
[[Page 47407]]
agreement entered into between the Financial Institution, as the
lender, and the Secretary, as the guarantor, which agreement shall
provide that:
(1) The lender has submitted or will submit a request for loan
guarantee assistance that is accompanied by the Borrower's request for
a loan to carry out eligible activities described in Sec. 573.3;
(2) The lender will require the Borrower to execute a promissory
note promising to repay the guaranteed loan in accordance with the
terms thereof;
(3) The lender will require the Borrower to provide collateral
security, to an extent and in a form, acceptable to HUD;
(4) HUD reserves the right to limit loan guarantees to loans
financing the replacement of damaged property with comparable new
property;
(5) The lender will follow certain claim procedures to be specified
by HUD in connection with any defaults, including appropriate
notification of default as required by HUD;
(6) The lender will follow procedures for payment under the
guarantee whereby the lender will be paid (up to the amount of
guarantee) the amount owed to the lender less any amount recovered from
the underlying collateral security for the loan; and
(7) The lender will act as the fiscal agent for the loan, servicing
the guaranteed loan, maintaining loan documents, and receiving the
Borrower's payments of principal and interest. The Borrower and the
lender may be required to execute a fiscal agency agreement.
(b) In addition, the agreement shall contain other requirements,
terms, and conditions required or approved by HUD.
Sec. 573.8 Environmental procedures and standards.
The environmental review requirements at 24 CFR part 50 are
applicable to this part.
(a) Environmental procedures. Before any lender's submission
requesting a loan guarantee for the acquisition, rehabilitation, or
construction of real property can be selected for a loan guarantee, HUD
shall determine whether any environmental thresholds are exceeded in
accordance with 24 CFR part 50, which implements the National
Environmental Policy Act (NEPA) and the related Federal environmental
laws and authorities listed under 24 CFR 50.4. To assist in complying
with environmental requirements, Borrowers are encouraged to select
sites that are free of environmental hazards and are to provide HUD
with environmental data needed to make a determination of compliance.
For successful Borrowers, the costs for preparing the environmental
data are eligible as project costs.
(1) If HUD determines that one or more of the thresholds are
exceeded, HUD shall conduct a compliance review of the issue and, if
appropriate, establish mitigating measures that the applicant shall
carry out for the property.
(2) The lender's submissions under Sec. 573.6 shall provide HUD
with:
(i) Documentation for environmental threshold review; and
(ii) Any previously issued environmental reviews prepared by local,
State, or other Federal agencies for the proposed property.
(3) In providing the above information, the Borrower is encouraged
to contact the local community development agency to obtain any
previously issued environmental reviews for the proposed property as
well as for other relevant information that can be used in the
applicant documentation for the environmental threshold review.
(4) HUD reserves the right to disqualify any request where one or
more environmental thresholds are exceeded if HUD determines that the
compliance review cannot be satisfactorily completed.
(5) If Guaranteed Loan Funds are requested for acquisition,
rehabilitation, or construction, Borrowers and Financial Institutions
are prohibited from committing or expending State, local, or other
funds to undertake property acquisition, rehabilitation or construction
under this part until HUD issues a letter of commitment notifying the
lender of HUD approval of the loan guarantee.
(b) Environmental thresholds. HUD shall determine whether a NEPA
environmental assessment is required. Also, HUD shall determine whether
the proposed property triggers thresholds for the applicable Federal
environmental laws and authorities listed under 24 CFR 50.4 as follows:
(1) For minor rehabilitation of a building and acquisition of any
property, Federal environmental laws and authorities may apply when the
property is:
(i) Located within designated coastal barrier resources;
(ii) Contaminated by toxic chemicals or radioactive materials;
(iii) Located within a floodplain;
(iv) A building for which flood insurance protection is required;
(v) Located within a runway clear zone at a civil airport or within
a clear zone or accident potential zone at a military airfield; or
(vi) Listed on, or eligible for listing on, the National Register
of Historic Places; located within, or adjacent to, an historic
district, or is a property whose area of potential effects includes a
historic district or property.
(2) For major rehabilitation of a building or for new construction
or rebuilding, and environmental assessment under NEPA is required and,
in addition to paragraph (b)(1) (i) through (vi) of this section, other
Federal environmental laws and authorities may apply when the property:
(i) Affects coastal zone management;
(ii) Is located near hazardous industrial operations handling fuels
or chemicals of an explosive or flammable nature;
(iii) Affects a sole source aquifer;
(iv) Affects endangered species;
(v) Is located within a designated wetland; or
(vi) Is located in a high noise area.
(c) Qualified data sources. The environmental threshold information
provided by applicants mut be from qualified data sources. A qualified
data source means any Federal, State, or local agency with expertise or
experience in environmental protection (e.g., the local community
development agency; the local planning agency; the State environmental
protection agency; or the State Historic Preservation Officer) or any
other source qualified to provide reliable information on the
particular property.
(d) Definition. Minor rehabilitation means proposed fixing and
repairs:
(1) Whose estimated cost is less than 75 percent of the estimated
cost of replacement after completion;
(2) That does not involve changes in land use from residential to
nonresidential, or from nonresidential to residential; and
(3) In the case of residential properties, that does not increase
density more than 20 percent.
(e) Project consultants. In achieving compliance with these
procedures, Borrower's architectural and engineering consultants shall
consider these environmental factors and provide information in their
plan narratives as to how their construction plans conform with the
above environmental factors. To facilitate HUD's compliance with party
50, the Borrower is required to submit the consultant's information and
plan narrative discussing the pertinent environmental factors under
this section.
[[Page 47408]]
Sec. 573.9 Other Requirements.
(a) Nondiscrimination and equal opportunity. The nondiscrimination
and equal opportunity requirements described in 24 CFR part 5, subpart
A apply to this part.
(b) 24 CFR part 84. The provisions of 24 CFR part 84 apply to
guaranteed loans under this part.
(c) Lead-Based Paint. Housing assisted under this part is subject
to the lead-based paint requirements described in 24 CFR part 35.
(d) Labor Standards. (1) Davis-Bacon. All laborers and mechanics
employed by contractors or subcontractors in the performance of
construction work financed in whole or in part with Guaranteed Loan
Funds under this part shall be paid wages at rates not less than those
prevailing on similar construction in the locality as determined by the
Secretary of Labor in accordance with the Davis-Bacon Act, as amended
(40 U.S.C. 276a-276a-5). This paragraph shall apply to the
rehabilitation of residential property only if such property contains
not less than 8 units.
(2) Volunteers. The provisions of paragraph (d)(1) of this section
shall not apply to volunteers under the conditions set forth in 24 CFR
part 70. In applying part 70, loan guarantees under this part shall be
treated as a program for which there is a statutory exemption for
volunteers.
(3) Labor standards. Any contract, subcontract, or building loan
agreement executed for a project subject to Davis-Bacon wage rates
under paragraph (d)(1) of this section shall comply with all labor
standards and provisions of 29 CFR parts 1, 3 and 5 that would be
applicable to a loan guarantee program to which Davis-Bacon wage rates
are made applicable by statute.
Sec. 573.10 Fees for guaranteed loans.
(a) No fees will be assessed by HUD for its guaranty of a loan
under this part.
(b) The lender may assess the Borrower loan origination fees or
other charges provided that such fees and charges are those charged by
the lender to its other customers for similar transactions, and are no
higher than those charged by the lender for similar transactions.
Sec. 573.11 Record Access and Recordkeeping.
Records pertaining to the loans made by the Financial Institution
shall be held for the life of the loan. A lender with a Section 4
Guaranteed Loan shall allow HUD, the Comptroller General of the United
States, and their authorized representatives access from time to time
to any documents, papers or files which are pertinent to the guaranteed
loan, and to inspect and make copies of such records which relate to
any Section 4 Loan. Any inspection will be made during the lender's
regular business hours or any other mutually convenient time.
Dated: September 5, 1996.
Howard Glaser,
Acting Assistant Secretary for Community Planning and Development.
[FR Doc. 96-23081 Filed 9-5-96; 2:54 pm]
BILLING CODE 4210-29-P
Complete official Federal Register PDF
FR Doc. 96-22963 Definition of the Term Lawfully Present in the United States for Purposes of Applying for Title II Benefits Under Section 401(b)(2) of Public Law 104-193
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47039-47041]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22963]
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DEPARTMENT OF JUSTICE
Immigration and Naturalization Service
8 CFR Part 103
[AG Order No. 2054-96; INS No. 1792-96]
RIN 1115-AE51
Definition of the Term Lawfully Present in the United States for
Purposes of Applying for Title II Benefits Under Section 401(b)(2) of
Public Law 104-193
AGENCY: Immigration and Naturalization Service, Justice.
ACTION: Interim rule with request for comments.
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SUMMARY: This interim rule amends the Immigration and Naturalization
Service (Service) regulations to define the term ``an alien who is
lawfully present in the United States'' so that the Social Security
Administration may determine which aliens in the United States are
eligible for benefits under title II of the Social Security Act. Aliens
who are considered ``lawfully present in the United States,'' however,
must otherwise satisfy the requirements for benefits under title II of
the Social Security Act in order to receive social security benefits.
DATES: This rule is effective September 6, 1996. Written comments must
be received on or before November 5, 1996.
ADDRESSES: Please submit written comments, in triplicate, to the
Director, Policy Directives and Instructions Branch, Immigration and
Naturalization Service, 425 I Street, NW., Room 5307, Washington, DC
20536. To ensure proper handling, please reference INS number 1792-96
on your correspondence. Comments are available for public inspection at
this location by calling (202) 514-3048 to arrange an appointment.
FOR FURTHER INFORMATION CONTACT:
Derek C. Smith, Assistant General Counsel, Office of the General
Counsel; or Sophia Cox, Adjudications Officers, Adjudications Division;
Immigration and Naturalization Service, 425 I Street, NW., Room 3214,
Washington, DC 20536, telephone (202) 514-2895 or (202) 514-5014.
SUPPLEMENTARY INFORMATION: On August 22, 1996, the President signed the
Personal Responsibility and Work Opportunity Reconciliation Act of 1996
(Personal Responsibility Act), Pub. L. 104-193. Section 401(a) of the
Personal Responsibility Act provides that, subject to limited
exceptions, only ``qualified aliens,'' as defined under section 431,
may receive Federal public benefits,
[[Page 47040]]
including retirement, welfare, health, disability, public or assisted
housing, postsecondary education, food assistance, and unemployment
benefits, among others.
Section 431(b) of the Personal Responsibility Act defines the term
``qualified alien'' to mean the following six groups of aliens:
(1) Aliens who are lawfully admitted for permanent residence under
the Immigration and Nationality Act (Act);
(2) Aliens who are granted asylum under section 208 of the Act;
(3) Refugees admitted into the United States under section 207 of
the Act;
(4) Aliens who are paroled into the United States under section
212(d)(5) of the Act for a period of at least 1 year;
(5) Aliens whose deportation is being withheld under section 243(h)
of the Act; and
(6) Aliens who are granted conditional entry pursuant to section
203(a)(7) of the Act as in effect prior to April 1, 1980.
Section 401(b)(2) of the Personal Responsibility Act, however,
provides an exception, which allows aliens who are ``lawfully present
in the United States,'' as determined by the Attorney General, to
receive benefits under title II of the Social Security Act. (Title II
benefits include, for example, retirement benefits.) The purpose of
this regulation, therefore, is to define the term ``an alien who is
lawfully present in the United States,'' as required under section
401(b)(2) of the Personal Responsibility Act, thereby enabling the
Social Security Administration to determine whether aliens who are not
``qualified aliens'' are eligible to receive title II benefits, if they
are lawfully present in this country. This definition is made solely
for the purpose of determining an alien's eligibility for payment of
title II social security benefits, as required under section 401(b)(2)
of the Personal Responsibility Act, and is not intended to confer any
immigration status or benefit under the Immigration and Nationality
Act.
In determining which aliens are lawfully present for the purposes
of section 401(b)(2) of Public Law 104-193, the Service had to
distinguish among many classes of aliens in the United States. The
characteristic common to all the classes of aliens defined as
``lawfully present in the United States'' is that their presence in the
United States has been sanctioned by a policy determination that a
particular class of aliens should be allowed to remain in the United
States, and that policy determination has almost always been
implemented by an official act having the force of law. Each of the
five categories defined as lawfully present fits within this rationale.
First, the Service has concluded that Congress intended for qualified
aliens, as defined in section 431(b) of the Personal Responsibility
Act, to be included in the definition of lawfully present. Second,
aliens who have been inspected and admitted to the United States and
have not violated their status are lawfully present under the terms of
the Immigration and Nationality Act. Third, an alien who has been
paroled into the United States is lawfully present pursuant to section
212(d)(5) of the Act. However, persons who are paroled in order to
determine whether or not they must be excluded under the Act are not
lawfully present because no determination has been made as to the
lawfulness of their presence, and they are allowed into the United
States to avoid having to keep them in detention while they wait
proceedings. Fourth, aliens who belong to one of the seven classes of
aliens listed in section 103.12(a)(4) of this rule have been permitted
to remain in the United States either by an act of Congress or through
some other policy determination affecting that class of aliens. Aliens
in temporary resident status pursuant to section 210 or 245A of the
Act, aliens under Temporary Protected Status (TPS) pursuant to section
244A of the Act, and Family Unity beneficiaries pursuant to section 301
of Pub. L. 101-649 are all in lawful status under the Act. Cuban-
Haitian entrants, aliens in deferred action status, aliens under
Deferred Enforced Departure, and aliens who are the spouses and
children of a United States citizen with an approved visa petition all
remain in the United States under a Presidential or administrative
policy that permits them to do so. Finally, applicants for asylum and
withholding of deportation are permitted to remain in the United States
because section 208(a) of the Act requires the Attorney General to
create a procedure for adjudicating claims for asylum made by aliens
physically present in the United States. Section 208(a) of the Act was
passed to implement the obligations of the United States under the
Convention Relating to the Status of Refugees, of July 28, 1951, as
incorporated into the Protocol Relating to the Status of Refugees, of
January 31, 1967.
Good Cause Exception
This interim rule is effective upon publication in the Federal
Register although the Service invites post-promulgation comments and
will address any such comments in a final rule. For the following
reasons, the Service finds that good cause exists for adopting this
rule without the prior notice and comment period ordinarily required by
5 U.S.C. 553(b). Section 401(b)(2) of Pub. L. 104-193 requires the
Attorney General to define the term ``an alien lawfully present in the
United States'' so that the Social Security Administration can
determine which aliens are eligible for payment of title II social
security benefits under the terms of the Social Security Act. Absent a
definition of ``an alien lawfully present in the United States,''
section 401(a) of Pub. L. 104-193 requires the Social Security
Administration to suspend payments under title II for aliens who are
not ``qualified aliens'' (as defined under section 431(b)) and who file
applications on or after September 1, 1996. It is therefore
impracticable to adopt this rule with the prior notice and comment
period normally required under 5 U.S.C. 553(b).
Regulatory Flexibility Act
The Attorney General, in accordance with the Regulatory Flexibility
Act (5 U.S.C. 605(b)), has reviewed this regulation and, by approving
it, certifies that this rule will not have a significant economic
impact on a substantial number of small entities, because this
regulation affects individuals, not small entities.
Executive Order 12866
This interim rule is considered by the Department of Justice,
Immigration and Naturalization Service, to be a ``significant
regulatory action'' under E.O. 12866, section 3(f), Regulatory Planning
Review, and it has been submitted to the Office of Management and
Budget for review under E.O. 12866.
Executive Order 12988
This interim rule meets the applicable standards set forth in
sections 3(a) and 3(b)(2) of E.O. 12988.
Executive Order 12612
This regulation will not have a substantial direct effect on the
States, on the relationships between the National government and the
States, or on the distribution of power and responsibilities among the
various levels of government. Therefore, in accordance with E.O. 12612,
it is determined that this rule does not have sufficient Federalism
implications to warrant the preparation of a Federalism Assessment.
List of Subjects in 8 CFR Part 103
Administrative practice and procedure, Authority delegations
[[Page 47041]]
(Government agencies), Freedom of Information, Privacy, Reporting and
recordkeeping requirements, Surety bonds.
Accordingly, part 103 of chapter I of title 8 of the Code of
Federal Regulations is amended as follows:
PART 103--POWERS AND DUTIES OF SERVICE OFFICERS; AVAILABILITY OF
SERVICE RECORDS
1. The authority citation for part 103 continues to read as
follows:
Authority: 5 U.S.C. 552, 552(a); 8 U.S.C. 1101, 1103, 1201, 1252
note, 1252b, 1304, 1356; 31 U.S.C. 9701; L E.O. 12356; 47 FR 14874,
15557; 3 CFR 1982 Comp., p. 166; 8 CFR part 2.
2. A new Sec. 103.12 is added to read as follows:
Sec. 103.12 Definition of the term ``lawfully present'' aliens for
purposes of applying for Title II social security benefits under Public
Law 104-193.
(a) Definition of the term an ``alien who is lawfully present in
the United States.'' For the purposes of section 401(b)(2) of Pub. L.
104-193 only, an ``alien who is lawfully present in the United States''
means:
(1) A qualified alien as defined in section 431(b) of Pub. L. 104-
193;
(2) An alien who has been inspected and admitted to the United
States and who has not violated the terms of the status under which he
or she was admitted or to which he or she has changed after admission;
(3) An alien who has been paroled into the United States pursuant
to section 212(d)(5) of the Act for less than 1 year, except:
(i) Aliens paroled for deferred inspection or pending exclusion
proceedings under 236(a) of the Act; and
(ii) Aliens paroled into the United States for prosecution pursuant
to 8 CFR 212.5(a)(3);
(4) An alien who belongs to one of the following classes of aliens
permitted to remain in the United States because the Attorney General
has decided for humanitarian or other public policy reasons not to
initiate deportation or exclusion proceedings or enforce departure:
(i) Aliens currently in temporary resident status pursuant to
section 210 or 245A of the Act;
(ii) Aliens currently under Temporary Protected Status (TPS)
pursuant to section 244A of the Act;
(iii) Cuban-Haitian entrants, as defined in section 202(b) Pub. L.
99-603, as amended;
(iv) Family Unity beneficiaries pursuant to section 301 of Pub. L.
101-649, as amended;
(v) Aliens currently under Deferred Enforced Departure (DED)
pursuant to a decision made by the President;
(vi) Aliens currently in deferred action status pursuant to Service
Operations Instructions at OI 242.1(a)(22);
(vii) Aliens who are the spouse or child of a United States citizen
whose visa petition has been approved and who have a pending
application for adjustment of status;
(5) Applicants for asylum under section 208(a) of the Act and
applicants for withholding of deportation under section 243(h) of the
Act who have been granted employment authorization, and such applicants
under the age of 14 who have had an application pending for at least
180 days.
(b) Non-issuance of an Order to Show Cause and non-enforcement of
deportation and exclusion orders. An alien may not be deemed to be
lawfully present solely on the basis of the Service's decision not to,
or failure to, issue an Order to Show Cause or solely on the basis of
the Service's decision not to, or failure to, enforce an outstanding
order of deportation or exclusion.
Dated: September 4, 1996.
Janet Reno,
Attorney General.
[FR Doc. 96-22963 Filed 9-4-96; 3:10 pm]
BILLING CODE 4410-10-M
Complete official Federal Register PDF
FR Doc. 96-22839 Safety Zone: Grande Fiesta Italiana Fireworks, Hempstead Harbor, NY
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47054-47055]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22839]
[[Page 47054]]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Coast Guard
33 CFR Part 165
[CGD01-96-109]
RIN 2115-AA97
Safety Zone: Grande Fiesta Italiana Fireworks, Hempstead Harbor,
NY
AGENCY: Coast Guard, DOT.
ACTION: Temporary final rule.
-----------------------------------------------------------------------
SUMMARY: The Coast Guard is establishing a temporary safety zone for
the Grande Fiesta Italiana fireworks display located in Hempstead
Harbor, New York. The safety zone is in effect from 9 p.m. until 10:30
p.m. on Saturday, September 7, 1996. The safety zone temporarily closes
all waters, shore to shore, within a 300 yard radius of a fireworks
barge anchored approximately 300 yards north of Bar Beach, Port
Washington, in Hempstead Harbor New York.
EFFECTIVE DATE: This rule is effective from 9 p.m. until 10:30 p.m. on
Saturday, September 7, 1996.
FOR FURTHER INFORMATION CONTACT:
Lieutenant (Junior Grade) D. D. Gefell, Waterways Oversight Branch,
Waterways Management Division, Coast Guard Activities New York, (212)
668-7906.
SUPPLEMENTARY INFORMATION:
Regulatory History
Pursuant to 5 U.S.C. 553, a notice of proposed rulemaking (NPRM)
was not published for this regulation. Good cause exists for not
publishing a NPRM and for making this regulation effective less than 30
days after Federal Register publication. Due to the date on which
complete information regarding this event was received, there was
insufficient time to draft and publish a NPRM. The delay that would be
required to provide a 30 day delay effective date would cause the event
to be cancelled. Cancellation of this event is contrary to public
interest because the event is intended for public entertainment.
Background and Purpose
Bay Fireworks Company, Inc., submitted an Application for Approval
of Marine Event to hold a fireworks display on the waters of Hempstead
Harbor. The fireworks program is being sponsored by the Sons of Italy
of Port Washington, NY. This regulation establishes a temporary safety
zone in all waters of Hempstead Harbor within a 300 yard radius of the
fireworks barge anchored approximately 300 yards north of Bar Beach,
Port Washington, NY, at or near 40 deg.49'52''N latitude,
73 deg.39'10''W longitude (NAD 1983). The safety zone is in effect from
9 p.m. until 10:30 p.m. on Saturday, September 7, 1996. The safety zone
prevents vessels from transiting this portion of Hempstead Harbor, and
is needed to protect mariners from the hazards associated with
fireworks exploding in the area.
Regulatory Evaluation
This regulation 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 been exempted from review 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 regulation to be so minimal that a full
Regulatory Evaluation under paragraph 10(e) of the regulatory policies
and procedures of DOT is unnecessary. This regulation closes a portion
of Hempstead Harbor, north of Bar Beach to vessel traffic from 9 p.m.
until 10:30 p.m. on Saturday, September 7, 1996. This portion of
Hempstead Harbor has limited commercial traffic and is used primarily
by recreational vessels. Although the regulation prevents traffic from
transiting this area, the effect of the regulation will not be
significant for several reasons: the duration of the event is limited;
the event is at a late hour; the amount of commercial traffic in the
area is minimal; and the extensive, advance advisories which will be
made.
Small Entities
Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the
Coast Guard must consider whether this regulation will have a
significant economic impact on a substantial number of small entities.
``Small entities'' may include (1) small businesses and not-for-profit
organizations that are not independently owned and operated and are not
dominant in their fields and (2) governmental jurisdictions with
populations of less than 50,000.
For reasons set forth in the Regulatory Evaluation, the limited
duration and commercial traffic, Coast Guard certifies under 5 U.S.C.
605(b) that this regulation will not have a significant economic impact
on a substantial number of small entities.
Collection of Information
This regulation 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 action in accordance with the
principles and criteria contained in Executive Order 12612 and has
determined that this regulation does not have sufficient federalism
implications to warrant the preparation of a Federalism Assessment.
Environment
The Coast Guard has considered the environmental impact of this
regulation and concluded that under section 2.B.2.e.(34)(g) of
Commandant Instruction M16475.1B (as revised by 59 FR 38654, July 29,
1994), the promulgation of this regulation is categorically excluded
from further environmental documentation. A Categorical Exclusion
Determination and Environmental Analysis Checklist are included in the
docket.
List of Subjects in 33 CFR Part 165
Harbors, Marine safety, Navigation (water), Reporting and
recordkeeping requirements, Security measures, Waterways.
Regulation
For reasons set out in the preamble, the Coast Guard amends 33 CFR
Part 165 as follows:
PART 165--[AMENDED]
1. The authority citation for Part 165 continues to read as
follows:
Authority: 33 U.S.C. 1231; 50 U.S.C. 191; 33 CFR 1.05-1(g),
6.04-1, 6.04-6, and 160.5; 49 CFR 1.46.
2. A temporary section 165.T01-109, is added to read as follows:
Sec. 165.T01-109 Safety Zone: Grande Fiesta Italiana Fireworks
Display, Hempstead Harbor, New York.
(a) Location. The waters of Hempstead Harbor, shore to shore,
within a 300 yard radius of a fireworks barge anchored approximately
300 yards north of Bar Beach, Port Washington, New York, at or near
40 deg.49'52''N latitude 73 deg.39'10''W longitude (NAD 1983).
(b) Effective date. This section is effective from 9 p.m. until
10:30 p.m. on Saturday, September 7, 1996.
(c) Regulations.
(1) The general regulations contained in 33 C.F.R. 165.23 apply.
(2) All persons and vessels shall comply with the instructions of
the
[[Page 47055]]
Coast Guard Captain of the Port or the designated on-scence patrol
personnel. Coast Guard patrol personnel include commissioned, warrant,
and petty officers of the Coast Guard. Upon being hailed by a Coast
Guard vessel via siren, radio, flashing light, or other means, the
operator of a vessel shall proceed as directed.
Dated: August 27, 1996.
Richard C. Vlaun,
Captain, U.S. Coast Guard, Captain of the Port, New York.
[FR Doc. 96-22839 Filed 9-5-96; 8:45 am]
BILLING CODE 4910-14-M
Complete official Federal Register PDF
FR Doc. 96-22837 Amendment to Class E Airspace; Tampa, FL
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47051-47052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22837]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
14 CFR Part 71
[Airspace Docket No. 96-ASO-12]
Amendment to Class E Airspace; Tampa, FL
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This amendment modifies the Class E airspace area at Tampa,
FL, to accommodate a GPS RWY 18 Standard Instrument Approach Procedure
(SIAP) for the Vandenberg Airport. Additional controlled airspace
extending upward from 700 feet above the surface (AGL) is needed to
accommodate this SIAP and for instrument flight rules (IFR) operations
at the airport. The operating status of the airport will change from
VFR to include IFR operations concurrent with publication of this SIAP.
EFFECTIVE DATE: 0901 UTC, December 5, 1996.
FOR FURTHER INFORMATION CONTACT:
Benny L. McGlamery, System Management Branch, Air Traffic Division,
Federal Aviation Administration, P.O. Box 20636, Atlanta, Georgia
30320; telephone (404) 305-5570.
SUPPLEMENTARY INFORMATION:
History
On June 24, 1996, the FAA proposed to amend Part 71 of the Federal
Aviation Regulations (14 CFR Part 71) by modifying Class E airspace at
Tampa, FL (61 FR 32374). This action would provide adequate Class E
airspace for IFR operations at the Vandenberg Airport.
Interested parties were invited to participate in this rulemaking
proceeding by submitting written comments on the proposal to the FAA.
[[Page 47052]]
No comments objecting to the proposal were received. Designations for
Class E airspace extending upward from 700 feet or more above the
surface are published in Paragraph 6005 of FAA Order 7400.9C dated
August 17, 1995, and effective September 16, 1995. The Class E airspace
designation listed in this document will be published subsequently in
the Order.
The Rule
This amendment to Part 71 of the Federal Aviation Regulations (14
CFR part 71) modifies Class E airspace at Tampa, FL, to accommodate a
GPS RWY 18 SIAP and for IFR operations at the Vandenberg Airport. The
operating status of the airport will change from VFR to include IFR
operations concurrent with publication of this SIAP.
The FAA has determined that this regulation only involves an
established body of technical regulations for which frequent and
routine amendments are necessary to keep them operationally current.
It, therefore, (1) is not a ``significant regulatory action'' under
Executive Order 12866; (2) is not a ``significant rule'' under DOT
Regulatory Policies and Procedures (44 FR 11034; February 26, 1979);
and (3) does not warrant preparation of a regulatory evaluation as the
anticipated impact is so minimal. Since this is a routine matter that
will only affect air traffic procedures and air navigation, it is
certified that this rule will not have a significant economic impact on
a substantial number of small entities under the criteria of the
Regulatory Flexibility Act.
List of Subjects in 14 CFR Part 71
Airspace, Incorporation by reference, Navigation (air).
Adoption of the Amendment
In consideration of the foregoing, the Federal Aviation
Administration amends 14 CFR Part 71 as follows:
PART 71--[AMENDED]
1. The authority citation for 14 CFR Part 71 continues to read as
follows:
Authority: 49 U.S.C. 106(g); 40103, 40113, 40120; EO 10854, 24
FR 9565, 3 CFR, 1959-1963 Comp., p. 389; 14 CFR 11.69.
Sec. 71.1 [Amended]
2. The incorporation by reference in 14 CFR 71.1 of Federal
Aviation Administration Order 7400.9C, Airspace Designations and
Reporting Points, dated August 17, 1995, and effective September 16,
1995, is amended as follows:
Paragraph 6005 Class E airspace areas extending upward from 700
feet above the surface of the earth.
* * * * *
ASO GA E5 Tampa, FL [Revised]
Tampa International Airport, FL
(Lat. 27 deg.5 8'32''N, long. 82 deg.31'59''W)
St. Petersburg-Clearwater International Airport
(Lat. 27 deg.54'39''N, long. 82 deg.41'14''W)
MacDill AFB
(Lat. 27 deg.50'57''N, long. 82 deg.31'17''W)
Peter O Knight Airport
(Lat. 27 deg.54'56''N, long. 82 deg.26'57''W)
Albert-Whitted Airport
(Lat. 27 deg.45'54''N, long. 82 deg.37'38''W)
Vandenberg Airport
(Lat. 28 deg.00'33''N, long. 82 deg.20'59''W)
That airspace extending upward from 700 feet above the surface
within a 7-mile radius of Tampa International Airport, St.
Petersburg-Clearwater International Airport, MacDill AFB and Peter O
Knight Airport and within a 6.3-mile radius of Albert-Whitted
Airport and Vandenberg Airport, excluding that airspace within the
Lakeland, FL, Class E airspace area.
* * * * *
Issued in College Park, Georgia, on August 27, 1996.
Benny L. McGlamery,
Acting Manager, Air Traffic Division, Southern Region.
[FR Doc. 96-22837 Filed 9-5-96; 8:45 am]
BILLING CODE 4910-13-M
Complete official Federal Register PDF
FR Doc. 96-22833 Amendment to Class E Airspace; Rochester, MN
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Page 47053]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22833]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
14 CFR Part 71
[Airspace Docket No. 96-AGL-1]
Amendment to Class E Airspace; Rochester, MN
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This action amends Class E airspace at Rochester, MN.
Additional controlled airspace is required for the Copter GPS 326
degrees approach to St. Mary's Hospital Heliport. Controlled airspace
extending upward from 700 to 1200 feet above ground level (AGL) is
needed to contain aircraft executing the approach. The intended affect
of this action is to provide segregation of aircraft using instrument
approach procedures in instrument conditions from other aircraft
operating in visual weather conditions.
EFFECTIVE DATE: 0901 UTC, October 10, 1996.
FOR FURTHER INFORMATION CONTACT:
John A. Clayborn, Air Traffic Division, Operations Branch, AGL-530,
Federal Aviation Administration, 2300 East Devon Avenue, Des Plaines,
Illinois 60018, telephone (847) 294-7568.
SUPPLEMENTARY INFORMATION:
History
On Wednesday, May 29, 1996, the FAA proposed to amend part 71 of
the Federal Aviation Regulations (14 CFR part 71) to amend Class E
airspace at Rochester, MN (61 FR 26855). The proposal was to add
controlled airspace extending upward from 700 to 1200 feet AGL to
contain Instrument Flight Rules (IFR) operations in controlled airspace
during portions of the terminal operation and while transiting between
the enroute and terminal environments.
Interested parties were invited to participate in this rulemaking
proceeding by submitting written comments on the proposal to the FAA.
No comments objecting to the proposal were received. Class E airspace
designations for areas extending upward from 700 feet or more above the
surface of the earth are published in paragraph 6005 of FAA Order
7400.9C dated August 17, 1995, and effective September 16, 1995, which
is incorporated by reference in 14 CFR 71.1. The Class E airspace
designation listed in this document will be published subsequently in
the Order.
The Rule
This amendment to part 71 of the Federal Aviation Regulations (14
CFR part 71) amends Class E airspace at Rochester, MN to accommodate
IFR, operators executing the Copter GPS 326 degrees approach procedure
to St. Mary's Hospital Heliport. Controlled airspace extending upward
from 700 to 1200 feet AGL is needed to contain aircraft executing the
approach. The area will be depicted on appropriate aeronautical charts
thereby enabling pilots to circumnavigate the area or otherwise comply
with IFR procedures.
The FAA has determined that this regulation only involves an
established body of technical regulations for which frequent and
routine amendments are necessary to keep them operationally current.
Therefore, this regulation--(1) Is not a ``significant regulatory
action'' under Executive Order 12866; (2) is not a ``significant rule''
under DOT Regulatory Policies and Procedures (44 FR 11034; February 26,
1979); and (3) does not warrant preparation of a Regulatory Evaluation
as the anticipated impact is so minimal. Since this is a routine matter
that will only affect air traffic procedures and air navigation, it is
certified that this rule will not have a significant economic impact on
a substantial number of small entities under the criteria of the
Regulatory Flexibility Act.
List of Subjects in 14 CFR Part 71
Airspace, Incorporation by reference, Navigation (air).
Adoption of the Amendment
In consideration of the foregoing, the Federal Aviation
Administration amends 14 CFR part 71 as follows:
PART 71--[AMENDED]
1. The authority citation for 14 part 71 continues to read as
follows:
Authority: 49 U.S.C. 106(g), 40103, 40113, 40120; E.O. 10854, 24
FR 9565, 3 CFR, 1959-1963 Comp., p. 389; 14 CFR 11.69.
Sec. 71.1 [Amended]
2. The incorporation by reference in 14 CFR 71.1 of the Federal
Aviation Administration Order 7400.9C, Airspace Designations and
Reporting Points, dated August 17, 1995, and effective September 16,
1995, is amended as follows:
Paragraph 6005 Class E airspace areas extending upward from 700
feet or more above the surface of the earth.
* * * * *
AGL MN E5 Rochester, MN [Revised]
Rochester International Airport, MN
(Lat. 43 deg.54'32'' N, long. 92 deg.29'53'' W)
St. Mary's Hospital Heliport, MN
(Lat. 44 deg.01'11'' N, long. 92 deg.28'59'' W)
Rochester VOR/DME
(Lat. 43 deg.46'58' N, long. 92 deg.35'49'' W)
That airspace extending upward from 700 feet above the surface
within a 6.7-mile radius of the Rochester International Airport and
within 3.2 miles each side of the Rochester VOR/DME 028 radial
extending from the 6.7-mile radius to 7.9 miles southwest of the
airport, within 5.3 miles southwest and 4 miles northeast of the
Rochester northwest localizer course extending from the 6.7-mile
radius to 20 miles northwest of the airport, within 5.3 miles
northeast and 4 miles southwest of the Rochester southeast localizer
course extending from the 6.7-mile radius to 17.3 miles southeast of
the airport and within a 6.4-mile radius of the St. Mary's Hospital
Heliport.
* * * * *
Issued in Des Plaines, Illinois on August 20, 1996.
Maureen Woods,
Manager, Air Traffic Division.
[FR Doc. 96-22833 Filed 9-5-96; 8:45 am]
BILLING CODE 4910-13-M
Complete official Federal Register PDF
FR Doc. 96-22828 Amendment to Class E Airspace; Smithfield, NC
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47052-47053]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22828]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
14 CFR Part 71
[Airspace Docket No. 96-ASO-11]
Amendment to Class E Airspace; Smithfield, NC
AGENCY: Federal Aviation Administration (FAA), DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This amendment modifies the Class E airspace area at
Smithfield, NC, as a result of an airspace review conducted to
accommodate an amendment to the LOC/DME RWY 3 Standard Instrument
Approach Procedure (SIAP) for the Smithfield/Johnston County Airport.
Less controlled airspace extending upward from 700 feet above the
surface (AGL) is needed to accommodate this SIAP and for instrument
flight rules (IFR) operations at the airport.
EFFECTIVE DATE: 0901 UTC, December 5, 1996.
FOR FURTHER INFORMATION CONTACT: Benny L. McGlamery, System Management
Branch, Air Traffic Division, Federal Aviation Administration, P.O. Box
20636, Atlanta, Georgia 30320; telephone (404) 305-5570.
SUPPLEMENTARY INFORMATION:
History
On July 10, 1996, the FAA proposed to amend Part 71 of the Federal
Aviation Regulations (14 CFR Part 71) by modifying Class E airspace at
Smithfield, NC (61 FR 36314). This action would provide adequate Class
E airspace for IFR operations at the Smithfield/Johnston County
Airport.
Interested parties were invited to participate in this rulemaking
proceeding by submitting written comments on the proposal to the FAA.
No comments objecting to the proposal were received. Designations for
Class E airspace extending upward from 700 feet or more above the
surface are published in Paragraph 6005 of FAA Order 7400.9C dated
August 17, 1995, and effective September 16, 1995. The Class E airspace
designation listed in this document will be published subsequently in
the Order.
The Rule
This amendment to Part 71 of the Federal Aviation Regulations (14
CFR part 71) modifies Class E airspace at Smithfield, NC, as a result
of an airspace review conducted to accommodate a LOC/DME RWY 3 SIAP.
Less controlled airspace extending upward from 700 feet AGL is needed
to accommodate this SIAP and for IFR operations at the airport.
The FAA has determined that this regulation only involves an
established body of technical regulations for which frequent and
routine amendments are necessary to keep them operationally current.
It, therefore, (1) is not a ``significant regulatory action'' under
Executive Order 12866; (2) is not a ``significant rule'' under DOT
Regulatory Policies and Procedures (44 FR 11034; February 26, 1979);
and (3) does not warrant preparation of a regulatory evaluation as the
anticipated impact is so minimal. Since this is a routine matter that
will only affect air traffic procedures and air navigation, it is
certified that this rule will not have a significant economic impact on
a substantial number of small entities under the criteria of the
Regulatory Flexibility Act.
List of Subjects in 14 CFR Part 71
Airspace, Incorporation by reference, Navigation (air).
Adoption of the Amendment
In consideration of the foregoing, the Federal Aviation
Administration amends 14 CFR Part 71 as follows:
[[Page 47053]]
PART 71--[AMENDED]
1. The authority citation for 14 CFR Part 71 continues to read as
follows:
Authority: 49 U.S.C. 106(g); 40103, 40113, 40120; EO 10854, 24
FR 9565, 3 CFR, 1959-1963 Comp., P. 389; 14 CFR 11.69.
Sec. 71.1 [Amended]
2. The incorporation by reference in 14 CFR 71.1 of Federal
Aviation Administration Order 7400.9C, Airspace Designations and
Reporting Points, dated August 17, 1995, and effective September 16,
1995, is amended as follows:
Paragraph 6005 Class E airspace areas extending upward from 700
feet above the surface of the earth.
* * * * *
ASO NC E5 Smithfield, NC [Revised]
Smithfield/Johnston Airport, NC
(Lat. 35 deg.32'27'' N, long. 78 deg.23'25'' W)
That airspace extending upward from 700 feet above the surface
within a 6.5-mile radius of the Smithfield/Johnston County Airport.
ASO NC E5 Smithfield, NC [Revised]
* * * * *
Issued in College Park, Georgia, on August 27, 1996.
Benny L. McGlamery
Acting Manager, Air Traffic Manager Southern Region.
[FR Doc. 96-22828 Filed 9-5-96; 8:45 am]
BILLING CODE 4910-13-M
Complete official Federal Register PDF
FR Doc. 96-22809 Control Strategy: Ozone (OINF3); Tennessee
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47057-47058]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22809]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[TN 167-1-9627a; FRL-5606-9]
Control Strategy: Ozone (O3); Tennessee
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule; withdrawal.
-----------------------------------------------------------------------
SUMMARY: Due to adverse comments, EPA is withdrawing the approval of an
exemption request from the oxides of nitrogen (NOX) reasonably
available control technology (RACT) and conformity requirements of the
Clean Air Act as amended in 1990 (CAA) for the five county Middle
Tennessee (Nashville) moderate ozone (O3) nonattainment area. The
original action was published in the Federal Register on July 11, 1996,
as a direct final rule. As stated in the Federal Register document, if
adverse or critical comments were received by August 12, 1996, the
effective date would be delayed and timely notice would be published in
the Federal Register. Therefore, due to receiving adverse comments
within the comment period, EPA is withdrawing the final rule and will
address all public comments received in a subsequent final rule based
on the proposed rule also
[[Page 47058]]
published on July 11, 1996. EPA will not institute a second comment
period on this document.
EFFECTIVE DATE: This withdrawal is effective September 6, 1996.
FOR FURTHER INFORMATION CONTACT: William C. Denman, Regulatory Planning
and Development Section, Air Programs Branch, United States
Environmental Protection Agency, Region 4, Atlanta Federal Center, 100
Alabama Street, SW, Atlanta, Georgia 30303-3104, (404) 562-9030.
SUPPLEMENTARY INFORMATION: See the information provided in the direct
final rule located in the final rules section of the July 11, 1996
Federal Register at (61 FR 36502), and in the document located in the
proposed rule section of the July 11, 1996 Federal Register at (61 FR
36534).
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Hydrocarbons,
Incorporation by reference, Intergovernmental relations, Ozone.
Dated: August 29, 1996.
A. Stanley Meiburg,
Acting Regional Administrator.
[FR Doc. 96-22809 Filed 9-5-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-22807 Approval and Promulgation of Air Quality Implementation Plans, Tennessee; Approval of Revisions To Permit Requirements, Definitions and Administrative Requirements
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47055-47057]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22807]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[TN-146-2-9608a; FRL-5554-6]
Approval and Promulgation of Air Quality Implementation Plans,
Tennessee; Approval of Revisions To Permit Requirements, Definitions
and Administrative Requirements
AGENCY: Environmental Protection Agency (EPA).
ACTION: Direct final rule.
-----------------------------------------------------------------------
SUMMARY: EPA is approving revisions to the permit requirements,
definitions, and administrative requirements for the Nashville/Davidson
County portion of the Tennessee State Implementation Plan (SIP). On
November 16, 1994, the State submitted revisions to the Nashville/
Davidson portion of the Tennessee SIP on behalf of Nashville/Davidson
County. These were revisions to the permit requirements for major
sources of air pollution, including revisions to the general
definitions, permit requirements, the Board's powers and duties, the
variances and hearings procedures, the measurement and reporting of
emissions, and the testing procedures. At this time, EPA is acting on
revisions submitted on November 16, 1994. EPA is approving all of the
submitted revisions except those which were submitted to meet the
requirements for enhanced monitoring. These will not be acted on at
this time.
DATES: This final rule is effective November 5, 1996 unless adverse or
critical comments are received by October 7, 1996. If the effective
date is delayed, timely notice will be published in the Federal
Register.
ADDRESSES: Written comments on this action should be addressed to Karen
C. Borel, at the EPA Regional Office listed below. Copies of the
documents relative to this action are available for public inspection
during normal business hours at the following locations. The
[[Page 47056]]
interested persons wanting to examine these documents should make an
appointment with the appropriate office at least 24 hours before the
visiting day.
Air and Radiation Docket and Information Center (Air Docket 6102), U.S.
Environmental Protection Agency, 401 M Street, SW, Washington, DC 20460
Environmental Protection Agency, Region 4 Air Programs Branch, 345
Courtland Street, NE., Atlanta, Georgia 30365
Bureau of Environmental Health Services, Metropolitan Health
Department, Nashville-Davidson County, 311--23rd Avenue, North,
Nashville, Tennessee 37203
Tennessee Department of Environment and Conservation, Division of Air
Pollution Control, 9th Floor L & C Annex, 401 Church Street, Nashville,
Tennessee 37243-1531.
FOR FURTHER INFORMATION CONTACT: Karen C. Borel, Regulatory Planning
and Development Section, Air Programs Branch, Air, Pesticides & Toxics
Management Division, Region 4 Environmental Protection Agency, 345
Courtland Street, N.E., Atlanta, Georgia 30365.The telephone number is
404/347-3555 x4197. Reference file TN-146-2-9608a.
SUPPLEMENTARY INFORMATION: The State of Tennessee submitted revisions
to the Nashville/Davidson County portion of the Tennessee SIP to EPA on
November 16, 1994. EPA found these submittals to be complete on
December 21, 1994. EPA approved several portions of this submittal on
July 28, 1995 (60 FR 38712), which were required for Nashville/Davidson
County's Federally enforceable local operating permit (FELOP) program.
At that time, EPA also approved Nashville/Davidson County's FELOP
program pursuant to section 112 of the Clean Air Act as amended in 1990
(CAA).
A. SIP Revisions
The Nashville/Davidson County Board of Health, officially adopted
proposed amendments to the Chapter 10.56, ``Air Pollution Control'' of
the Metropolitan Code of Laws on October 6, 1994. These regulatory
revisions to their Chapter 10.56 make changes to some definitions, to
their requirements for public hearings, and to some testing procedure
requirements. These revisions are the remainder of their plan to bring
the SIP into accordance with title I requirements and to support their
title V program. EPA is approving all of the following revisions except
where it is specifically noted that the proposed revisions are not
receiving action.
Section 10.56.010--Definitions
Definitions of ``Legally Enforceable'' and ``Uniform Administrative
Procedures Act'' were added. The definition of legally enforceable
states that ``all limitations and conditions which are enforceable by
the Director or the Administrator * * *'' in accordance with the
requirements of the CAA. The Uniform Administrative Procedures Act is
defined as the Tennessee Code Annotated Title 4, Chapter 5.
Section 10.56.020--Construction Permits
Paragraph (A)(2) was revised to require that all hearings now be
conducted in accordance with the Uniform Administrative Procedures Act.
This formerly stated that the hearing would simply be conducted before
the Nashville/Davidson County Metropolitan Board of Health.
Paragraph (N) was added to this section. This paragraph adds the
requirement for monthly notification of the public, through newspaper
advertisements, of the applicants seeking to obtain construction or
modification permits of air pollution sources.
Section 10.56.090.C.4--Board--Powers and Duties
This paragraph has been revised to change the appeal process for
civil penalties. This process was formerly conducted in accordance with
the provisions of another section in the SIP (10.56.020). This will now
be done according to the Uniform Administrative Procedures Act.
Section 10.56.110--Rules and Regulations--Hearing Procedures
Paragraph (A) has been revised to allow the Board to conduct a
hearing in accordance with the Uniform Administrative Procedures Act.
In paragraphs (B) and (B)(2), references to ``by the Board'' have
been deleted. This was done because of the new requirements to do
hearings in accordance with the Uniform Administrative Procedures Act,
as were previously discussed in the above paragraphs.
Section 10.56.120.B--Complaint Notice--Hearings Procedure
These hearings will now be conducted in accordance with the
contested cases provisions in the Uniform Administrative Procedures
Act, as previously defined. The specific requirements for conducting a
complaint hearing, as defined in subparagraphs (1) through (7) have
been deleted. These are now defined in the Uniform Administrative
Procedures Act.
Section 10.56.130.D.2--Variances--Hearings Procedure
These public hearings will now be conducted in accordance with the
Uniform Administrative Procedures Act.
Section 10.56.290.D and E--Measurement and Reporting of Emissions
The revisions to Section 10.56.290 for enhanced monitoring are in
response to a May 21, 1994, SIP call from EPA Region 4 which was based
on a proposed rule. However, the EPA is taking no action on revisions
to Section 10.56.290 of the Nashville/Davidson County SIP at this time
because the federal requirement to which the revision pertains is not
yet final.
Section 10.56.300.B--Testing Procedures
This paragraph addresses the requirements for demonstrating
compliance with emission standards. The phrase ``The determination of''
has been deleted and replaced with ``Source testing conducted for the
purpose of demonstrating.''
Final Action
EPA is fully approving the submitted revisions to the Nashville/
Davidson County portion of the Tennessee State Implementation Plan
(SIP) with the exception of the enhanced monitoring provisions in
Section 10.56.290, which are not being acted on in this rulemaking.
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 to approve the SIP revision
should adverse or critical comments be filed. This action will be
effective on November 5, 1996 unless, by October 7, 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 then be
addressed in a subsequent final rule based on the proposed rule. The
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 on November 5, 1996.
[[Page 47057]]
Under section 307(b)(1) of the Act, 42 U.S.C. 7607 (b)(1),
petitions for judicial review of this action must be filed in the
United States Court of Appeals for the appropriate circuit by [insert
date 60 days from date of publication]. 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) of the Act, 42 U.S.C. 7607
(b)(2).]
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.
Nothing in this action should be construed as permitting or
allowing or establishing a precedent for any future request for
revision to any SIP. Each request for revision to any SIP shall be
considered separately in light of specific technical, economic, and
environmental factors and in relation to relevant statutory and
regulatory requirements.
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 economic impact on a substantial number of small entities.
Small entities include small business, small not-for-profit
enterprises, and government entities with jurisdiction over populations
of less than 50,000.
SIP approvals under sections 110 and subchapter I, part D of the
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 Act, preparation of a regulatory flexibility
analysis would constitute Federal inquiry into the economic
reasonableness of state action. The Act forbids EPA to base its actions
concerning SIPs on such grounds. Union Electric Co. v. U.S.E.P.A., 427
U.S. 246, 256-66 (1976); 42 U.S.C. 7410(a)(2) and 7410(k)(3).
Under Sections 202, 203, and 205 of the Unfunded Mandates Reform
Act of 1995 (``Unfunded Mandates Act''), signed into law on March 22,
1995, EPA must undertake various actions in association with proposed
or final rules that include a Federal mandate that may result in
estimated costs of $100 million or more to the private sector, or to
State, local, or tribal governments in the aggregate.
Through submission of this state implementation plan or plan
revision, the State and any affected local or tribal governments have
elected to adopt the program provided for under Section 165 of the CAA.
These rules may bind State, local and tribal governments to perform
certain actions and also require the private sector to perform certain
duties. EPA has determined that the rules being approved by this action
will impose no new requirements, since such sources are already subject
to these regulations under State law. Accordingly, no additional costs
to State, local, or tribal governments, or to the private sector,
result from this action.
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 52
Air pollution control, Incorporation by reference, Reporting and
recordkeeping requirements.
Dated: July 18, 1996.
A. Stanley Meiburg,
Acting Regional Administrator.
Part 52 of chapter I, title 40, 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 RR--[Amended]
2. Section 52.2220 is amended by adding paragraph (c)(141) to read
as follows:
Sec. 52.2220 Identification of plan.
* * * * *
(c) * * *
(141) On November 16, 1994, the State submitted revisions to the
Nashville/Davidson portion of the Tennessee State Implementation Plan
(SIP) on behalf of Nashville/Davidson County. These were revisions to
the permit requirements for major sources of air pollution, including
revisions to the general definitions, permit requirements, the Board's
powers and duties, the variances and hearings procedures, the
measurement and reporting of emissions, and the testing procedures.
These revisions incorporate changes to Nashville's Chapter 10.56 which
are required in the Clean Air Act as amended in 1990 and 40 CFR part
51, subpart I.
(i) Incorporation by reference.
(A) Code of Laws of the Metropolitan Government of Nashville and
Davidson County, Tennessee, Chapter 10.56, except Section 10.56.290,
Air Pollution Control, approved on October 6, 1994, except Section
10.56.010, definition of ``Regulated Pollutant''; Section 10.56.050,
paragraphs (C), (D), and (E); Section 10.56.080.
(ii) Other material. None.
[FR Doc. 96-22807 Filed 9-5-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-22786 Milk in the Black Hills, South Dakota, Marketing Area; Termination of the Order
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47038-47039]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22786]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 1075
[DA-96-12]
Milk in the Black Hills, South Dakota, Marketing Area;
Termination of the Order
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule; termination order.
-----------------------------------------------------------------------
SUMMARY: This document terminates all but certain administrative
sections of the order regulating the handling of milk in the Black
Hills, South Dakota, marketing area. Termination of this order was
requested by Black Hills Milk Producers, a cooperative association that
represents all of the producers whose milk is pooled under the order.
Thus, termination of the order is required under the Agricultural
Marketing Agreement Act of 1937, as amended.
EFFECTIVE DATE: October 1, 1996.
FOR FURTHER INFORMATION CONTACT: Clifford M. Carman, Marketing
Specialist, USDA/AMS/Dairy Division, Order Formulation Branch, Room
2971, South Building, P.O. Box 96456, Washington, DC 20090-6456, (202)
720-9368.
SUPPLEMENTARY INFORMATION: The Department is issuing this rule in
conformance with Executive Order 12866.
This termination order has been reviewed under Executive Order
12988, Civil Justice Reform. This action is not intended to have
retroactive effect. This rule will not preempt any state or local laws,
regulations, or policies, unless they present an irreconcilable
conflict with this rule.
The Agricultural Marketing Agreement Act of 1937, as amended (7
U.S.C. 601-674), provides that administrative proceedings must be
exhausted before parties may file suit in court. Under section
608c(15)(A) of the Act, any handler subject to an order may file with
the Secretary a petition stating that the order, any provision of the
order, or any obligation imposed in connection with the order is not in
accordance with the law and requesting a modification of an order or to
be exempted from the order. A handler is afforded the opportunity for a
hearing on the petition. After a hearing, the Secretary would rule on
the petition. The Act provides that the District Court of the United
States in any district in which the handler is an inhabitant, or has
its principal place of business, has jurisdiction in equity to review
the Secretary's ruling on the petition, provided a bill in equity is
filed not later than 20 days after the date of the entry of the ruling.
This order of termination is issued pursuant to the provisions of
the Agricultural Marketing Agreement Act and of the order regulating
the handling of milk in the Black Hills, South Dakota, marketing area.
Small Business Consideration
During June 1996, the representative period determined for this
action, 58 producers (all members of the Black Hills Milk Producers
cooperative association) had their milk pooled under the Black Hills
order. The Small Business Administration (SBA) criterion of $500,000 in
annual receipts, adjusted to reflect the information for one month
($500,000 divided by 12, divided by the 1995 average order blend price
of $13.95 per hundredweight) was used to determine that dairy farmers
marketing less than 300,000 pounds of milk meet the description of a
small dairy farm. On the basis of the pounds of milk marketed during
the representative period, 54 of the 58 dairy farmers would be small
businesses. Of these, 27 marketed less than 100,000 pounds during June,
20 marketed between 100,000 and 200,000 pounds, and 7 marketed between
200,000 and 300,000 pounds.
In addition to the cooperative, there is one other milk handler
regulated under the Black Hills order in South Dakota. Under SBA
criterion, this handler would be considered a small business.
Consequently, nearly all of the parties affected by the Black Hills
milk order would be classified as small entities.
The current reporting, recordkeeping and other compliance
requirements of the rule would cease with termination of the order.
None of the currently-affected entities would be subject to any
additional reporting or recordkeeping requirements for purposes of the
Federal milk order program as a result of the
[[Page 47039]]
order's termination. However, a handler would continue to be required
to maintain records of milk receipts and sales into another Federal
order marketing area and report them to the market administrator of the
other marketing area. In addition, if a handler's sales into another
Federal order marketing area become a large enough percentage of a
handler's milk receipts, a handler would be pooled under another order
and incur the same reporting, recordkeeping and payment obligations it
currently has under the Black Hills order.
Termination of the order will remove government enforcement of
minimum prices to handlers and to producers that are determined by
supply and demand conditions. It will also remove other stabilizing
features of the regulatory program such as: an impartial audit of
handler records to insure payment to dairy farmers and to verify the
reported uses of milk; the assurance to farmers of accurate weighing,
testing, classification and accounting for milk; and the existence of
marketing information to evaluate market performance. Thus, it is
likely that market conditions would tend to become less orderly or
stable. However, it must be assumed that the consequences of the
removal of the regulatory program have been considered by the
cooperative association that has requested the action, and that
possibly other approaches have or will be made to replace the
stabilizing influence of the order.
Regardless of the possible economic effects of the order
termination on the small entities involved, a termination is required
by the Agricultural Marketing Agreement Act of 1937, as amended,
whenever a termination is requested by a majority of the producers
engaged in the production of milk for sale in the marketing area in a
representative period determined by the Secretary. Black Hills Milk
Producers, as the cooperative association representing all of the
producers whose milk is pooled under the Black Hills milk order, has
requested that the order be terminated.
Determination
It is hereby determined that termination of the Black Hills, South
Dakota, order, Part 1075, is favored by a majority of the producers
engaged in the production of milk for sale in the marketing area in the
representative period, determined to be June 1996, and that such
producers produced more than 50 percent of the milk produced for sale
in the Black Hills, South Dakota, milk marketing area in such
representative period.
It is also determined that notice of proposed rule making and
public procedure thereon is impracticable, unnecessary and contrary to
the public interest. Section 608(c)(16)(B) of the Agricultural
Marketing Agreement Act of 1937, as amended, requires that if a
majority of the producers engaged in the production of milk for sale in
the marketing area in a representative period determined by the
Secretary favor termination of the order, and such producers produced
more than 50 percent of the milk produced for sale in the marketing
area in the representative period, that such order shall be terminated.
It is therefore necessary that the provisions of the order, as amended,
subject to specific exceptions, be terminated effective October 1,
1996.
List of Subjects in 7 CFR Part 1075
Milk marketing orders.
Order
Pursuant to the provisions of the Agricultural Marketing Agreement
Act of 1937, as amended (7 U.S.C. 601 et seq.) it is hereby ordered
that all provisions of the order, as amended, regulating the handling
of milk in the Black Hills, South Dakota, marketing area (7 CFR Part
1075) except Sec. 1075.1, which incorporates the General Provisions in
Part 1000, are hereby terminated effective October 1, 1996.
Milk marketing orders.
For the reason set forth in the preamble, 7 CFR Part 1075 is
amended as follows:
PART 1075--MILK IN THE BLACK HILLS, SOUTH DAKOTA, MARKETING AREA
1. The authority citation for 7 CFR Part 1075 continues to read as
follows:
Authority: (Secs. 1-19, 48 Stat. 31, as amended; 7 U.S.C. 601-
674).
Secs. 1075.2 through 1075.85 [Removed]
2. In part 1075 Secs. 1075.2 through 1075.85 and their undesignated
center headings are removed effective October 1, 1996.
Dated: August 30, 1996.
Michael V. Dunn,
Assistant Secretary, Marketing and Regulatory Programs.
[FR Doc. 96-22786 Filed 9-5-96; 8:45 am]
BILLING CODE 3410-02-P
Complete official Federal Register PDF
FR Doc. 96-22784 Highly Erodible Land and Wetland Conservation
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47019-47038]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22784]
========================================================================
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. 174 / Friday, September 6, 1996 /
Rules and Regulations
[[Page 47019]]
DEPARTMENT OF AGRICULTURE
Office of the Secretary
7 CFR Part 12
RIN 0578-AA17
Highly Erodible Land and Wetland Conservation
AGENCY: Office of the Secretary, USDA.
ACTION: Interim final rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: The United States Department of Agriculture (USDA) is issuing
an interim final rule for the Highly Erodible Land and Wetland
Conservation provisions of the Food Security Act of 1985, as amended.
This interim final rule incorporates specific changes required by the
Federal Agriculture Improvement and Reform Act of 1996 and makes other
changes to improve the administration of these provisions. USDA is
seeking comments from the public which will be considered prior to
issuing a final rule.
DATES: Effective Dates: September 6, 1996.
Comments must be received by November 5, 1996.
ADDRESSES: All comments concerning this interim final rule should be
addressed to Lloyd E. Wright, Director, Conservation Ecosystems
Assistance Division, Natural Resources Conservation service, P.O. Box
2890, Washington, D.C. 20013-2890. Attention: HELWC. Fax: 202-720-1838.
This rule may also be accessed, and comments submitted, via Internet.
Users can access the NRCS Federal Register homepage and submit comments
at http:/astro.itc.nrcs.usda.gov:6500.
FOR FURTHER INFORMATION CONTACT:
Sandra N. Penn, Conservation Ecosystems Assistance Division, Natural
Resources Conservation Service, 202-720-1845.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This rule has been determined to be significant and was reviewed by
the Office of Management and Budget (OMB) under Executive Order 12866.
Pursuant to Sec. 6(a)(3) of Executive Order 12866, CCC and NRCS have
conducted an economic analysis of the potential impacts associated with
this interim final rule. The economic analysis concluded that the past
ten years of experience in implementing these provisions demonstrates
that the provisions are an effective incentive to implementing
conservation practices. Changes in the 1985 Act and the implementing
regulations will help to increase that incentive by making compliance
achievable by more producers, providing more liberal technical
assistance, and increasing flexibility in farm operations that deterred
some producers from participation in USDA programs in the past. A copy
of this cost-benefit analysis is available upon request from Sandra N.
Penn, Conservation Ecosystems Assistance Division, Natural Resources
Conservation Service, P.O. Box 1890, Washington, D.C. 20013-1890.
Regulatory Flexibility Act
The Regulatory Flexibility Act is not applicable to this rule
because USDA is not required by 5 U.S.C. 533 or any other provisions of
law to publish a notice of proposed rulemaking with respect to the
subject matter of this rule.
Environmental Evaluation
It has been determined through an environmental assessment that the
issuance of this interim final rule will not have a significant impact
upon the human environment. Copies of the environmental assessment may
be obtained from Sandra N. Penn, Conservation Ecosystems Assistance
Division, Natural Resources Conservation Service, P.O. Box 2890,
Washington, D.C. 20013-2890.
Paperwork Reduction Act
No substantive changes have been made in this interim final rule
that affect the recordkeeping requirements and estimated burdens
previously reviewed and approved under OMB control number 0560-0004.
Executive Order 12788
This interim final rule has been reviewed in accordance with
Executive Order 12778. The provisions of this interim final rule are
not retroactive except for Sec. 12.5(b)(4)-(8) in relation to certain
actions or determinations that occurred after December 23, 1985,
relative to the conversion of wetlands or the production of an
agricultural commodity upon a converted wetland. Furthermore, the
provisions of this final interim rule preempt State and local laws to
the extent such laws are inconsistent with this interim final rule.
Before an action may be brought in a Federal court of competent
jurisdiction, the administrative appeal rights afforded persons at CFR
parts 11,614,780 and 1900 Subpart B of this title, as appropriate, must
be exercised and exhausted.
Unfunded Mandates Reform Act of 1995
Pursuant to Title II of the unfunded Mandates Reform Act of 1995,
Pub. L. 104-4, the effects of this rulemaking action on State, local,
and tribal governments, and the public have been assessed. This action
does not compel the expenditure of $100 million or more by any State,
local, or tribal governments, or anyone in the private sector;
therefore a statement under Sec. 202 of the Unfunded Mandates Reform
Act of 1995 is not required.
Discussion of Provisions
Title XII of the Food Security Act of 1985, as amended (the 1985
Act), encourages participants in United States Department of
Agriculture (USDA) programs to adopt land management measures by
linking eligibility for USDA program benefits to farming practices on
highly erodible land and converted wetlands. In particular, the highly
erodible land provisions (HEL) of the 1985 Act provide that after
December 23, 1985, a program participant is ineligible for certain USDA
program benefits for the production of an agricultural commodity on a
field in which highly erodible land is predominant. Additionally, the
wetland conservation (WC) provisions of the 1985 Act provide that after
December 23, 1985, a program participant is ineligible for certain USDA
program benefits for the production of an agricultural commodity on a
converted
[[Page 47020]]
wetland, or after November 28, 1990, for the conversion of a wetland
that makes the production of an agriculture commodity possible. The
1985 Act, however, affords relief to program participants who meet
certain conditions identified under the 1985 Act by exempting such
actions from the ineligibility provisions.
The USDA issued a final rule implementing the HEL and WC provisions
of the 1985 Act on September 17, 1987. These regulations, found at 7
CFR part 12, provided the terms of program ineligibility, described the
several exemptions from ineligibility, outlined the responsibilities of
the several USDA agencies involved in implementing the provisions, and
generally established the framework for administration of the
provisions.
The Food, Agriculture, Conservation, and Trade Act of 1990 (the
1990 Act), amended the 1985 Act and made some significant modifications
to the HEL and WC conservation provisions. These statutory changes were
incorporated into part 12 through amendments issued April 23, 1991, and
May 23, 1991.
The implementing regulations mirror the 1985 Act's structure by
listing the activities that will cause a person to lose program
benefits, the program benefits that are at risk, and the conditions
under which these activities can occur without losing program
eligibility. The current regulations are divided into three subparts.
Subpart A describes the terms of ineligibility, USDA programs
encompassed by its terms, the list of exemptions from ineligibility,
the agency responsibilities, and the appeal provisions for persons
adversely affected by an agency determination. Subpart B describes in
greater detail the technical aspects of the highly erodible land
provisions, including the criteria for identification of highly
erodible lands, criteria for highly erodible field determinations, and
requirements for the development of conservation plans and conservation
systems. Subpart C describes in greater detail the technical aspects of
the wetland conservation provisions, including the criteria for
determining a wetland, the criteria for determining a converted
wetland, and the uses of wetlands and converted wetlands that can be
made without losing program eligibility.
Since December 23, 1985, program participants have farmed in a more
sustainable manner, resulting in more soil remaining on the field and
more wetlands remaining available to wildlife and migratory fowl.
Meeting the objectives of the HEL and WC provisions, however, has been
difficult for some producers. Wherever possible, USDA helps individual
program participants address their unique resources concerns in a
manner that meets the requirements of the HEL and WC provisions. The
Federal Agriculture Improvement and Reform Act (the 1996 Act), enacted
April 4, 1996, made several modifications to the HEL and WC provisions
which will increase USDA's ability to meet these individual situations
in a more flexible manner.
The Federal Agriculture Improvement and Reform Act
The 1996 Act amendments to the HEL and WC provisions became
effective 90 days after the date of enactment, i.e., July 3, 1996.
Accordingly, delaying implementation of this rule would be contrary to
the public interest and it has been determined that this rule should,
therefore, be effective when issued but subject to further review based
on comments submitted in response to this interim final rule.
The 1996 Act made the following changes to the implementation of
the HEL and WC provisions:
Adds new programs to the list of USDA program benefits
covered.
Deletes some programs from the list of USDA program
benefits covered.
Under certain conditions, allows a person who is
determined to be ineligible for USDA program benefits because of
failure to apply a conservation system up to 1 year to implement the
necessary practices without loss of benefits.
Provides for expedited variances related to weather, pest,
and disease problems and establishes a time period to render a decision
on whether to grant those variances.
Requires a measurement of soil erosion on a highly
erodible field prior to the implementation of a conservation system,
based on estimated average annual soil erosion rates.
Provides for self-certification of compliance for HEL and
authorizes the Natural Resources Conservation Service (NRCS) to exclude
that person from status review on the basis of that certification of
compliance.
Provides for revision or modification of a conservation
plan by a person if the same level of treatment is maintained.
Permits a person to use, on a field-trial basis,
conservation practices other than those currently approved if NRCS
determines in advance that the practices have a reasonable likelihood
of success.
Provides for a review, and relief to a person, by the
local county committee if applying a conservation system would cause
the person undue economic hardship.
Requires that an employee of USDA who notices a
conservation compliance deficiency on a person's farm while providing
technical assistance on other land inform the person of the deficiency
and actions necessary to come into compliance, and allow up to 1 year
for the person to fully implement corrective action before reporting
the observation as a compliance violation.
Requires that highly erodible land exiting the
Conservation Reserve Program not be held to a higher conservation
compliance standard than similar cropland in the same area.
Permits a person to cease using farmed wetlands, or
farmed-wetland pastures, as identified by NRCS, for cropping or forage
production, and allows the lands to return to wetland conditions, and
subsequently bring these lands back into agricultural production after
any length of time without loss of eligibility for USDA program
benefits, given certain conditions.
Allows flexibility in determining the programs for which a
person who violates wetland conservation provisions will become
ineligible.
Ensures that persons the right to request and appeal a
certified wetland determination.
Provides that a certified wetland delineation will remain
in effect until the person requests a new determination and
certification.
Ensures that wetlands that were certified as prior-
converted cropland will continue to be considered prior-converted
cropland even if wetland characteristics return as a result of lack of
maintenance of the land or other circumstances beyond the person's
control provided the prior-converted cropland continues to be used for
agricultural purposes.
Requires USDA to identify on a regional basis which
categories of activities constitute a minimal effect on wetland
functions and values.
Provides persons who convert a wetland greater flexibility
to mitigate the loss of wetland functions and values through
restoration, enhancement, or creation of wetlands.
Allows the Farm Service Agency (FSA) to waive a person's
ineligibility for benefits if FSA believes the person acted in good
faith and without intent to violate the wetland provisions.
Provides for a pilot program for wetland mitigation
banking.
Repeals the requirements for consultation with the Fish
and Wildlife Service (FWS).
[[Page 47021]]
Provides that benefits of affiliates of a business
enterprise who violate HEL or WC provisions will be reduced in
proportion to the interest held by the affiliate in the business
enterprise.
Defines ``agricultural lands'' for the purpose of
implementing the January 6, 1994, interagency memorandum of agreement
on Federal wetland delineations on agricultural lands.
Public Listing Forums
In April 1996, USDA held nine forums to provide opportunities for
public comment in advance of this rulemaking action. These forums were
held at Sacramento, California; Longmont, Colorado; Columbus, Georgia;
Springfield, Illinois; Wyomissing, Pennsylvania; Sioux Falls, South
Dakota; Abilene, Texas, Spokane, Washington; and, Washington, D.C. More
than 850 people, including 206 speakers, attended these forums. In
addition, USDA accepted written comments. The USDA considered the
public comments provided at these forums in the preparation of this
interim final rule. The documents relating to these forums are
available for public inspection at Room 6029 South Building, USDA, 14th
and Independence Ave. SW, Washington, D.C. The following discussion is
a brief 3summary of how USDA responded to the issues generated by the
comments:
USDA received seven comments related to the granting of variance
for persons who fail to meet the highly erodible land conservation
requirements. Section 12.5(a)(6)(ii) addresses procedures for granting
variances for weather, pest, and disease problems, and the factors that
NRCS will consider in granting those variances.
USDA received three comments related to procedures for determining
whether a conservation system results in a substantial reduction in
erosion. Section 12.23 addresses procedures for evaluating conservation
systems for land with and without cropping history.
USDA received 25 comments related to policies regarding when a
violation is in good faith. Sections 12.5(a)(5) and (b)(5) address
procedures for determining when a violation is in good faith.
USDA received 16 comments related to procedures for conducting
status reviews. Although procedures for conducting status reviews are
not addressed in the rule, the NRCS will consider these comments in
preparing its internal operating procedures.
USDA received 46 comments related to procedures on wetland
mitigation; these included the suggestion that mitigation always be in
the same watershed; that mitigation should place priority on
restoration or enhancement rather than creation of wetlands; that
mitigation should be flexible; and, that mitigation should meet the
requirements of the WC provision. Section 12.5(b)(4) sets forth
procedures to be used for wetland mitigation, and adds that the State
Conservationist may determine that mitigation for certain types or
classes of wetlands will not be considered because it is not possible
to achieve equivalent replacement of wetland functions and values
within a reasonable time frame. USDA received another 28 comments
related to mitigation banking.
USDA received 68 comments related to certification of wetland
determinations. Some commenters favored reviewing all wetland
determinations and correcting errors; other commenters favored not
reviewing existing wetland determinations. Some commenters suggested
that landowners should be formally notified of the certification of
wetland determinations. Some commenters suggested that NRCS should be
the lead agency for wetland determinations. Section 12.30(c) describes
the proposed approach to certification of wetland determinations. It
also specifies that a certified wetland determination will remain valid
and in effect until the person affected by the certification requests
review of the certification by NRCS.
USDA received 17 comments related to the role of FWS in carrying
out the wetland conservation provisions. Of these, four commenters
expressed support for FWS involvement and eight commenters favored
decreasing the role of the FWS. Five commenters made no specific
recommendation. The 1996 Act removed the requirement for consultation
with FWS, and that requirement has been removed from the rule. In
addition, Sec. 12.30 defines the role of the FWS in carrying out the
wetland conservation provisions.
USDA received 36 comments related to prior-converted cropland
issues and abandonment of wetlands. Of these, 19 commenters expressed
support for the ``once a PC, always a PC'' change made by the 1996 Act;
three commenters expressed concern over that change. Section 12.33
incorporates changes made by the 1996 Act amendments.
USDA received four comments stating that NRCS should withdraw from
the Interagency Memorandum of Agreement on Wetlands (MOA) with FWS,
Environmental Protection Agency (EPA), and the U.S. Army Corps of
Engineers (Corps). This comment is outside the scope of this rule, but
as discussed in greater detail below, NRCS is dedicated to continued
coordination with the other Federal agencies with wetland
responsibilities. Currently, the MOA provides a useful and available
framework for this coordination.
Description of Amendments
As the summary of the forum comments indicates, the statutory
changes affect provisions throughout 7 CFR part 12. Because of these
numerous changes, USDA will republish part 12 in its entirety to help
the public form opinions and offer comments. When USDA reviews the
comments received from the public, those comments concerning new
regulatory provisions will receive greater consideration.
In addition to revisions necessary to accommodate changes in the
Act, USDA makes several changes to interpret, clarify, or specify
procedures followed in the implementation for the HEL and WC
provisions. USDA invites public comment on these changes.
Amendments to the HEL Provisions
USDA finds that the following regulatory changes will improve the
quality of implementation of the HEL provisions of the 1985 Act:
Section 12.5(a)(6)(ii) is amended to list factors that
NRCS will consider when a landowner requests a variance related to
weather, pest, or disease problems.
Section 12.22(c) is added to clarify that when fields are
combined, the part of the new field that was previously a highly
erodible field shall continue to be subject to the highly erodible land
requirements.
Section 12.23(a) is amended to clarify that the adequacy
of a conservation system will be evaluated according to whether it
conforms to the NRCS field office technical guide in use at the time
that the plan or system is developed or revised.
Section 12.23(b) is added to clarify procedures to be used
to evaluate the adequacy of conservation systems for achieving
substantial reduction in soil erosion on land with and without cropping
history.
Section 12.23(c) is added to specify that conservation
field trials included in a person's conservation plan must have prior
approval by NRCS and must be documented in the person's conservation
plan specifying the limited time period during which the field trial is
in effect.
Section 12.23(j) sets forth the factors to be considered
by the FSA State Committee in determining whether to grant a person's
request for relief based on undue economic
[[Page 47022]]
hardship in implementing a conservation system.
Amendments to the WC Provisions
USDA finds that the following changes will improve the
implementation of the WC provisions of the 1985 Act (WC provisions):
Identification of wetland types: The WC provisions clearly limit
the conversion of wetlands and the planting of an agricultural
commodity on a converted wetland, yet the technical identification of
when these provisions are triggered can prove complex. Even though the
1985 Act implicitly identifies three distinct land types (wetlands,
converted wetlands, and non-wetlands), the inherent complexity of
natural systems and the diversity of land management methods available
to an agricultural producer require that greater sophistication be used
in application of broad national standards to local conditions. Some
areas of land have been planted to an agricultural commodity but still
exhibit the characteristic of a natural wetland if cropping ceases for
even a short period of time. Likewise, areas managed for hay or pasture
can exhibit the characteristics of a natural wetland if the management
of the area ceases. Some activities can permanently remove most of the
water from an area without making the production of an agricultural
commodity possible while natural events can make the production of an
agricultural commodity possible without permanently removing water from
an area.
Since 1987, USDA has identified in policy the threshold
characteristics that define when: a wetland has been manipulated
sufficiently to make the production of an agricultural commodity
possible; a wetland is ``converted;'' conditions meet a particular
exemption identified under the 1985 Act; and a producer has expanded
the drainage system beyond what existed prior to December 23, 1985. The
USDA is adding definitions to Sec. 12.2 to state more precisely the
variety of wetland types found in the agricultural landscape. Section
12.5 and Secs. 12.30-12.33 are amended to describe how these wetland
types relate to particular exemptions from ineligibility. In this
manner, agricultural producers are provided the maximum flexibility to
manage their lands in a manner that will not trigger the ineligibility
provisions of the 1985 Act.
Coordination with other Federal agencies: Consistent with the
intent expressed in the Manager's Report accompanying the 1996 Act
amendments, the changes made in this rule ``do not supersede the
wetland protection authorities and responsibilities of the
Environmental Protection Agency [EPA] or the Corps of Engineers [the
Corps] under Section 404 of the Clean Water Act.'' This rule is
promulgated under the authority of the 1985 Act, as amended, and
therefore does not affect the obligations of any person under other
Federal statutes, or the legal authorities of any other Federal agency
including, for example, EPA's authority to determine the geographic
scope of Clean Water Act jurisdiction. Nonetheless, NRCS, the Corps,
and EPA place a high priority on adopting procedures and policies that
minimize duplication and inconsistencies between the wetland
conservation provisions of the 1985 Act and the Clean Water Act section
404 programs. To help achieve these important policy objectives, on
January 6, 1994, four Federal agencies with wetland responsibilities
(USDA, EPA, the Department of the Interior, the Department of the Army)
entered into a Memorandum of Agreement (MOA), regarding the delineation
of wetlands for purposes of section 404 of the Clean Water Act and the
WC provisions. This MOA provides a framework for continuing
coordination between the Federal agencies regarding the administration
of Federal wetland laws. Consistent with the objectives of the MOA, the
NRCS will continue to coordinate with the other Federal agencies in the
development of its policies and procedures related to the
implementation of these regulations.
More specifically, the agencies will coordinate to develop policies
and procedures for evaluating the accuracy of existing non-certified
wetland determinations made by NRCS. The necessary first step in these
procedures will be to make an assessment of the quality of previous
determinations. After completing the quality assessment, in order to
provide certainty for the agricultural community, the Federal agencies
will complete the process of validating prior determinations in an
expeditious manner.
It is also the goal of the agencies to minimize duplication and
inconsistencies between the WC provisions and the Clean Water Act. The
agencies will coordinate to develop policies and procedures to minimize
duplication and inconsistencies between the WC provisions and the Clean
Water Act programs regarding other issues; in particular, conversion
for non-agricultural use, minimal effects determinations (including
categorical minimal effects exemptions), mitigation determination, or
other written agreements between persons and NRCS, the re-establishment
of agriculture use on abandoned farmed wetlands and farmed-wetland
pasture, conversions due to NRCS wetland determination errors, and
drainage maintenance. As part of this effort, the Corps intends to
develop a new Clean Water Act nationwide permit that addresses NRCS
minimal effects determinations, NRCS mitigation requirements, and
modify the existing nationwide permit that addresses voluntary wetland
restoration (See 61 FR part VII (June 17, 1996)).
In the MOA, the agencies agreed to follow certain guidelines for
delineating wetlands. The MOA agencies currently use the 1987 Corps of
Engineers Wetland Delineation Manual (1987 Corps Manual) for
delineating wetlands on areas where the native vegetation is intact
(i.e., non-agricultural lands) and use the National Food Security Act
Manual, Third ed. (NFSAM), for delineating wetlands on areas where the
native vegetation has been removed due to ongoing agricultural
activities (i.e., agricultural lands).
Copies of the NFSAM and the MOA are available from the NRCS, P.O.
Box 2890, Washington, D.C., 20013. Copies of the 1987 Corps Manual are
available from the National Technical Information Service (NTIS), 5285
Port Royal Road, Attn: Order Department, Springfield, Virginia, 22171.
Copies of the Supplemental guidance issued by the Corps concerning use
of the 1987 Manual (i.e., the October 7, 1991, Questions and Answers,
and the March 6, 1992, Clarification and Interpretation Memorandum) may
be obtained by contacting the Regulatory Branch of the local Corps
district, the EPA Wetlands Hotline at (800) 832-7828, or the Regulatory
Branch of Corps headquarters (Office of the Chief of Engineers) at
(202) 272-0199. NRCS will publish notice in the Federal Register
concerning a change in the Federal wetland delineation criteria that
may be used in implementation of the WC provisions.
This interim final rule, however, only applies to administration of
Title XII of the 1985 Act. As discussed earlier, the four agencies have
identified a need to expand and revise the MOA to assure consistency
and fairness in the implementation of these acts. The current MOA will
remain in effect until it is amended or rescinded by the four agencies.
A goal of the Administration's 1993 Wetlands Plan is to harmonize
the WC provisions and the Clean Water Act to the extent practicable.
These regulations are modified in several ways to further the
President's Wetlands Plan. In
[[Page 47023]]
particular, Sec. 12.5(b)(5) provides that when a person requests relief
on the basis that an action was conducted in good faith, USDA may
consider whether the person has a record of violating the wetland
provisions of these regulations or other Federal, State, or local
wetland provisions.
Additionally, Sec. 12.6(e) is added to state that NRCS may accept
the assistance of other Federal agencies to carry out the wetland
responsibilities of these regulations. Sections 12.30(a) and (b)
provide that NRCS will consult with FWS at the State level to develop a
process for implementation of the WC provisions.
Section 12.30(c) describes the procedure for certification of
wetland determinations and specifies that certified wetland
determinations will meet current Federal mapping conventions.
A certified wetland determination will remain in effect unless the
person affected by the certification requests a review under certain
circumstances or the wetland characteristics are changed as a result of
human activities.
Section 12.31(b)(3) is amended to provide that the determination of
prevalence of hydrophytic vegetation will be made in accordance with
the current Federal wetland delineation methodology in use at the time
of the determination. This change assures that the four agencies will
utilize consistent and up-to-date technical standards and criteria.
Summary of Rule Modifications
Based on the changes in the 1996 Act and the other considerations
set forth above, the changes to 7 CFR part 12 adopted in this notice
are as follows:
Subpart A
This interim final rule adds several new definitions to Sec. 12.2.
The Department of Agriculture Reorganization Act of 1994 abolished
several agencies and established new agencies to assume Department
responsibilities. Therefore, Sec. 12.2 is amended to reflect the new
agencies with responsibilities for implementation of these regulations.
Section 12.2: This interim final rule adds new definitions for
``conservation plan,'' ``conservation system,'' and ``field'' as stated
in the statute. It also adds several new definitions related to types
of wetlands and management actions related to wetlands that have
previously only been identified in policy. Definitions for ``prior-
converted cropland,'' ``farmed wetland,'' ``farmed-wetland pasture,''
and ``commenced-conversion wetland'' have been added. Other provisions
of the rule have been amended, including Sec. 12.5 and Secs. 12.31-.33,
to incorporate these new definitions where applicable.
The 1996 Act amendments provide that a person who converts a
wetland may remain eligible for USDA program benefits if the loss of
wetland functions and values are mitigated through the restoration,
enhancement, or creation of a wetland. Therefore, definitions for
``creation'', ``enhancement'', and ``restoration'', have been added to
clarify this new flexibility.
Section 12.3: This interim final rule applies to all actions taken
after July 3, 1996, and to determinations made after, or pending on,
July 3, 1996, the date on which the HEL and WC statutory amendments
become effective. This section is amended to reflect the passage of the
1996 Act and the scope of these new provisions.
Section 12.4: Section 12.4 describes the actions that will cause a
person to lose eligibility for USDA program benefits and the program
benefits that are subject to reduction or loss. The 1996 Act treats HEL
and WC differently regarding the programs encompassed by each provision
and the extent of the sanctions if the provisions are violated. Section
12.4 deletes applicability to some programs, such as crop insurance and
obsolete programs. A person who violates the WC provisions may lose all
or only a portion of certain USDA benefits, but a person who violates
HEL could lose all of of these same benefits and additional program
benefits. Sections 12.4(c) is amended to include an interpretation of
which crop year's benefits are affected by a violation decision, and
sets forth the factors that FSA will consider in determining the extent
of benefits to be lost based on the seriousness of the violation.
Section 12.5: The 1996 Act amendments modify the provisions of
Sec. 12.5 regarding the exemptions from ineligibility for USDA program
benefits. Section 12.5(a) addresses the exemptions that apply to HEL
and Sec. 12.5(b) addresses the exemptions that apply to WC.
Section 12.5(a)(5) specifies that HEL violations that are
determined to have been made in good-faith are eligible for graduated
sanctions if they were on land that was converted from native
vegetation, i.e., rangeland or woodland, to crop production after
December 23, 1985. For good faith violations on land that was converted
from native vegetation, i.e., rangeland or woodland, to crop production
before December 23, 1985, the person will be allowed up to one year to
correct the problem before being found ineligible. After one year, if
the problem is not corrected, the ineligibility provisions of Sec. 12.4
will apply. Section 12.5(a)(6) grants an automatic variance if within
30 days NRCS fails to respond to a persons request for a variance
because of weather, pest, or disease. It describes criteria that NRCS
will consider when determining whether to grant a variance for a
natural disaster such as weather, pest, or disease. NRCS is especially
soliciting comments on how these criteria may be specified to ensure
that variances are granted where appropriate.
Under Sec. 12.5(b), the exemptions from ineligibility relative to
wetland conservation, there exists a new exemption for land that was
certified as having been converted prior to December 23, 1985, (prior-
converted croplands), but had returned to wetland characteristics after
that date. This exemption provides that if certain requirements are
met, a prior-converted cropland will not be considered abandoned for
purposes of implementation of these regulations. Likewise, there exists
another new exemption for areas that NRCS determined were manipulated
but were not completely converted prior to December 23, 1985, (farmed
wetlands and farmed-wetland pastures), but may revert to wetland status
through a voluntary restoration, enhancement, or creation action. This
exemption provides that if certain requirements are met, the area will
not be considered abandoned for purposes of implementation of these
regulations.
These exemptions do not address how the Corps may treat these
wetland types for purposes of section 404 of the Clean Water Act. The
Corps has a notice in 61 FR part VII (June 17, 1996) to issue, reissue,
and modify the nationwide permits for section 404 of the Clean Water
Act that addresses these issues.
The 1996 Act provides that certain wetland conversion activities
that were conducted pursuant to a permit issued under section 404 of
the Clean Water Act may be exempt from ineligibility under the WC
provisions, if the conversion activity was adequately mitigated for
purposes of these provisions. This rule provides that a person who
received an individual permit under section 404 of the Clean Water Act
after December 23, 1985, and met certain sequencing requirements, is
exempt from the ineligibility provisions of these regulations.
This rule, however, provides that a person whose conversion
activity is encompassed by a nationwide or regional general permit
issued pursuant to section 404 of the Clean Water Act
[[Page 47024]]
may not be exempt under these regulations. USDA will evaluate whether
any mitigation was required, and whether the wetland functions and
values lost by the conversion activity were adequately replaced before
USDA decides whether the conversion activity is exempt from
ineligibility under these regulations.
The regulations that existed prior to this interim final rule
described a detailed procedure by which a person could receive a
commenced conversion determination from FSA. Persons who believed that
they qualified for such a determination had to request one from FSA by
September 19, 1988. The purpose of the determination was to minimize
any unnecessary economic hardship to someone who had incurred
substantial financial obligations related to the conversion of a
wetland prior to December 23, 1985, but had not actually converted the
wetland by that date. Any person who received a commenced-conversion
wetland determination had to complete the conversion activity by
January 1, 1995, to retain the exemption status. Because the commenced
conversion determination had to be received by 1988 and the conversion
had to be completed by the end of 1994, the references in the rule
related to the process to obtain a determination have been removed. If
a person completed conversion activity by January 1, 1995, the land
will qualify for the same exemptions from ineligibility as prior-
converted cropland. If, however, a person did not complete the
conversion activity by that date, the land will be subject to the same
requirements under this rule as farmed wetlands.
The 1996 Act provides that a person may remain eligible for an
action resulting in the conversion of a wetland if the wetland
functions and values are adequately mitigated through the restoration
of a converted wetland, the enhancement of an existing wetland, or the
creation of a new wetland. Section 12.5(b)(4) provides that this
exemption applies if the mitigation is completed in accordance with
several requirements, including that the person implement a mitigation
plan approved by NRCS. The mitigation plan may be a single document or
it may be a component of a larger conservation plan created voluntarily
by the program participant. The requirements for this exemption are
similar to the requirements for restoration of a converted wetland
under the current regulations, such as the granting of an easement to
USDA, recording an easement on the public land records, and that such
mitigation not be at the expense of the Federal government.
The 1996 Act provides that USDA may expend Federal funds for the
establishment of a pilot program for mitigation banking. USDA has not
yet decided whether it will establish such a pilot program or what the
particulars of such a program would be. During the public comment
period, USDA is especially soliciting comments from the public
regarding this subject.
The 1996 Act removes the requirement for graduated sanctions if the
FSA determines that a wetland violation was committed in good faith.
Central to the determination about whether a person acted in good faith
is the knowledge available to the person concerning the existence of a
wetland on the subject land. This knowledge can either be direct, such
as information received from NRCS in the form of a wetland
determination, or can be inferred from a person's past experience with
violating wetland laws or regulations. This interim final rule provides
that if a person is considered to have acted in good faith and the
person agrees to implement a mitigation plan, then USDA may waive
applying the ineligibility provisions of Sec. 12.4.
Section 12.6: Section 12.6 concerns the respective responsibilities
of USDA agencies; the new responsibilities created by the 1996 Act have
been added. Section 12.6(b) is amended to specify that FSA is
responsible for determining the extent of reduction in benefits for
wetland violations based on the seriousness of the violation, and for
determining whether a person should receive relief because application
of a conservation system would result in undue economic hardship.
Section 12.6(c) is amended to reflect that NRCS is responsible for
providing information to FSA relating to the seriousness of a
violation.
In response to the need to coordinate with the MOA agencies
regarding wetland determinations, a new paragraph has been added to
Sec. 12.6 New paragraph (f) provides that NRCS may accept the
assistance of the MOA agencies in implementing these regulations. This
paragraph also confirms that NRCS will continue to seek the
coordination of the other agencies on wetland matters to increase the
public's understanding of the importance of wetland functions and
values and the objectives of the WC provisions and the Clean Water Act.
Section 12.7: Section 12.7 addresses certification by a program
participant that such participant is in compliance with the HEL and WC
provisions. Section 12.7 is amended to allow a person to certify
application of practices in a plan or measurement of residue required
by a plan.
Section 12.8: Section 12.8 is amended to revise the definition of
affiliated persons for the purpose of determining whose benefits may be
affected by a decision and to what extent. In particular, Sec. 12.8(b)
is amended to provide that spouses who provide sufficient evidence of
separate operations shall not be considered affiliates, and
partnerships, trusts, and joint ventures are not considered affiliates
if the interest is held indirectly through another business enterprise.
Section 12.8(d) limits the reduction in payments for partnerships,
joint ventures, trust, or other enterprises to the extent of interest
held by the person responsible for the violation. Section 12.8(e)
states that limitations on affiliations if action has been taken to
avoid payment reductions for partnerships, joint ventures, trusts, or
the application of the sanctions provided for in the regulations.
Subpart B
Section 12.21: Section 12.21 is amended to include a reference to
publication of soil loss equations at 7 CFR part 610.
Section 12.22: Section 12.22 is amended to allow combining HEL and
non-HEL fields, but the requirements of these regulations continue to
apply to the previous HEL portion only.
Section 12.23: Section 12.23 is amended to specify that:
conservation systems shall be technically and economically feasible
(based on local resource conditions and available technology), cost
effective, and shall not cause undue economic hardship; the standard
for determining whether a plan provides a substantial reduction in
erosion is the estimated annual level of erosion compared to the level
before the system is applied; for new land brought into production, in
no case will the required conservation system permit a substantial
increase in erosion; procedures for conducting field trials as on-farm
reseach; and procedures and criteria used by FSA when a person requests
relief based on undue economic hardship.
Subpart C
Subpart C addresses the technical responsibilities of NRCS and the
technical criteria used to make the necessary determinations for
wetland conservation under these regulations.
Section 12.30: Section 12.30 is amended to reflect that NRCS will
continue to work with the Corps, EPA, and FWS to improve the quality of
wetland determinations and other
[[Page 47025]]
processes that affect the implementation of the WC provisions.
The 1996 Act repealed the requirement for consultation with FWS,
thus allowing the Secretary to determine under what circumstances FWS
should be utilized in the implementation of the WC provisions. Section
12.30 is amended to reflect that NRCS will develop a process at the
State level, in coordination with FWS, for implementing the WC
provisions and review such implementation on an annual basis. The
technical expertise of FWS may be utilized whenever NRCS determines
that such expertise is needed to address adequately the requirements of
the WC provisions or to enhance the quality of implementation.
Under the new mitigation flexibility provided by the 1996 Act, the
expertise of FWS will be valuable for conducting wetland functional
assessments associated with minimal effects determinations and
formulation of mitigation plans. The State-level process is intended,
in part, to identify any geographic or programmatic areas where NRCS
may need additional technical expertise to assess biological impacts of
proposed wetland conversions.
Section 12.30 is also amended to address the process for
certification of wetland determinations for the implementation of the
WC provisions of the 1985 Act. If NRCS certified a wetland
determination prior to July 3, 1996, the certification will remain
valid. Upon request, a person may obtain certification of a wetland
determination. A certified wetland determination means that the
determination is of sufficient quality to make a determination of
ineligibility for program benefits under these regulations. As
indicated above, NRCS will continue to work with the other MOA agencies
to coordinate the identification and certification of wetlands for the
purposes of these regulations and for the Clean Water Act. The agencies
recognize the importance of providing certainty for the agricultural
community as to the status of their wetland determinations which have
not been certified. The Federal agencies are therefore considering
establishing a specific time frame for completing the evaluation of
existing wetland determinations. During this time frame, an evaluation
would be made as to the accuracy of wetland determinations within a
given geographic area or of a specific type of wetland. Based on the
evaluation, landowners would be notified whether their current wetland
determinations are acceptable for both the WC provisions and the Clean
Water Act. USDA is especially seeking comments regarding implementation
of this process.
Section 12.31; Section 12.31 is amended to reflect that NRCS will
utilize the 1987 Corps Manual for determining the prevalence of
hydrophytic vegetation. Section 12.31 is also amended to add the
criteria for determining ``categorical minimal effect exemptions.'' If
NRCS identifies any categories of conversion activities and conditions
which would only have a minimal effect on wetland functions and values,
then such activities and conditions will be placed on a list of
``categorical minimal effect exemptions'' and such conversion
activities and conditions will be considered exempt from the
ineligibility provisions of these regulations. NRCS will incorporate
such activities and conditions in the provisions of these regulations
USDA is especially seeking comments regarding implementation of this
new exemption. For purposes of the Clean Water Act, the Corps intends
to address this provision as part of its reissuance of the Clean Water
Act section 404 nationwide permits (See 61 FR part VII (June 17,
1996)).
Sections 12.32 and 12.33: Sections 12.32 and 12.33 have been
amended to incorporate the definitions for farmed wetland, farmed-
wetland pasture, commenced-conversion wetland, and prior-converted
cropland, where appropriate.
Section 12.33: Section 12.33 has also been amended to modify the
conditions under which NRCS will consider a particular site to be
abandoned for purposes of these regulations. A person who wishes to
allow a particular site to revert to wetland conditions should contact
NRCS to ascertain what documentation is necessary to prevent such land
from being considered abandoned for purposes of the WC provisions of
these regulations. For purposes of the Clean Water Act, the Corps
intends to address this provision as part of its re-issuance of the
Clean Water Act section 404 nationwide permits (See 61 FR part VII
(June 17, 1996)).
The amendments to part 12 do not affect the recordkeeping
requirements and estimated burdens previously reviewed and approved
under Office of Management and Budget control number 0560-0004.
List of Subjects in 7 CFR Part 12
Administrative practices and procedures, Soil Conservation,
Wetlands.
Accordingly, Title 7 of the Code of Federal Regulations is amended
by revising Part 12 as follows:
PART 12--HIGHLY ERODIBLE LAND AND WETLAND CONSERVATION
Subpart A--General Provisions
Sec.
12.1 General.
12.2 Definitions.
12.3 Applicability.
12.4 Determination of ineligibility.
12.5 Exemptions.
12.6 Administration.
12.7 Certification of compliance.
12.8 Affiliated persons.
12.9 Landlords and tenants.
12.10 Scheme or device.
12.11 Action based upon advice or action of USDA.
12.12 Appeals.
Subpart B--Highly Erodible Land Conservation
12.20 NRCS responsibilities regarding highly erodible land.
12.21 Identification of highly erodible lands criteria.
12.22 Highly erodible field determination criteria.
12.23 Conservation plans and conservation systems.
Subpart C--Wetland Conservation
12.30 NRCS responsibilities regarding wetlands.
12.31 Onn-site wetland identification criteria.
12.32 Converted wetland identification criteria.
12.33 Use of wetland and converted wetland.
12.34 Paperwork Reduction Act assigned number.
Authority: 16 U.S.C. 3801 et seq.
Subpart A--General Provisions
Sec. 12.1 General.
(a) Scope. This part sets forth the terms and conditions under
which a person who produces an agricultural commodity on highly
erodible land or designates such land for conservation use, plants an
agricultural commodity on a converted wetland, or converts a wetland
shall be determined to be ineligible for certain benefits provided by
the United States Department of Agriculture (USDA) and agencies and
instrumentalities of USDA.
(b) Purpose. The purpose of the provisions of this part are to
remove certain incentives for persons to produce agricultural
commodities on highly erodible land or converted wetland and to
thereby--
(1) Reduce soil loss due to wind and water erosion;
(2) Protect the Nation's long-term capability to produce food and
fiber;
(3) Reduce sedimentation and improve water quality; and
(4) Assist in preserving the functions and values of the Nation's
wetlands.
[[Page 47026]]
Sec. 12.2 Definitions.
(a) General. The following definitions shall be applicable for the
purposes of this part:
Agricultural commodity means any crop planted and produced by
annual tilling of the soil, including tilling by one-trip planters, or
sugarcane.
CCC means the Commodity Credit Corporation, wholly-owned government
corporation within USDA organized under the provisions of 15 U.S.C. 714
et seq.
Conservation District (CD) means a subdivision of a State or local
government organized pursuant to the applicable law to develop and
implement soil and water conservation activities or programs.
Conservation plan means the document that--
(1) Applies to highly erodible cropland;
(2) Describes the conservation system applicable to the highly
erodible cropland and describes the decisions of the person with
respect to location, land use, tillage systems, and conservation
treatment measures and schedules; and
(3) Is approved by the local soil conservation district in
consultation with the local committees established under section
8(b)(5) of the Soil Conservation and Domestic Allotment Act (16 U.S.C.
590h(b)(5)) and the Natural Resources Conservation Service (NRCS) for
purposes of compliance with this part.
Conservation system means a combination of one or more conservation
measures or management practices that are--
(1) Based on local resource conditions, available conservation
technology, and the standards and guidelines contained in the NRCS
field office technical guides (available from NRCS State offices); and
(2) Designed for purposes of this part to achieve, in a cost-
effective and technically practicable manner, a substantial reduction
in soil erosion or a substantial improvement in soil conditions on a
field or group of fields containing highly erodible cropland when
compared to the level of erosion or soil conditions that existed before
the application of the conservation measures and management practices.
Conservation use or set aside means cropland that is designated as
conservation-use acreage, set aside, or other similar designation for
the purpose of fulfilling provisions under any acreage-limitation or
land-diversion program administered by the Secretary of Agriculture
requiring that the producer devote a specified acreage to conservation
or other non-crop production uses.
Creation of a wetland means the development of the hydrologic,
geochemical, and biological components necessary to support and
maintain a wetland where a wetland did not previously exist. Any
wetland established on a non-hydric soil will be considered a created
wetland.
CSREES means the Cooperative State Research, Education, and
Extension Service, an agency of USDA which is generally responsible for
coordinating the information and educational programs of USDA.
Department means the United States Department of Agriculture
(USDA).
Enhancement of a wetland means the alteration of an existing
wetland to increase its specific functions and values. Enhancement
actions include new capabilities, management options, structures, or
other actions to influence one or several functions and values.
Erodibility index means a numerical value that expresses the
potential erodibility of a soil in relation to its soil loss tolerance
value without consideration of applied conservation practices or
management.
FSA means the Farm Service Agency, an agency of USDA which is
generally responsible for administering commodity production adjustment
and certain conservation programs of USDA.
Field means a part of a farm that is separated from the balance of
the farm by permanent boundaries such as fences, roads, permanent
waterways, or other similar features. At the option of the owner or
operator of the farm, croplines may also be used to delineate a field
if farming practices make it probable that the croplines are not
subject to change. Any highly erodible land on which an agricultural
commodity is produced after December 23, 1985, and is not exempt under
Sec. 12.5(a), shall be considered part of the field in which the land
was included on December 23, 1985, unless, to carry out this title, the
owner and FSA agree to modify the boundaries of the field.
Highly erodible land means land that has an erodibility index of 8
or more.
Hydric soils means soils that, in an undrained condition, are
saturated, flooded, or ponded long enough during a growing season to
develop an anaerobic condition that supports the growth and
regeneration of hydrophytic vegetation.
Hydrophytic vegetation means plants growing in water or in a
substrate that is at least periodically deficient in oxygen during a
growing season as a result of excessive water content.
Landlord means a person who rents or leases farmland to another
person.
Local FSA office means the county office of the Farm Service Agency
serving the county or a combination of counties in the area in which a
person's land is located for administrative purposes.
NRCS means the Natural Resources Conservation Service, an agency
within USDA which is generally responsible for providing technical
assistance in matters of natural resources conservation and for
administering certain conservation programs of USDA.
Operator means the person who is in general control of the farming
operations on the farm during the crop year.
Owner means a person who is determined to have legal ownership of
farmland and shall include a person who is purchasing farmland under
contract.
Person means an individual, partnership, association, corporation,
cooperative, estate, trust, joint venture, joint operation, or other
business enterprise or other legal entity and, whenever applicable, a
State, a political subdivision of a State, or any agency thereof, and
such person's affiliates as provided in Sec. 12.8 of this part.
Restoration of a wetland means the re-establishment of wetland
conditions, including hydrologic condition or native hydrophytic
vegetation, to an area where a wetland had previously existed.
Secretary means the Secretary of USDA.
Sharecropper means a person who performs work in connection with
the production of a crop under the supervision of the operator and who
receives a share of such crop for such labor.
Soil map unit means an area of the landscape shown on a soil map
which consists of one or more soils.
State means each of the 50 states, the District of Columbia, the
Commonwealth of Puerto Rico, Guam, the Virgin Islands of the United
States, American Samoa, the Commonwealth of the Northern Mariana
Islands, or the Trust Territory of the Pacific Islands.
Tenant means a person usually called a ``cash tenant'', ``fixed-
rent tenant'', or ``standing rent tenant'' who rents land from another
for a fixed amount of cash or a fixed amount of a commodity to be paid
as rent; or a person (other than a sharecropper) usually called a
``share tenant'' who rents land from another person and pays as rent a
share of the crops or proceeds therefrom. A tenant shall not be
considered the farm operator unless the tenant is determined
[[Page 47027]]
to be the operator pursuant to this part and 7 CFR part 718.
Wetland, except when such term is a part of the term ``converted
wetland'', means land that--
(1) Has predominance of hydric soils;
(2) Is inundated or saturated by surface or groundwater at a
frequency and duration sufficient to support a prevalence of
hydrophytic vegetation typically adapted for life in saturated soil
conditions; and
(3) Under normal circumstances does not support a prevalence of
such vegetation, except that this term does not include lands in Alaska
identified as having a high potential for agricultural development and
a predominance of permafrost soils.
Wetland determination means a decision regarding whether or not an
area is a wetland, including identification of wetland type and size. A
wetland determination may include identification of an area as one of
the following types of wetland--
(1) Artificial wetland is an area that was formerly non-wetland,
but now meets wetland criteria due to human activities, such as:
(i) An artificial lake or pond created by excavating or diking land
that is not a wetland to collect and retain water that is used
primarily for livestock, fish production, irrigation, wildlife, fire
control, flood control, cranberry growing, or rice production, or as a
settling pond; or
(ii) A wetland that is temporarily or incidentally created as a
result of adjacent development activity;
(2) Commenced-conversion wetland is a wetland, farmed wetland,
farmed-wetland pasture, or a converted wetland on which conversion
began, but was not completed, prior to December 23, 1985.
(3) Converted wetland is a wetland that has been drained, dredged,
filled, leveled, or otherwise manipulated (including the removal of
woody vegetation or any activity that results in impairing or reducing
the flow and circulation of water) for the purpose of or to have the
effect of making possible the production of an agricultural commodity
without further application of the manipulations described herein if:
(i) Such production would not have been possible but for such
action, and
(ii) Before such action such land was wetland, farmed wetland, or
farmed-wetland pasture and was neither highly erodible land nor highly
erodible cropland;
(4) Farmed wetland is a wetland that prior to December 23, 1985,
was manipulated and used to produce an agricultural commodity, and on
December 23, 1985, did not support woody vegetation and met the
following hydrologic criteria:
(i) Is inundated for 15 consecutive days or more during the growing
season or 10 percent of the growing season, whichever is less, in most
years (50 percent chance or more), or
(ii) If a pothole, playa, or pocosion, is ponded for 7 or more
consecutive days during the growing season in most years (50 percent
chance of more) or is saturated for 14 or more consecutive days during
the growing season in most years (50 percent chance or more);
(5) Farmed-wetland pasture is wetland that was manipulated and
managed for pasture or hayland prior to December 23, 1985, and on
December 23, 1985, met the following hydrologic criteria:
(i) Inundated or ponded for 7 or more consecutive days during the
growing season in most years (5) percent chance or more), or
(ii) Saturated for 14 or more consecutive days during the growing
season in most years (50 percent chance or more);
(6) Not-inventoried land, is an area for which no evaluation of
soils, vegetation, or hydrology has been conducted to determine if
wetland criteria are met;
(7) Non-wetland is;
(i) Land that under natural conditions does not meet wetland
criteria, or
(ii) Is converted wetland the conversion of which occurred prior to
December 23, 1985, and on that date, the land did not meet wetland
criteria but and agricultural commodity was not produced and the area
was not managed for pasture or hay;
(8) Prior-converted cropland is a converted wetland where the
conversion occurred prior to December 23, 1985, an agricultural
commodity had been produced at least once before December 23, 1985, and
as of December 23, 1985, the converted wetland did not support woody
vegetation and met the following hydrologic criteria:
(i) Inundation was less than 15 consecutive days during the growing
season or 10 percent of the growing season, whichever is less, in most
years (50 percent chance or more); and
(ii) If a pothole, playa or pocosin, ponding was less than 7
consecutive days during the growing season in most years (50 percent
chance or more) and saturation was less than 14 consecutive days during
the growing season most years (50 percent chance or more); or
(9) Wetland, as defined above in this section.
Wetland delineation means outlining the boundaries of a wetland
determination on aerial photography, digital imagery, other graphic
representation of the area, or on the land.
(b) Terms for FSA operations. In the regulations in this part, and
in all instructions, forms, and documents in connection therewith, all
other words and phrases specifically relating to FSA operations shall,
unless required by the subject matter or the specific provisions of
this part, have the meanings assigned to them in the regulations at
part 718 of this title that govern reconstitutions of farms,
allotments, and bases and any subsequent amendment thereto.
Sec. 12.3 Applicability.
(a) Geographic scope. The provisions of this part shall apply to
all land, including Indian tribal land, in the fifty States, the
District of Columbia, the Commonwealth of Puerto Rico, Guam, the Virgin
Island of the United States, American Samoa, the Commonwealth of the
Northern Mariana Islands, and the Federated States of Micronesia, the
Republic of Palau, and the Republic of the Marshall Islands.
(b) Effective date. The provisions of this part apply to all
actions taken after July 3, 1996, and to determinations made after or
pending on July 3, 1996, except to the extent that Sec. 12.5(a)(5) and
12.5 (b)(4) through (b)(8) specify retroactive application on December
23, 1985, and November 28, 1990, for certain actions and determinations
regarding wetlands and converted wetlands. Actions taken and
determinations made prior to July 3, 1996, are subject to regulations
set forth in this part as of July 2, 1996, except as otherwise provided
in this part. Further, to the extent that a person may be eligible for
an exemption for an action taken before July 3, 1996, the action is
subject to the provisions of this part.
Sec. 12.4 Determination of ineligibility.
(a) Actions. Except as provided in Sec. 12.5, a person shall be
ineligible for all or a portion of USDA program benefits listed in this
section if:
(1) The person produces an agricultural commodity on a field in
which highly erodible land is predominant, or designates such a field
for conservation use;
(2) The person produces an agricultural commodity on wetland that
was converted after December 23, 1995; or
(3) After November 28, 1990, the person converts a wetland by
draining, dredging, filling, leveling, removing woody vegetation, or
other means for the purpose, or to have the effect, of making the
production of an agricultural commodity possible.
[[Page 47028]]
(b) Highly erodible land. A person determined to be ineligible
under paragraph (a)(1) of this section may be ineligible for all
program benefits listed in (d) and (e) of this section.
(c) Wetland conservation. A person determined to be ineligible
under paragraph (a)(2) of this section shall be ineligible for all or a
portion of the USDA program benefits listed in paragraph (d) of this
section for which the person otherwise would have been eligible during
the crop year of the commodity that was planted on the converted
wetland. A person determined to be ineligible under paragraph (a)(3) of
this section for the conversion of a wetland shall be ineligible for
all or a portion of the USDA program benefits listed in paragraph (d)
of this section for which the person otherwise would have been eligible
during the crop year which is equal to the calendar year during which
the violation occurred and each subsequent crop year until the
converted wetland is restored or the loss of wetland functions and
values have been mitigated prior to the beginning of such calendar year
in accordance with Sec. 12.5(b)(4)(i) (A) and (C) through (F) of this
part. Ineligibility under paragraph (a)(2) or (a)(3) of this section
may be reduced, in lieu of the loss of all benefits specified under
paragraph (d) of this section for such crop year, based on the
seriousness of the violation, as determined by the FSA Deputy
Administrator for Farm Programs or designee upon recommendation by the
FSA County Committee. Factors such as the information that was
available to the affected person prior to the violation, previous land
use patterns, the existence of previous wetland violations under this
part or under other Federal, State, or local wetland provisions, the
wetland functions and values affected, the recovery time for full
mitigation of the wetland functions and values, and the impact that a
reduction in payments would have on the person's ability to repay a
USDA farm loan shall be considered to making this determination.
(d) Programs subject to either highly erodible land or wetland
conservation. USDA program benefits covered by a determination of
ineligibility under this rule are:
(1) Contract payments under a production flexibility contract,
marketing assistance loans, and any type of price support or payment
made available under the Agricultural Market Transition Act, the
Commodity Credit Corporation Charter Act (15 U.S.C. 714 et seq.), or
any other Act;
(2) A farm credit program loan made or guaranteed under the
Consolidated Farm and Rural Development Act (7 U.S.C. 1921 et seq.) or
any other provision of law administered by FSA if the Secretary
determines that the proceeds of such loan will be used for a purpose
that contributes to the conversion of wetlands that would make
production of an agricultural commodity possible or for a purpose that
contributes to excessive erosion of highly erodible land (i.e.,
production of an agricultural commodity or highly erodible land without
a conservation plan or conservation system as required by this part);
(3) A payment made pursuant to a contract entered into under the
Environmental Quality Incentives Program under chapter 4 of subtitle D
of the Food Security Act of 1985, as amended; or a payment under any
other provision of Subtitle D of that Act;
(4) A payment made under section 401 or 402 of the Agricultural
Credit Act of 1978 (16 U.S.C. 2201 or 2202);
(5) A payment, loan, or other assistance under section 3 or 8 of
the Watershed Protection and Flood Prevention Act (16 U.S.C. 1003 or
1006a).
(e) Programs subject to highly erodible land only. In addition to
programs listed in paragraph (d) of this section, a person determined
to be ineligible under paragraph (a)(1) of this section shall be
ineligible as determined by FSA for the following USDA program benefits
for which the person otherwise would have been eligible during the crop
year for which the determination applies:
(1) A farm storage facility loan made under section 4(h) of the
Commodity Credit Corporation Charter Act (15 U.S.C. 714b(h));
(2) A disaster payment made under the Federal Agricultural
Improvement and Reform Act, Pub. L. 104-127, or any other act; and
(3) A payment made under section 4 or 5 of the Commodity Credit
Corporation Charter Act (15 U.S.C. 714b or 714c) for the storage of an
agricultural commodity acquired by the Commodity Credit Corporation.
(f) Prior loans. The provisions of paragraphs (a), (b), and (c) of
this section do not apply to any loan described in paragraphs (d) or
(e) of this section that was made prior to December 23, 1985.
(g) Determination of ineligibility. For the purpose of paragraph
(a) of this section, a person shall be determined to have produced an
agricultural commodity on a field in which highly erodible land is
predominant or to have designated such a field for conservation use, to
have produced an agricultural commodity on converted wetland, or to
have converted a wetland if:
(1) NRCS has determined that--
(i) Highly erodible land is predominant in such field, or
(ii) All or a portion of the field is converted wetland; and
(2) FSA has determined that the person is or was the owner or
operator of the land, or entitled to share in the crops available from
the land, or in the proceeds thereof; and
(3) With regard to the provisions of paragraph (a)(1) and (a)(2) of
this section, FSA has determined that the land is or was planted to an
agricultural commodity or was designated as conversation use during the
year for which the person is requesting benefits.
(h) Intent to participate in USDA programs. Persons who wish to
participate in any of the USDA programs described in paragraph (d) or
(e) of this section are responsible for contacting the appropriate
agency of USDA well in advance of the intended participated date so
that Form AD-1026 can be completed. This contact will help assure that
the appropriate determinations regarding highly erodible land or
wetland, and conversation plans or conversation systems are scheduled
in a timely manner. A late contact may not allow sufficient time for
USDA to service the request and could result in a substantial delay in
receiving a USDA determination of eligibility or ineligibility.
Sec. 12.5 Exemption.
(a) Exemptions regarding highly erodible land.
(1) Highly erodible cropland in production or in USDA programs
during 1981 through 1985 crop years. During the period beginning on
December 23, 1985, and ending on the later of January 1, 1990, or the
date that is two years after the date the cropland on which an
agricultural commodity is produced was surveyed by NRCS to determine if
such land is highly erodible, no person shall be determined to be
ineligible for benefits as provided in Sec. 12.4 as the result of the
production of an agricultural commodity on any highly erodible land:
(i) That was planted to an agricultural commodity in any year 1081
through 1985; or
(ii) That was set aside, diverted, or otherwise not cultivated in
any such crop years under a program administered by the Secretary for
any such crops to reduce production of an agricultural commodity.
[[Page 47029]]
(2) Compliance with a conservation plan or conservation system. as
further specified in this part, no person shall be ineligible for the
program benefits described in Sec. 12.4 as the result of production of
an agricultural commodity on highly erodible land or the designation of
such land for conservation use if such production or designation is in
compliance with a conservation plan or conservation system approved
under paragraph (a)(2)(i) or (a)(2)(ii) of this section. A person shall
not be ineligible for program benefits under Sec. 12.4 as the result of
the production of an agricultural commodity on highly erodible land or
as the result of designation of such land as conservation use if the
production or designation is:
(i) In an area within a CD, under a conservation system that has
been approved by the CD after the CD determines that the conservation
system is in conformity with technical standards set forth in the NRCS
field office technical guide for such district; or
(ii) In an area not within a CD, under a conservation system that
has been approved by NRCS to be adequate for the production of such
agricultural commodity on highly erodible land or for the designation
of such land as conservation use.
(3) Reliance upon NRCS determination for highly erodible land. A
person may be relieved from ineligibility for program benefits as the
result of the production of an agricultural commodity which was
produced on highly erodible land or for the designation of such land as
conservation use in reliance on a determination by NRCS that such land
was not highly erodible land, except that this paragraph shall not
apply to any agricultural commodity that was planted on highly erodible
land, or for the designation of highly erodible land as conservation
use after NRCS determines that such land is highly erodible land, and
the person is notified of such determinations.
(4) Areas of 2 acres or less. No person shall be determined to be
ineligible under Sec. 12
FR Doc. 96-22784 Highly Erodible Land and Wetland Conservation
.4 for noncommercial production of agricultural
commodities on highly erodible land on an area of 2 acres or less if it
is determined by FSA that such production is not intended to circumvent
the conservation requirements otherwise applicable under this part.
(5) Good faith.
(i) No person shall become ineligible under Sec. 12.4 as a result
of the failure of such person to apply a conservation system on highly
erodible land that was converted from native vegetation, i.e. rangeland
or woodland, to crop production before December 23, 1985, if FSA
determines such person has acted in good faith and without the intent
to violate the provisions of this part and if NRCS determines that the
person complies with paragraph (a)(5)(ii) of this section.
(ii) A person is who determined to meet the requirements of
paragraph (a)(5)(i) of this section shall be allowed a reasonable
period of time, as determined by NRCS, but not to exceed one year,
during which to implement the measures and practices necessary to be
considered applying the person's conservation plan. If a person does
not take the required corrective actions, the person may be determined
to be ineligible for the crop year during which such actions were to be
taken as well as any subsequent crop years. Notwithstanding the good-
faith requirements of paragraph (a)(5)(i) of this section, if NRCS
observes a possible compliance deficiency while providing on-site
technical assistance, NRCS shall provide to the responsible person, not
later than 45 days after observing the possible violation, information
regarding actions needed to comply with the plan and this subtitle.
NRCS shall provide this information in lieu of reporting the
observation as a violation, if the responsible person attempts to
correct the deficiencies as soon as practicable, as determined by NRCS,
after receiving the information, and if the person takes corrective
action as directed by NRCS not later than one year after receiving the
information. If a person does not take the required corrective actions,
the person may be determined to be ineligible for the crop year during
which the compliance deficiencies occurred as well as any subsequent
crop years.
(iii) No person shall become ineligible under Sec. 12.4 as a result
of failure to apply a conservation system with respect to highly
erodible cropland that was converted from native vegetation, i.e.,
rangeland or woodland, to crop production after December 23, 1985, if
such person has acted in good faith and without an intent to violate
the provisions of this part. The person shall, in lieu of the loss of
all benefits specified under Sec. 12.4 (d) and (e) for such crop year,
be subject to a reduction in benefits of not less than $500 nor more
than $5,000 depending upon the seriousness of the violation, as
determined by FSA. The dollar amount of the reduction will be
determined by FSA and may be based on the number of acres and the
degree of erosion hazard for the area in violation, as determined by
NRCS, or upon such other factors as FSA deems appropriate.
(iv) Any person whose benefits are reduced in a crop year under
paragraph (a)(5) of this section may be eligible for all of the
benefits specified under Sec. 12.4 (d) and (e) for any subsequent crop
year if NRCS determines that such person is applying a conservation
plan according to the schedule set forth in the plan on all highly
erodible land planted to an agricultural commodity or designated as
conservation use.
(6) Allowable variances.
(i) Notwithstanding any other provisions of this part, no person
shall be determined to be ineligible for benefits as a result of the
failure of such person to apply a conservation system if NRCS
determines that--
(A) The failure is technical and minor in nature and that such
violation has little effect on the erosion control purposes of the
conservation plan applicable to the land on which the violation has
occurred; or
(B) The failure is due to circumstances beyond the control of the
person; or
(C) NRCS grants a temporary variance from the practices specified
in the plan for the purpose of handling a specific problem, including
weather, pest, and disease problems, which NRCS determines cannot
reasonably be addressed except through such variance.
(ii) If the person's request for a temporary variance involves the
use of practices or measures to address weather, pest, or disease
problems, NRCS shall make a decision on whether to grant the variance
during the 30-day period beginning on the date of receipt of the
request. If NRCS fails to render a decision during the period, the
temporary variance shall be considered granted unless the person
seeking the variance had reason to know that the variance would not be
granted. In determining whether to grant a variance for natural
disasters such as weather, pest, or disease problems, NRCS will
consider such factors as:
(A) The percent of a stand damaged or destroyed by the event;
(B) The percent of expected crop production compared to normal
production for that crop;
(C) The documented invasion of non-native insects, weeds, or
diseases for which no recognized treatment exists;
(D) Whether an event is severe or unusual based on historical
weather records; and
(E) Other specific circumstances caused by a natural event that
prevented the implementation of conservation practices or systems,
installation of structures, or planting of cover crops.
[[Page 47030]]
(b) Exemptions for wetlands and converted wetlands.
(1) General exemptions. A person shall not be determined to be
ineligible for program benefits under Sec. 12.4 as the result of the
production of an agricultural commodity on converted wetland or the
conversion of wetland if:
(i) The land is a prior-converted cropland and meets the definition
of a prior-converted cropland as of the date of a wetland determination
by NRCS;
(ii) The land has been determined by NRCS to be a prior-converted
cropland and such determination has been certified, and NRCS determines
that the wetland characteristics returned after the date of the wetland
certification as a result of--
(A) The lack of maintenance of drainage, dikes, levees, or similar
structures,
(B) The lack of management of the lands containing the wetland, or
(C) Circumstances beyond the control of the person;
(iii) The land was determined by NRCS to be a farmed wetland or a
farmed-wetland pasture and--
(A) Such land meets wetland criteria through a voluntary
restoration, enhancement, or creation action after that determination,
(B) The technical determinations regarding the baseline site
conditions and the restoration, enhancement, or creation action have
been adequately documented by NRCS,
(C) The proposed conversion action is documented by the NRCS prior
to implementation, and
(D) The extent of the proposed conversion is limited so that the
conditions will be at least equivalent to the wetland functions and
values that existed at the time of implementation of the voluntary
wetland restoration, enhancement, or creation action;
(iv) NRCS has determined that the conversion if for a purpose that
does not make the production of an agricultural commodity possible,
such as conversions for fish production, trees, vineyards, shrubs,
cranberries, agricultural waste management structures, livestock ponds,
fire control, or building and road construction and no agricultural
commodity is produced on such land;
(v) NRCS has determined that the actions of the person with respect
to the conversion of the wetland or the combined effect of the
production of an agricultural commodity on a wetland converted by the
person or by someone else, individually and in connection with all
other similar actions authorized by NRCS in the area, would have only a
minimal effect on the wetland functions and values of wetlands in the
area;
(vi) (A) After December 23, 1985, the Army Corps of Engineers
issued an individual permit pursuant to section 404 of the Clean Water
Act, 33 U.S.C. 1344, authorizing such action and the permit required
mitigation that adequately replaced the functions and values of the
wetlands converted, as determined by NRCS, or
(B) After December 23, 1985, the action is encompassed under
section 404 of the Clean Water Act, 33 U.S.C. 1344, by an Army Corps of
Engineers nationwide or regional general permit and the wetland
functions and values were adequately mitigated, as determined by NRCS;
or
(vii) The land is determined by NRCS to be--
(A) An artificial wetland,
(B) A wet area created by a water delivery system, irrigation,
irrigation system, or application of water for irrigation,
(C) A nontidal drainage or irrigation ditch excavated in non-
wetland, or
(D) A wetland converted by actions of persons other than the person
applying for USDA program benefits or any of the person's predecessors
in interest after December 23, 1985, if such conversion was not the
result of a scheme or device to avoid compliance with this part.
Further drainage improvement on such land is not permitted without loss
of eligibility for USDA program benefits, unless NRCS determines under
paragraph (b)(1)(v) of this section that further drainage activities
applied to such land would have minimal effect on the wetland functions
and values in the area. In applying this paragraph, a converted wetland
shall be presumed to have been converted by the person applying for
USDA program benefits unless the person can show that the conversion
was caused by a third party with whom the person was not associated
through a scheme or device as described under Sec. 12.10 of this part.
In this regard, activities of a water resource district, drainage
district, or similar entity will be attributed to all persons within
the jurisdiction of the district or other entity who are assessed for
the activities of the district or entity. Accordingly, where a person's
wetland is converted due to the actions of the district or entity, the
person shall be considered to have caused or permitted the drainage.
Notwithstanding the provisions of the preceding sentences and as
determined by FSA to be consistent with the purposes of this part, the
activities of a drainage district or other similar entity will not be
attributed to a person to the extent that the activities of the
district or entity were beyond the control of the person and the
wetland converted is not used by the person for the production of an
agricultural commodity or a forage crop for harvest by mechanical means
or mitigation for the converted wetland occurs in accordance with this
part.
(2) Commenced conversion wetlands.
(i) The purpose of a determination of a commenced conversion made
under this paragraph is to implement the legislative intent that those
persons who had actually started conversion of a wetland or obligated
funds for conversion prior to December 23, 1985, would be allowed to
complete the conversion so as to avoid unnecessary economic hardship.
(ii) All persons who believed they had a wetland or converted
wetland for which conversion began but was not completed prior to
December 23, 1985, must have requested by September 19, 1988, FSA to
make a determination of commencement in order to be considered exempt
under this section.
(iii) Any conversion activity considered by FSA to be commenced
under this section lost its exempt status if such activity as not
completed on or before January 1, 1995. For purposes of this part, land
on which such conversion activities were completed by January 1, 1995,
shall be evaluated by the same standards and qualify for the same
exemptions as prior-converted croplands. For purposes of this part,
land on which such conversion activities were not completed by January
1, 1995, shall be evaluated by the same standards and qualify for the
same exemptions as wetlands or famed wetlands, as applicable.
(iv) Only those wetlands for which the construction had begun, or
to which the contract or purchased supplies and materials related,
qualified for a determination of commencement. However, in those
circumstances where the conversion of wetland did not meet the specific
requirements of this paragraph, the person could have requested a
commencement of conversion determination from the FSA Deputy
Administrator for Farm Programs, upon a showing that undue economic
hardship would have resulted because of substantial financial
obligations incurred prior to December 23, 1985, for the primary and
direct purpose of converting the wetland.
(3) Wetlands farmed under natural conditions. A person shall not be
determined to be ineligible for program benefits under Sec. 12.4 of
this part as a result of the production of an agricultural commodity on
a wetland on which the owner or operator of a farm
[[Page 47031]]
or ranch uses normal cropping or ranching practices to produce
agricultural commodities in a manner that is consistent for the area,
where such production is possible as a result of natural conditions,
such as drought, and is without action by the producer that alters the
hydrology or removes woody vegetation.
(4) Mitigation.
(i) No person shall be determined to be ineligible under Sec. 12.4
for any action associated with the conversion of a wetland if the
wetland functions and values are adequately mitigated, as determined by
NRCS, through the restoration of a converted wetland, the enhancement
of an existing wetland, or the creation of a new wetland, if the
mitigation--
(A) Is in accordance with a mitigation plan approved by NRCS;
(B) Is in advance of, or concurrent with, the wetland conversion or
the production of an agricultural commodity, as applicable;
(C) Is not at the expense of the federal government in either
supporting the direct or indirect costs of the restoration activity or
costs associated with acquiring or securing mitigation sites, except if
conducted under a mitigation banking pilot program established by USDA;
(D) Occurs on lands in the same general area of the local watershed
as the converted wetlands, provided that for purposes of this
paragraph, lands in the same general area of the local watershed may
include regional mitigation banks;
(E) Is on lands for which the owner has granted an easement to
USDA, recorded the easement on public land records, and has agreed to
the maintenance of the restored, created, or enhanced wetland for as
long as the converted wetland for which the mitigation occurred remains
in agricultural use or is not returned to its original wetland
classification with equivalent functions and values; and
(F) Provides the equivalent functions and values that will be lost
as a result of the wetland conversion.
(ii) A mitigation plan is a record of decisions that document the
actions necessary to compensate for the loss of wetland functions and
values that result from converting a wetland. The mitigation plan may
be a component of a larger natural resources conservation plan.
(iii) The State Conservationist, in consultation with the State
Technical Committee, may name certain types or classes of wetland not
eligible for exemption under paragraph (b)(4)(i) of this section where
the State Conservationist determines that mitigation will not achieve
equivalent replacement of wetland functions and values within a
reasonable time frame or for other reasons identified by the State
Conservationist. Any type or class of wetland that a State
Conservationist identifies as not eligible for exemption under
paragraph (b)(4)(i) of this section will be published in the Federal
Register for inclusion in this part.
(5) Good Faith Violations.
(i) A person who is determined under Sec. 12.4 to be ineligible for
benefits as the result of the production of an agricultural commodity
on a wetland converted after December 23, 1985, or as the result of the
conversion of a wetland after November 28, 1990, may regain eligibility
for benefits if--
(A) FSA determines that such person acted in good faith and without
the intent to violate the wetland provisions of this part, and
(B) NRCS determines that the person within an agreed to period, not
to exceed 1 year, is implementing all practices in a mitigation plan.
(ii) In determining whether a person acted in good faith under
paragraph (b)(5)(i)(A) of this section, the FSA shall consider such
factors as whether--
(A) The characteristics of the site were such that the person
should have been aware that a wetland existed on the subject land,
(B) NRCS had informed the person about the existence of a wetland
on the subject land,
(C) The person did not convert the wetland, but planted an
agricultural commodity on converted wetland when the person should have
known that a wetland previously existed on the subject land,
(D) The person has a record of violating the wetland provisions of
this part or other Federal, State, or local wetland provisions, or
(E) There exists other information that demonstrates that the
person acted with the intent to violate the wetland provisions of this
part.
(iii) After the requirements of paragraph (b)(5)(i) of this section
are met, USDA may waive applying the ineligibility provisions of
Sec. 12.4.
(6) Reliance upon NRCS wetland determination. (i) A person shall
not be ineligible for program benefits as a result of taking an action
in reliance on a previous certified wetland determination by NRCS.
(ii) A person who may be ineligible for program benefits as the
result of the production of an agricultural commodity on converted
wetland or for the conversion of a wetland may seek relief under
Sec. 12.11 of this part if such action was taken in reliance on an
incorrect technical determination by NRCS as to the status of such
land. If the error caused the person to make a substantial financial
investment, as determined by the NRCS, for the conversion of a wetland,
the person may be relieved of ineligibility for actions related to that
portion of the converted wetland for which the substantial financial
investment was expended in conversion activities. The relief available
under this paragraph shall not apply to situations in which the person
knew or reasonably should have known that the determination was in
error because the characteristics of the site were such that the person
should have been aware that a wetland existed on the subject land, or
for other reasons.
(7) Responsibliity to provide evidence. It is the responsibility of
the person seeking an exemption related to converted wetlands under
this section to provide evidence, such as receipts, crop-history data,
drawings, plans or similar information, for purposes of determining
whether the conversion or other action is exempt in accordance with
this section.
Sec. 12.6 Administration.
(a) General. A determination of ineligibility for benefits in
accordance with the provisions of this part shall be made by the agency
of USDA to which the person has applied for benefits. All
determinations required to be made under the provisions of this part
shall be made by the agency responsible for making such determinations,
as provided in this section.
(b) Administration by FSA.
(1) The provisions of this part which are applicable to FSA will be
administered under the general supervision of the Administrator, FSA,
and shall be carried out in the field in part by State FSA committees
and county FSA committees (COC).
(2) The FSA Deputy Administrator for Farm Programs may determine
any question arising under the provisions of this part which are
applicable to FSA and may reverse or modify any determination of
eligibility with respect to programs administered by FSA made by a
State FSA committee or COC or any other FSA office or FSA official
(except the Administrator) in connection with the provisions of this
part.
(3) FSA shall make the following determinations which are required
to be made in accordance with this part:
(i) Whether a person produced an agricultural commodity on a
particular field as determined under Sec. 12.5(a)(1);
(ii) The establishment of field boundaries;
[[Page 47032]]
(iii) Whether land was planted to an agricultural commodity in any
of the years, 1981 through 1985, for the purposes of Sec. 12.5(a)(1);
(iv) Whether land was set aside, diverted, or otherwise not
cultivated under a program administered by the Secretary for any crop
to reduce production of an agricultural commodity under Sec. 12.4(g)
and Sec. 12.5(a)(1);
(v) Whether for the purposes of Sec. 12.9, the production of an
agricultural commodity on highly erodible land or converted wetland by
a landlord's tenant or sharecropper is required under the terms and
conditions of the agreement between the landlord and such tenant or
sharecropper;
(vi) Whether the conversion of a particular wetland was commenced
before December 23, 1985, for the purposes of Sec. 12.5(b)(3);
(vii) Whether the conversion of a wetland was caused by a third
party under Sec. 12.5(b)(1)(vii)(D);
(viii) Whether certain violations were made in good faith under
Secs. 12.5(a)(5) or 12.5(b)(5);
(ix) The determination of the amount of reduction in benefits based
on the seriousness of the violation, based on technical information
provided by NRCS;
(x) The determination of whether the application of the producer's
conservation system would impose an undue economic hardship on the
producer; and
(xi) Whether the proceeds of a farm loan made, insured, or
guaranteed by FSA will be used for a purpose that will contribute to
excessive erosion of highly erodible land or to the conversion of
wetland.
(4) A representative number of farms selected in accordance with
instructions issued by the Deputy Administrator shall be inspected by
an authorized representative of FSA to determine compliance with any
requirement specified in this part as a prerequisite for obtaining
program benefits.
(5) FSA may consult with U.S. Fish and Wildlife Service on third-
party determinations.
(c) Administraiton by NRCS.
(1) The provisions of this part that are applicable to NRCS shall
be administered under the general supervision of the Deputy Chief for
Natural Resources Conservation Programs, and shall be carried out in
the field by the regional conservationist, state conservationist, area
conservationist, and district conservationist or other NRCS
representative.
(2) An NRCS representative shall make the following determinations
which are required to be made in accordance with this part:
(i) Whether land is highly erodible or has a wetland type or a
converted wetland identified in accordance with the provisions of this
part;
(ii) Whether highly erodible land is predominant on a particular
field under Sec. 12.22;
(iii) Whether the conservation plan that a person is applying is
based on the local NRCS field office technical guide and is approved
by--
(A) The CD and NRCS, or
(B) By NRCS;
(iv) Whether the conservation system that a person is using has
been approved by the CD under Sec. 12.5(a)(2) or, in an area not within
a CD, a conservation system approved by NRCS to be adequate for the
production of an agricultural commodity on highly erodible land;
(v) Whether the actions of a person(s) with respect to the
conversion of a wetland or production of an agricultural commodity on
converted wetland would have only a minimal effect on the functions and
values of wetlands in the area;
(vi) Whether an approved conservation plan is being applied on
highly erodible fields in accordance with the schedule specified
therein or whether a failure to apply the plan is technical and minor
in nature, due to circumstances beyond the control of the person, or
whether a temporary variance form the requirements of the plan should
be granted;
(vii) Whether an approved conservation system is being used on a
highly erodible field;
(viii) Whether the conversion of a wetland is for the purpose or
has the effect of making the production of an agricultural commodity
possible;
(ix) Whether a farmed wetland or farmed-wetland pasture is
abandoned;
(x) Whether the planting of an agricultural commodity on a wetland
is possible under natural conditions;
(xi) Whether maintenance of existing drainage of a wetland
described in Sec. 12.33 exceeds the scope and effect of the original
drainage;
(xii) Whether a plan for the mitigation of a converted wetland will
be approved and whether the mitigation of a converted wetland is
accomplished according to the approved mitigation plan;
(xiii) Whether all technical information relating to the
determination of a violation and severity of a violation has been
provided to FSA for making payment-reduction determinations; and
(xiv) Whether or not a commenced-conversion activity was completed
by January 1, 1995.
(3) NRCS may provide such other technical assistance for
implementation of the provisions of this part as is determined to be
necessary.
(4) A person may obtain a highly erodible land or a wetland scope-
and-effect determination by making a written request on Form AD-1026.
The determination will be made in writing, and a copy will be provided
to the person.
(5) A determination of whether or not an area meets the highly
erodible land criteria or whether wetland criteria, identified in
accordance with the current Federal wetland delineation methodology in
use at the time of the determination and that are consistent with
current mapping conventions, may be made by the NRCS representative
based upon existing records or other information and without the need
for an on-site determination. This determination will be made by the
NRCS representative as soon as possible following a request for such a
determination.
(6) An on-site determination as to whether an area meets the
applicable criteria shall be made by an NRCS representative if the
person has disagreed with the determination made under paragraph (c)(5)
of this section, or if adequate information is not otherwise available
to an NRCS representative on which to make an off-site determination.
(7) An on-site determination, where applicable, will be made by the
NRCS representative as soon as possible following a request for such a
determination, but only when site conditions are favorable for the
evaluation of soils, hydrology, or vegetation.
(8) With regard to wetland determinations, if an area is
continuously inundated or saturated for long periods of time during the
growing season to such an extent that access by foot to make a
determination of predominance of hydric soils or prevalence of
hydrophytic vegetation is not feasible, the area will be determined to
be a wetland.
(9) Persons who are adversely affected by a determination made
under this section and believe that the requirements of this part were
improperly applied may appeal, under Sec. 12.12 of this part, any
determination by NRCS.
(d) Administration by CSREES. The CSREES shall coordinate the
related information and education program for
[[Page 47033]]
USDA concerning implementation of this rule.
(e) Assistance of other Federal agencies. If NRCS determines,
through agreement or otherwise, that the purposes of this part would be
furthered by the assistance of other Federal agencies with wetland
responsibilities, NRCS may accept such assistance and adopt any or all
such actions by these agencies as an action by an NRCS representative
under this part.
Sec. 12.7 Certification of compliance.
(a) Self-certification. In order for a person to be determined to
be eligible for any of the benefits specified in Sec. 12.4:
(1) It must be determined by USDA whether any field in which the
person applying for the benefits has an interest and intends to produce
an agricultural commodity contains highly erodible land;
(2) The person applying for or receiving the benefits must certify
in writing on Form AD-1026 that such person will not produce an
agricultural commodity on highly erodible land, or designate such land
for conservation use; or plant an agricultural commodity on a converted
wetland; or convert a wetland to make possible the production of an
agricultural commodity during the crop year in which the person is
seeking such benefits, unless such actions are exempt, under Sec. 12.5,
from the provisions of Sec. 12.4 of this part;
(3) A person may certify application of practices required by the
person's conservation plan. NRCS shall permit a person who makes such a
certification with respect to a conservation plan to revise the
conservation plan in any manner, if the same level of conservation
treatment provided for by the conservation system under the person's
conservation plan is maintained. NRCS may not revise the person's
conservation plan without the concurrence of the person;
(4) The person applying for a FSA direct or guaranteed farm credit
program loan must certify that such person shall not use the proceeds
of the loan for a purpose that will contribute to excessive erosion on
highly erodible land or to conversion of wetlands for the purpose, or
to have the effect, of making the production of an agricultural
commodity possible; and
(5) The person applying for the benefits must authorize and provide
representatives of USDA access to all land in which such person has an
interest for the purpose of verifying any such certification.
(b) Availability to other agencies. Each agency of USDA shall make
all certifications of compliance received by such agency and the
results of investigations concerning such certifications of compliance
available to other agencies.
(c) Compliance. A certification made in accordance with this
section does not relieve any person from compliance with provisions of
this part.
Sec. 12.8 Affiliated persons.
(a) Ineligibility of affiliated persons. Ineligibility of an
individual or entity under this part for benefits shall also be an
ineligibility for benefits for ``affiliated persons'' as defined in
this section.
(b) Affiliated persons of an individual. If the person requesting
benefits is an individual, the affiliated persons are:
(1) The spouse and minor child of such person or guardian of such
child; except that spouses who establish to the satisfaction of the COC
that operations of the husband and wife are maintained separately and
independently shall not be considered affiliates;
(2) Any partnership, joint venture, or other enterprise in which
the person or any person listed in paragraphs (b)(1) has an ownership
interest or financial interest; unless such interest is held indirectly
through another business enterprise; or
(3) Any trust in which the individual, business enterprise, or any
person listed in paragraph (b)(1) is a beneficiary or has a financial
interest, unless such interest is held indirectly through another
business enterprise.
(c) Affiliated persons of an entity. If the person who has
requested benefits from USDA is a corporation, partnership, or other
joint venture, the affiliated persons are any participant or
stockholder therein of the corporation, partnership, or other joint
venture, except for persons who have an indirect interest through
another business enterprise in such corporation, partnership, or other
joint venture or persons with a 20 percent or less share in a
corporation.
(d) Limitation. Any reduction in payments which results only from
the application of the affiliation provisions of this section to a
partnership, joint venture, trust, or other enterprise shall be limited
to the extent of interest held in such partnership, joint venture,
trust, or other enterprise by the person or business enterprise that
committed the violation. However, for violations for which the business
enterprise is considered directly responsible under the provisions of
this part, the business enterprise shall be subject to a full loss of
benefits, including those instances in which the business enterprise
has an interest in the land where the violation occurred or where the
business enterprise had an interest in the crops produced on the land.
(e) Avoidance of this part. Limitations on affiliation shall not
apply as needed to correct for any action that would otherwise tend to
defeat the purposes of this part.
Sec. 12.9 Landlords and tenants.
(a) Landlord eligibility.
(1) Except as provided in paragraph (a)(2) of this section, the
ineligibility of a tenant or sharecropper for benefits (as determined
under Sec. 12.4) shall not cause a landlord to be ineligible for USDA
program benefits accruing with respect to land other than those in
which the tenant or sharecropper has an interest.
(2) The provisions of paragraph (a)(1) of this section shall not be
applicable to a landlord if the production of an agricultural commodity
on highly erodible land or converted wetland by the landlord's tenant
or sharecropper is required under the terms and conditions of the
agreement between the landlord and such tenant or sharecropper and such
agreement was entered into after December 23, 1985, or if the landlord
has acquiesced in such activities by the tenant or sharecropper.
(b) Tenant or renter eligibility.
(1) The ineligibility of a tenant or renter may be limited to the
program benefits listed in Sec. 12.4(c) accruing with respect to only
the farm on which the violation occurred if:
(i) The tenant or renter shows that a good-faith effort was made to
comply by developing an approved conservation plan for the highly
erodible land in a timely manner and prior to any violation of the
provisions of this part; and
(ii) The owner of such farm refuses to apply such a plan and
prevents the tenant or renter from implementing certain practices that
are a part of the approved conservation plan; and
(iii) FSA determines that the lack of compliance is not a part of a
scheme or device as described in Sec. 12.10.
(2) If relief is granted under paragraph (b)(1) of this section,
the tenant or renter must actively apply those conservation treatment
measures that are determined to be within the control of the tenant or
renter.
Sec. 12.10 Scheme or device.
All or any part of the benefits listed in Sec. 12.4 otherwise due a
person from USDA may be withheld or required to be refunded if the
person adopts or participates in adopting any scheme or
[[Page 47034]]
device designed to evade, or which has the effect of evading, the
provisions of this part. Such acts shall include, but are not limited
to, concealing from USDA any information having a bearing on the
application of the provisions of this part or submitting false
information to USDA or creating entities for the purpose of concealing
the interest of a person in a farming operation or to otherwise avoid
compliance with the provisions of this part. Such acts shall also
include acquiescence in, approval of, or assistance to acts which have
the effect of, or the purpose of, circumventing these regulations.
Sec. 12.11 Action based upon advice or action of USDA.
The provisions of part 718 of this Title, as amended, relating to
performance based upon the action or advice of a County Committee (COC)
or State FSA Committee shall be applicable to the provisions of this
part. In addition, if it is determined by the appropriate USDA agency
that the action of a person which would form the basis of any
ineligibility under this part was taken by such person in good-faith
reliance on erroneous advice, information, or action of any other
authorized representative of USDA, the appropriate agency may make such
benefits available to the extent that similar relief would be allowed
under 7 CFR part 718.
Sec. 12.12 Appeals.
Any person who has been or who would be denied program benefits in
accordance with Sec. 12.4 as the result of any determination made in
accordance with the provisions of this part may obtain a review of such
determination in accordance with the administrative appeals procedures
of the agency which rendered such determination. Agency appeal
procedures are contained in the Code of Federal Regulations as follows:
FSA, part 780 of this title; NRCS, part 614 of this title; Rural
Utilities Service, part 1900, subpart B of this title.
Subpart B--Highly Erodible Land Conservation
Sec. 12.20 NRCS responsibilities regarding highly erodible land.
In implementing the provisions of this part, NRCS shall, to the
extent practicable:
(a) Develop and maintain criteria for identifying highly erodible
lands;
(b) Prepare and make available to the public lists of highly
erodible soil map units;
(c) Make soil surveys for purposes of identifying highly erodible
land; and
(d) Provide technical guidance to conservation districts which
approve conservation plans and systems, in consultation with local
county FSA committees, for the purposes of this part.
Sec. 12.21 Identification of highly erodible lands criteria.
(A) Basis for identification as highly erodible. Soil map units and
an erodibility index will be used as the basis for identifying highly
erodible land. The erodibility index for a soil is determined by
dividing the potential average annual rate of erosion for each soil by
its predetermined soil loss tolerance (T) value. The T value represents
the maximum annual rate of soil erosion that could occur without
causing a decline in long-term productivity. The equation for measuring
erosion is described below.
(1) The potential average annual rate of sheet and rill erosion is
estimated by multiplying the following factors of the Universal Soil
Loss Equation (USLE):
(i) Rainfall and runoff (R);
(ii) The degree to which the soil resists water erosion (K); and
(iii) The function (LS), which includes the effects of slope length
(L) and steepness (S).
(2) The potential average annual rate of wind erosion is estimated
by multiplying the following factors of the Wind Erosion Equation
(WEQ): Climatic characterization of windspeed and surface soil moisture
(C) and the degree to which soil resists wind erosion (I).
(3) The USLE is explained in the U.S. Department of Agriculture
Handbook 537, ``Predicting Rainfall Erosion Losses.'' The WEQ is
explained in the paper by Woodruff, N.P., and F. H. Siddaway, 1965, ``A
Wind Erosion Equation,'' Soil Science Society of America Proceedings,
Vol. 29. No. 5, pages 602-608. Values for all the factors used in these
equations are contained in the NRCS field office technical guide and
the references which are a part of the guide. The Universal Soil Loss
Equation, the Revised Universal Soil Loss Equation, and the Wind
Erosion Equation and the rules under which NRCS uses the equations are
published at Secs. 610.11 through 610.15 of this title.
(b) Highly erodible. A soil map unit shall be determined to be
highly erodible if either the RKLS/T or the CI/T value for the map unit
equals or exceeds 8.
(c) Potentially highly erodible. Whenever a soil map unit
description contains a range of a slope length and steepness
characteristics that produce a range of LS values which result in RKLS/
T quotients both above and below 8, the soil map unit will be entered
on the list of highly erodible soil map units as ``potentially highly
erodible.'' The final determination of erodibility for an individual
field containing these soil map unit delineations will be made by an
on-site investigation.
Sec. 12.22 Highly erodible field determination criteria.
(a) Predominance. Highly erodible land shall be considered to be
predominant on a field if either:
(1) 33.33 percent or more of the total field acreage is identified
as soil map units which are highly erodible; or
(2) 50 or more acres in such field are identified as soil map units
which are highly erodible.
(b) Modification of field boundaries. A person may request the
modification of field boundaries for the purpose of excluding highly
erodible land from a field. Such a request must be submitted to, and is
subject to the approval of, FSA. FSA shall use the technical
determination of NRCS in approving this request.
(C) Impact of changing field boundaries. When field boundaries are
changed to include areas of land that were included in a field that was
previously determined to be predominately highly erodible according to
paragraph (a) of this section, such areas shall continue to be subject
to the requirements for predominately highly erodible fields, except as
provided in paragraph (b) of this section.
(d) Small area of noncropland. Small areas of noncropland within or
adjacent to the boundaries of existing highly erodible crop fields such
as abandoned farmsteads, areas around filled or capped wells, rock
piles, trees, or brush which are converted to cropland are considered
to meet the requirement of Sec. 12.5(a)(2) if they are included in an
approved conservation plan for the entire highly erodible field.
Sec. 12.23 Conservation plans and conservation systems.
(a) Use of field office technical guide. A conservation plan or
conservation system developed for the purposes of Sec. 12.5(a) must be
based on, and to the extent practicable conform with, the NRCS field
office technical guide in use at the time the plan is developed or
revised. For highly erodible croplands which were used to produce
agricultural commodities prior to December 23, 1985, the applicable
conservation systems in the field office technical guide are designed
to achieve substantial reductions in soil erosion. Conservation systems
shall be
[[Page 47035]]
technically and economically feasible; based on local resource
conditions and available conservation technology; cost-effective; and
shall not cause undue economic hardship on the person applying the
conservation system. Any conservation plans or systems that were
approved prior to July 3, 1996, are deemed to be in compliance with
this paragraph.
(b) Substantial reduction in soil erosion. For the purpose of
determining whether there is a substantial reduction in soil erosion on
a field containing highly erodible cropland which was used to produce
an agricultural commodity prior to December 23, 1985, the measurement
of erosion reduction achieved by applying a conservation plan or system
shall be based on a comparison of the estimated annual level of erosion
that is expected to occur on that portion of the field for which a
conservation plan or system was developed and is being applied, to the
estimated annual level of erosion that existed on that same portion of
the field before the application of a conservation plan or system. On a
field that is converted from native vegetation after July 3, 1996, and
where any crop production will result in increased erosion, in no case
will the required conservation plan or system permit a substantial
increase in erosion.
(c) Field trials. NRCS may allow a person to include in the
person's conservation plan or a conservation system under the plan, on
a field-trial basis, practices that are not currently approved but that
NRCS considers have a reasonable likelihood of success. These trials
must have prior approval by NRCS, and must be documented in the
person's conservation plan specifying the limited time period during
which the field trial is in effect. If, at the end of the conservation
field trial period, NRCS finds that the practice does not meet
conservation compliance requirements, the person will not be ineligible
for USDA program benefits during the period of the field trial.
(d) Highly erodible land previously under a Conservation Reserve
Program contract. Any person who owns or operates highly erodible land
that was under a Conservation Reserve Program contract as authorized by
section 1231 of the Food Security Act of 1985, as amended, shall have 2
years after the expiration of termination of the contract to fully
apply a conservation system if the conservation plan for such land
requires the installation of structural measures for the production of
an agricultural commodity. NRCS officials may extend this period one
additional year for circumstances beyond the control of the person. The
person shall not be required to meet a higher conservation standard
than the standard applied to other highly erodible cropland located
within the area served by the field office technical guide for the area
in which the field is located.
(e) Information regarding conservation options. NRCS, in providing
assistance to a person for the preparation or revision of a
conservation plan under this part, will provide such person with
information concerning cost-effective and applicable erosion control
alternatives, crop flexibility, or other conservation assistance
options that may be available.
(f) Timely request for assistance. Persons who require NRCS
assistance for the development of a conservation plan or the
installation of a conservation system are encouraged to request this
assistance well in advance of deadline dates for compliance; otherwise
the person may not be able to comply with these provisions and maintain
eligibility for USDA program benefits.
(g) Action by conservation districts. Conservation districts
approve or disapprove conservation plans or conservation systems after
NRCS determines that the plans or systems conform to the NRCS field
office technical guide. If a conservation district fails, without due
cause, to act on a request for conservation plan or conservation system
approval within 45 days, or if no conservation district exists, NRCS
will approve or disapprove, as appropriate, the conservation plan or
system in question.
(h) Application of a conservation plan or system. A person is
considered to be applying a conservation plan for purposes of
Sec. 12.5(a) if the conservation system or plan being applied achieves
or exceeds the substantial reduction in soil erosion as described in
paragraph (b) which the conservation system or plan was designed to
achieve. It is the responsibility of the person to:
(1) Certify that the conservation plan or system is being applied;
and
(2) Arrange for a revision of the conservation plan with NRCS, if
changes are made in land use, crop rotation or management, conservation
practices, or in the original schedule of practice installation that
would affect the achievement of substantial reduction in soil erosion
in a given crop year.
(i) Appeal to FSA. Persons who are adversely affected by the
determinations made under this subpart and believe that the
requirements of this subpart were improperly applied may appeal the
decision to FSA under Sec. 12.12.
(j) Undue economic hardship. After a technical determination has
been made, the FSA county committee shall, if a person asserts that the
application of the person's conservation system would impose an undue
economic hardship on the person, make a recommendation to the State FSA
Committee as to whether or not the application of the conservation
system would impose an undue economic hardship. The State FSA Committee
may provide the person with a variance on the basis of the hardship.
Under this variance, and any conditions that may be required in the
variance, the person will be considered to be in compliance with the
applicable provisions of this part. The State FSA Committee will
consider relevant factors, such as the cost of installation of required
conservation practices and benefits earned through programs subject to
compliance with this part, and the person's general economic situation.
Subpart C--Wetland Conservation
Sec. 12.30 NRCS responsibilities regarding wetlands.
(a) Technical and coordination responsibilities. In carrying out
the provisions of this part, NRCS shall:
(1) Oversee the development and application of criteria to identify
hydric soils in consultation with the National Technical Committee for
Hydric Soils and make available to the public an approved county list
of hydric soil map units, which is based upon the National List of
Hydric Soils;
(2) Coordinate with the U.S. Fish and Wildlife Service and others
in updating the National List of Plant Species that Occur in Wetlands;
(3) Make or approve wetland determinations, delineations and
certifications, functional assessments, mitigation plans, categorical
minimal effects, and other technical determinations relative to the
implementation of the wetland conservation provisions of this part;
(4) Develop and utilize off-site and on-site wetland identification
procedures;
(5) Assure quality of service and determinations through procedures
developed by NRCS in consultation with other Federal agencies that have
wetland responsibilities;
(6) Investigate complaints and make technical determinations
regarding potential violations;
(7) Develop a process at the state level, in coordination with the
U.S. Fish and Wildlife Service, to ensure that these provisions are
carried out in a technically defensible and timely
[[Page 47036]]
manner, seek assistance as appropriate, and annually review the
progress being made on implementation; and
(8) Conduct reviews of implementation and provide the Army Corps of
Engineers, Environmental Protection Agency, and the U.S. Fish and
Wildlife Service an opportunity to participate in this review.
(b) Technical assistance from others In carrying out the provisions
of this part, NRCS may request technical assistance from the U.S. Fish
and Wildlife Service, State or local agencies conservation districts,
or qualified private entities when NRCS determines that additional
staff resources or technical expertise are needed to address adequately
the requirements of this part or to enhance the quality of
implementation of this part.
(c) Certification of wetland determinations and wetland
delineations.
(1) Certification of a wetland determination means that the wetland
determination is of sufficient quality to make a determination of
ineligibility for program benefits under Sec. 12.4 of this part.
Certification of a wetland determination shall be completed according
to delineation procedures agreed to by the Army Corps of Engineers, the
Environmental Protection Agency, the U.S. Fish and Wildlife Service and
NRCS. NRCS may certify a wetland determination without making a field
investigation. NRCS will notify the person affected by the
certification and provide an opportunity to appeal the certification
prior to the certification becoming final. All wetland determinations
made after July 3, 1996, will be done on a tract basis and will be
considered certified wetland determinations. A not-inventoried
designation within a certified wetland is subject to change when the
soil, hydrology, and vegetation evaluation is completed and identified
as to type of wetland or as a non-wetland. This change from a not-
inventoried designation to an approved wetland designation will be done
at the request of the landowner or during a formal investigation of a
potential violation.
(2) The wetland determination and wetland delineation shall be
certified as final by the NRCS official 30 days after providing the
person notice of certification or, if an appeal is filed with USDA,
after the administrative appeal procedures are exhausted.
(3) In the case of an appeal, NRCS will review and certify the
accuracy of the determination of all lands subject to the appeal to
ensure that the subject lands have been accurately delineated. Prior to
a decision being rendered on the appeal, NRCS will conduct an on-site
investigation of the subject land.
(4) Before any benefits are withheld, an on-site investigation of a
potential wetland violation will be made by NRCS. The affected person
will be provided an opportunity to appeal the on-site determination to
USDA if the on-site determination differs from the original
determination. Such action by NRCS shall be considered a review of the
prior determination and certification of the delineation. If the prior
determination was a certified wetland determination, an appeal of the
NRCS on-site determination shall be limited to the determination that
the wetland was converted in violation of this part.
(5) A copy of the information from the final certified wetland
determination and the wetland delineation shall be recorded on official
USDA aerial photography, digital imagery, or other graphic
representation of the area.
(6) As long as the affected person is in compliance with the
wetland conservation provision of this part, and as long as the area is
devoted to the use and management of the land for production of food,
fiber, horticultural crops, a certification made under this section
will remain valid and in effect until such time as the person affected
by the certification requests review of the certification by NRCS. A
person may request review of a certification only if a natural event
alters the topography or hydrology of the subject land to the extent
that the final certification is no longer a reliable indication of site
conditions, or if NRCS concurs with an affected person that an error
exists in the current wetland determination
Sec. 12.31 On-site wetland identification criteria.
(a) Hydric soils.
(1) NRCS shall identify hydric soils through the use of published
soil maps which reflect soil surveys completed by NRCS or through the
use of on-site reviews. If a published soil map is unavailable for a
given area, NRCS may use unpublished soil maps which were made
according to the specifications of the National Cooperative Soil Survey
or may conduct an on-site evaluation of the land.
(2) NRCS shall determine whether an area of a field or other parcel
of land has a predominance of hydric soils that are inundated or
saturated as follows:
(i) If a soil map unit has hydric soil as all or part of its name,
that soil map unit or portion of the map unit related to the hydric
soil shall be determined to have a predominance of hydric soils;
(ii) If a soil map unit is named for a miscellaneous area that
meets the criteria for hydric soils (i.e., riverwash, playas, beaches,
or water) the soil map unit shall be determined to have a predominance
of hydric soils; or
(iii) If a soil map unit contains inclusions of hydric soils, that
portion of the soil map unit identified as hydric soil shall be
determined to have a predominance of hydric soils.
(3) List of hydric soils.
(i) Hydric soils are those soils which meet criteria set forth in
the publication ``Hydric Soils of the United States 1985'' which was
developed by the National Technical Committee for Hydric Soils and
which is incorporated by reference. This publication may be obtained
upon request by writing NRCS at U.S. Department of Agriculture, P.O.
Box 2890, Washington, DC 20013, and is available for inspection at the
Office of the Federal Register Information Center, 800 North Capitol
Street NW., Suite 700, Washington, DC 20408. Incorporation of this
publication by reference was approved by the Director of the Federal
Register on June 24, 1986. The materials are incorporated as they exist
on the date of the approval and a notice of any change in these
materials will be published in the Federal Register.
(ii) An official list of hydric soil map units shall be maintained
at the local NRCS office and shall include--
(A) All soils from the National List of Hydric Soils that can be
found in that field office area, and
(B) Any soil map units or areas which the state conservationist
determines to meet such hydric soil criteria.
(iii) Any deletions of a hydric soil unit from the hydric soil map
unit list must be made according to the established procedure contained
in the publication ``Hydric Soils of the United States 1985'' for
adding or deleting soils from the National List of Hydric Soils.
(b) Hydrophytic vegetation. Hydrophytic vegetation consists of
plants growing in water or in a substrate that is at least periodically
deficient in oxygen during a growing season as a result of excessive
water content.
(1) A plant shall be considered to be a plant species that occurs
in wetland if such plant is listed in the National List of Plant
Species that Occur in Wetlands. The publication may be obtained upon
request from the U.S. Fish and Wildlife Service at National Wetland
Inventory, Monroe Bldg. Suite 101, 9720 Executive Center Drive, St.
Petersburg, Florida 33702.
(2) For the purposes of the definition of ``wetland'' in Sec. 12.2
of this part, land shall be determined to have a prevalence of
hydrophytic vegetation if:
(i) NRCS determines through the criteria specified in paragraph
(b)(3) of
[[Page 47037]]
this section that under normal circumstances such land supports a
prevalence of hydrophytic vegetation. The term ``normal circumstances''
refers to the soil and hydrologic conditions that are normally present,
without regard to whether the vegetation has been removed; or
(ii) In the event the vegetation on such land has been altered or
removed, NRCS will determine if a prevalence of hydrophytic vegetation
typically exists in the local area on the same hydric soil map unit
under non-altered hydrologic conditions.
(3) The determination of prevalence of hydrophytic vegetation will
be made in accordance with the current Federal wetland delineation
methodology in use by NRCS at the time of the determination.
(c) Mitigation wetlands. Notwithstanding the provisions of this
section, wetlands which are created in order to mitigate the loss of
other wetlands as a result of irrigation, recreation, municipal water,
flood control, or other similar projects shall not be considered to be
artificial wetland for the purposes of Sec. 12.5(b)(1)(vii)(A) of this
part.
(d) Minimal effect determination. For the purposes of
Sec. 12.5(b)(1)(v) of this part, NRCS shall determine whether the
effect of any action of a person associated with the conversion of a
wetland, the conversion of wetland and the production of an
agricultural commodity on converted wetland, or the combined effect of
the production of an agricultural commodity on a wetland converted by
someone else has a minimal effect on the functions and values of
wetlands in the area. Such determination shall be based upon a
functional assessment of functions and values of the wetland under
consideration and other related wetlands in the area, and will be made
through an on-site evaluation. A request for such determination will be
made prior to the beginning of activities that would convert the
wetland. If a person has converted a wetland and then seeks a
determination that the effect of such conversion on wetland was
minimal, the burden will be upon the person to demonstrate to the
satisfaction of NRCS that the effect was minimal.
The production of an agricultural commodity on any portion of a
converted wetland in conformance with a minimal-effect determination by
NRCS is exempt under Sec. 12.5(b)(1)(v) of this part. However, any
additional action of a person that will change the functions and values
of a wetland for which a minimal-effect determination has been made
shall be reported to NRCS for a determination of whether the effect
continues to be minimal. The loss of a minimal effect determination
will cause a person who produces an agricultural commodity on the
converted wetland after such change in status to be ineligible, under
Sec. 12.4, for certain program benefits. In situations where the
wetland functions and values are replaced by the restoration,
enhancement or creation of a wetland in accordance with a mitigation
plan approved by NRCS, the exemption provided by the determination will
be effective after NRCS determines that all practices in a mitigation
plan are being implemented.
(e) Categorical Minimal Effect Exemptions.
(1) The state conservationist, in consultation with the state
technical committee established under 16 U.S.C. 3861, shall identify
any categories of conversion activities and conditions which are
routinely determined by NRCS to have minimal effect on wetland
functions and values, as described in paragraph (d) of this section,
and recommend to the Chief, NRCS, or a designee, inclusion on a list of
categorical minimal effect exemptions.
(2) The Chief, or designee, shall evaluate the conversion practices
recommended by the state conservationists in the region to ensure
consistency across State and regional lines, and to determine whether
any categories of conversion activities identified pursuant to
paragraph (e)(1) of this section, if such activities were exempt from
the ineligibility provisions of Sec. 12.4, would only have a minimal
effect on wetland functions and values in a wetland system within the
region.
(3) Any categories of conversion activities which meet the criteria
of paragraph (e)(2) of this section will be published in the Federal
register for inclusion in this part and shall be exempt under
Sec. 12.5(b)(1)(v) of this part.
(4) The NRCS local field office shall maintain a list of any
activities and conditions which are determined by the Chief, or
designee, exempt pursuant to this section and will provide the list to
a person upon request.
Sec. 12.32 Converted wetland identification criteria.
(a) Converted wetland shall be identified by determining whether
the wetland was altered so as to meet the definition of converted
wetland. In making this determination, the following factors are to be
considered:
(1) Where hydric soils have been used for production of an
agricultural commodity and the effect of the drainage or other altering
activity is not clearly discernible, NRCS will compare the site with
other sites containing the same hydric soils in a natural condition to
determine if the hydric soils can or cannot be used to produce an
agricultural commodity under natural conditions. If the soil on the
comparison site could not produce an agricultural commodity under
natural conditions, the subject wetland will be considered to be
converted wetland.
(2) Where woody hydrophytic vegetation has been removed from hydric
soils for the purpose of or permitting the production of an
agricultural commodity, the area will be considered to be converted
wetland.
(b) A wetland shall not be considered to be converted if:
(1) Production of an agricultural commodity on such land is
possible as a result of a natural condition, such as drought, and it is
determined that the actions of the person producing such agricultural
commodity does not permanently alter or destroy natural wetland
characteristics. Destruction of herbaceous hydrophytic vegetation
(i.e., plants other than woody shrubs or trees) as a result of the
production of an agricultural commodity shall not be considered as
altering or destroying natural wetland characteristic if such
vegetation could return following cessation of the natural condition
which made production of the agricultural commodity possible; or
(2) Such land is correctly identified as farmed wetland or farmed-
wetland pasture.
Sec. 12.33 Use of wetland and converted wetland.
(a) The provisions of Sec. 12.32(b)(2) are intended to protect
remaining functions and values of the wetlands described therein.
Persons may continue to farm such wetlands under natural conditions or
as they did prior to December 23, 1985. However, no action can be taken
to increase effects on the water regime beyond that which existed on
such lands on or before December 23, 1985, unless NRCS determines the
effect on losing remaining wetland values would be minimal under
Sec. 12.5(b)(1)(v). If, after December 23, 1985, changes due to human
activity occurred in the watershed and resulted in an increase in the
water regime on a person's land, the person may be allowed to adjust
the existing drainage system to accommodate the increased water regime
on the condition that the person affected by this additional water
provides NRCS with appropriate documentation of the increased water
regime, the causes thereof, and the
[[Page 47038]]
planned changes in the existing drainage system. In order to maintain
program eligibility, a person must provide sufficient documentation and
receive approval from NRCS prior to making any changes that will have
the effect of increasing the capacity of the existing drainage systems.
(b) Unless otherwise provided in this part, the production of an
agricultural commodity on land determined by NRCS to be prior-converted
cropland is exempted by law from these regulations for the area which
was converted. Maintenance or improvement of drainage systems on prior-
converted croplands are not subject to this rule so long as the prior-
converted croplands are used for the production of food, forage, or
fiber and as long as such actions do not alter the hydrology of nearby
wetlands or do not make possible the production of an agricultural
commodity on these other wetlands. Other wetlands under this section
means any natural wetland, farmed wetland, farmed-wetland pasture, or
any converted wetland that is not exempt under Sec. 12.5 of this part.
(c) Abandonment is the cessation for five consecutive years of
management or maintenance operations related to the use of a farmed
wetland or a farmed-wetland pasture. Unless the criteria for receiving
an exemption under Sec. 12.5(b)(1)(iii) are met, such land is
considered to be abandoned when the land meets the wetland criteria of
Sec. 12.31. In order for documentation of site conditions to be
considered adequate under Sec. 12.5(b)(1)(iii), the affected person
must provide to NRCS available information concerning the extent of
hydrological manipulation, the extent of woody vegetation, and the
history of use. In accordance with Sec. 12.5(b)(1)(iii), participation
in a USDA approved wetland restoration, set-aside, diverted acres, or
similar programs shall not be deemed to constitute abandonment.
(d) The maintenance of the drainage capacity or any alteration or
manipulation, including the maintenance of a natural waterway operated
and maintained as a drainage outlet, that affects the circulation and
flow of water made to a farmed wetland or farmed-wetland pasture would
not cause a person to be determined to be ineligible under this part,
provided that the maintenance does not exceed the scope and effect of
the original alteration or manipulation, as determined by NRCS, and
provided that the area is not abandoned. Any resultant conversion of
wetlands is to be at the minimum extent practicable, as determined by
NRCS.
Sec. 12.34 Paperwork Reduction Act assigned number.
The information collection requirements contained in this
regulation (7 CFR part 12) have been approved by the Office of
Management and Budget under provisions of 44 U.S.C. chapter 35 and have
been assigned OMB Number 0560-0004.
Signed at Washington, D.C. on August 23, 1996.
Dan Glickman,
Secretary.
[FR Doc. 96-22784 Filed 9-5-96; 8:45 am]
BILLING CODE 3410-01-M
Complete official Federal Register PDF
FR Doc. 96-22775 Office of the Assistant Secretary for Housing-Federal Housing Commissioner; Termination of Tenancy for Criminal Activity
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47380-47382]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22775]
[[Page 47379]]
_______________________________________________________________________
Part V
Department of Housing and Urban Development
_______________________________________________________________________
24 CFR Parts 247, 880, and 884 Termination of Tenancy for Criminal
Activity; Final Rule
Federal Register / Vol. 61, No. 174 / Friday, September 6, 1996 /
Rules and Regulations
[[Page 47380]]
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 247, 880, and 884
[Docket No. FR-3472-F-02]
RIN 2502-AG12
Office of the Assistant Secretary for Housing-Federal Housing
Commissioner; Termination of Tenancy for Criminal Activity
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule provides that any criminal activity that
threatens the health, safety, or right to peaceful enjoyment of the
premises by other residents; any criminal activity that threatens the
health, safety, or right to peaceful enjoyment of their residences by
persons residing in the immediate vicinity of the premises; any
criminal activity that threatens the health, or safety of any on-site
property management staff responsible for managing the premises; or any
drug-related criminal activity on or near such premises, engaged in by
a resident, any member of the resident's household, or any guest or
other person under the resident's control shall be grounds for
termination of tenancy.
EFFECTIVE DATE: October 7, 1996.
FOR FURTHER INFORMATION CONTACT: Barbara D. Hunter, Director, Program
Management Division, Office of Multifamily Asset Management and
Disposition, Room 6180, Department of Housing and Urban Development,
451 Seventh Street, S.W., Washington, D.C. 20410-8000; telephone,
(voice) (202) 708-3944; (TTY) (202) 708-4594. (These are not toll-free
numbers.)
SUPPLEMENTARY INFORMATION:
The Proposed Rule
On February 3, 1994, the Department published in the Federal
Register a proposed rule (59 FR 5155) that would provide that any
criminal activity that threatens the health, safety, or right to
peaceful enjoyment of the premises by other tenants; any criminal
activity that threatens the health, safety, or right to peaceful
enjoyment of their residences by persons residing in the immediate
vicinity of the premises; or any drug-related criminal activity on or
near such premises, engaged in by a tenant, any member of the tenant's
household, or any guest or other person under the tenant's control
would be grounds for termination of tenancy.
The deadline for public comments on the proposed rule was April 4,
1994. By that date, the Department received 130 comments. Most of these
comments (111 out of 130) came from individuals or entities responsible
for managing subsidized housing. The Department also received comments
from several housing authorities and housing finance agencies, as well
as from several public interest and legal aid associations.
The majority of the public commenters (121 out of 130) supported
the proposed rule. These commenters typically reported that criminal
activity, particularly drug-related criminal activity, is the biggest
problem faced by managers of subsidized housing. Many of these
commenters stated that the provisions of the proposed rule will provide
them legal strength in eviction proceedings; they asserted that judges
often place more weight on Federal regulations than on the lease or
other rules. Several commenters added that the provisions of the
proposed rule would help them provide decent and safe housing to their
tenants, and that such provisions are long overdue.
Several commenters suggested revisions to the proposed rule. For
instance, several commenters suggested that the Department define
phrases such as ``on or near such premises,'' ``criminal activity,''
and ``any guest or other person under the tenant's control.'' These
commenters asserted that these phrases are subject to differing
interpretations, and they provide little guidance to a landlord trying
to decide whether to pursue a termination of tenancy. Other commenters
suggested that the Department broaden the provisions of the proposed
rule to protect the health and safety of any on-site property
management staff, because these individuals are often endangered by
criminal activity.
Six commenters expressed serious legal and policy concerns with the
proposed rule. These commenters argued that the Department would
violate several State and Federal statutes and the U.S. Constitution if
it permitted the eviction of a tenant who did not commit, had no
knowledge of, nor had means to stop the criminal activity. While the
proposed rule echoes statutory language (42 U.S.C.
1437f(d)(1)(B)(iii)), one commenter presented evidence that Congress
intended to protect innocent tenants. These commenters argued further
that the proposed rule should more closely track the public housing
regulations, which provide that in the case of an eviction for criminal
activity, the PHA shall have discretion to consider all the
circumstances of the case, including the seriousness of the offense,
the extent of participation by family members, and the effects that the
eviction would have on family members not involved in the proscribed
activity (24 CFR 966.4).
The Final Rule
In response to public comments, this final rule represents two
changes to the provisions of the proposed rule. First, the Department
decided to include in this final rule criminal activity against on-site
property management staff as grounds for termination of tenancy.
Second, this final rule provides a definition for ``drug-related
criminal activity.''
While some of the commenters requested additional definitions, the
Department has determined that such definitions would not, on balance,
further the goals of this rule. Providing concrete definitions would be
contrary to the recommendations of the national Occupancy Task Force.
The Occupancy Task Force was convened under Congressional mandate, and
it consisted of representatives of both housing providers and tenant
advocacy/legal aid organizations. The Task Force was charged with
issuing a final report to Congress and to HUD on occupancy and
management recommendations in public and assisted housing. The members
of the Occupancy Task Force observed in their Final Report, which was
issued in April 1994, that they had considered defining related terms
such as ``criminal activity that threatens,'' but they ``agreed that
from a practical standpoint, it would be impossible to define this term
since it turns on the facts in every given situation'' (page 3-7).
(Notice of the availability of the final report was published in the
Federal Register on July 21, 1994, 59 FR 37255). Furthermore, in
accordance with several of the commenters, the Department intended that
the provisions of this rule would parallel the public housing
regulations; none of the terms suggested by the commenters are defined
in the comparable public housing regulations.
The Department has decided, however, to include the definition of
``drug-related criminal activity'' in this final rule, because this
definition is provided in section 8(f)(5) of the United States Housing
Act of 1937. Accordingly, this final rule provides that ``drug-related
criminal activity'' means the illegal manufacture, sale, distribution,
use or possession with the intent to manufacture, sell, distribute, or
use, of a controlled substance (as defined in section 102 of the
Controlled Substances Act (21 U.S.C. 802)).
[[Page 47381]]
With regard to the concerns raised by several commenters that the
proposed rule could result in the eviction of an innocent tenant, the
Department would like to emphasize that an owner may not evict any
tenant except by judicial action pursuant to State or local law, and in
accordance with the Department's due process procedures. This final
rule applies uniformly to all assisted housing tenants. Furthermore,
the Department adopted similar termination language (excluding the
reference to project management employees) for the HUD Model Form of
Lease (used for all subsidized multifamily housing programs) by
Handbook 4350.3, Change 22 of June 1992.
The Department believes that promulgation of this rule is
consistent with sound program administration, is balanced and fair, and
provides a valuable tool for fighting crime and drugs in assisted
housing communities while maintaining requisite due process protections
for the residents. Establishing criminal activity of a threatening
nature and drug-related crime on or near the premises as clear grounds
for termination of tenancy is supported by the recommendation (#58,
page 3-7) of the Occupancy Task Force Final Report.
This final rule revises 24 CFR parts 247, 880, and 884 by adding a
definition of ``drug-related criminal activity'' and by revising the
management provisions. Since the Department removed the management
provisions of parts 881 and 883 in a final rule published on March 27,
1996 (61 FR 13586), and replaced them with a cross-reference to the
identical management provisions in part 880, it is unnecessary for the
Department to amend parts 881 and 883 in this final rule.
For purposes of existing housing under the section 8 loan
management and property disposition programs (24 CFR part 886, subparts
A and C), this final rule implements section 8(d)(1)(B)(iii) of the
United States Housing Act of 1937 (42 U.S.C. 1437f), as that section
was amended by the Cranston-Gonzalez National Affordable Housing Act
and the Housing and Community Development Act of 1992. These two
programs rely upon part 247 for termination of tenancy provisions. In
addition, this final rule covers the following subsidized projects
subject to the regulations in 24 CFR part 247: multifamily housing
projects that receive the benefit of subsidy in the form of below-
market interest rates under sections 221(d) (3) and (5); interest
reduction payments under section 236 of the National Housing Act,
including Rental Assistance Payments (RAP); below-market interest rate
direct loans under section 202 of the Housing Act of 1959; rental
subsidy in the form of rent supplement payments under section 101 of
the Housing and Urban Development Act of 1965; and section 8 in
connection with section 202 Loans for Housing for the Elderly or
Handicapped (24 CFR part 891); the Supportive Housing for the Elderly
program and the Supportive Housing for Persons with Disabilities
program (24 CFR part 891). (By final rule published on March 22, 1996
(61 FR 11948), the regulations governing (1) Loans for Housing for the
Elderly or Handicapped, formerly found in 24 CFR part 885, (2)
Supportive Housing for the Elderly, formerly found in 24 CFR part 889,
and (3) Supportive Housing for Persons with Disabilities, formerly
found in 24 CFR part 890, were consolidated into a new part 24 CFR part
891.) Finally, this rule also applies to evictions under the section 8
new construction and substantial rehabilitation programs.
Other Matters
Environmental Impact
A Finding of No significant Impact (FONSI) with respect to the
environment was made at the time of the development of the proposed
rule, in accordance with HUD regulations at 24 CFR part 50, which
implement section 102(2)(c) of the National Environmental Policy Act of
1969, 42 U.S.C. 4321 et seq. That FONSI remains applicable to this
final rule and is available for public inspection between 7:30 a.m. and
5:30 p.m. weekdays in the Office of the Rules Docket Clerk at the above
address.
Regulatory Flexibility Act
The Secretary in accordance with the Regulatory Flexibility Act (5
U.S.C. 605(b)) has reviewed and approved this rule, and in so doing
certifies that this rule will not have a significant economic impact on
a substantial number of small entities. This rule prohibits any
criminal activity or drug-related criminal activity on or near premises
where law-abiding tenants live.
Family Impact
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this final rule has the
potential for a significant impact on family formation, maintenance,
and general well-being; this rule should increase the safety and
security of families living in assisted housing. Since the impact of
this rule on the family is beneficial, no further review is considered
necessary.
Federalism
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that the policies
contained in this rule would not have significant federalism
implications and thus, are not subject to review under the order. This
final rule will not interfere with or preempt State or local government
functions.
Regulatory Planning and Review
The Office of Management and Budget (OMB) reviewed this rule under
Executive Order 12866, Regulatory Planning and Review, issued by the
President on September 30, 1993. Any changes to the rule subsequent to
its submission to OMB are identified in the docket file, which is
available for public inspection between 7:30 a.m. and 5:30 p.m.
weekdays in the Office of the Rules Docket Clerk, Department of Housing
and Urban Development, Room 10276, 451 Seventh Street, SW., Washington,
DC.
List of Subjects
24 CFR Part 247
Grant programs--housing and community development, Loan programs--
housing and community development, Low and moderate income housing,
Rent subsidies.
24 CFR Part 880
Grant programs--housing and community development, Rent subsidies,
Reporting and recordkeeping requirements.
24 CFR Part 884
Grant programs--housing and community development, Rent subsidies,
Reporting and recordkeeping requirements, Rural areas.
Accordingly, 24 CFR parts 247, 880, and 884 are amended as follows:
PART 247--EVICTIONS FROM CERTAIN SUBSIDIZED AND HUD-OWNED PROJECTS
1. The authority citation for 24 CFR part 247 is revised to read as
follows:
Authority: 12 U.S.C. 1701q, 1701s, 1715b, 1715l, and 1715z-1; 42
U.S.C. 1437a, 1437c, 1437f, and 3535(d).
2. Section 247.2 is amended by removing the paragraph designation
for each definition, and by adding a definition ``Drug-related criminal
activity'' in alphabetical order, to read as follows:
[[Page 47382]]
Sec. 247.2 Definitions.
* * * * *
Drug-related criminal activity means the illegal manufacture, sale,
distribution, use or possession with the intent to manufacture, sell,
distribute, or use, of a controlled substance as defined in section 102
of the Controlled Substances Act, 21 U.S.C. 802.
* * * * *
3. Section 247.3 is amended by removing the word ``or'' from
paragraph (a)(2); by redesignating paragraph (a)(3) as paragraph
(a)(4); by amending paragraph (b) by removing the reference to
``Sec. 247.3(a)(3)'' and adding in its place ``Sec. 247.3(a)(4)''; and
by adding a new paragraph (a)(3); to read as follows:
Sec. 247.3 Entitlement of tenants to occupancy.
(a) * * *
(3) Any criminal activity that threatens the health, safety, or
right to peaceful enjoyment of the premises by other residents; any
criminal activity that threatens the health, safety, or right to
peaceful enjoyment of their residences by persons residing in the
immediate vicinity of the premises; any criminal activity that
threatens the health, or safety of any on-site property management
staff responsible for managing the premises; or any drug-related
criminal activity on or near such premises, engaged in by a resident,
any member of the resident's household, or any guest or other person
under the resident's control shall be grounds for termination of
tenancy.
* * * * *
Sec. 247.4 [Amended]
4. In Sec. 247.4, paragraph (c) is amended by removing the
reference to ``Sec. 247.3(a)(3)'' and by adding in its place
``Sec. 247.3(a)(4).''
PART 880--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM FOR NEW
CONSTRUCTION
5. The authority citation for 24 CFR part 880 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437f and 3535(d), and 13611-
13619.
6. Section 880.201 is amended by adding the definition ``Drug-
related criminal activity'' in alphabetical order, to read as follows:
Sec. 880.201 Definitions.
* * * * *
Drug-related criminal activity. The illegal manufacture, sale,
distribution, use or possession with the intent to manufacture, sell,
distribute, or use, of a controlled substance as defined in section 102
of the Controlled Substances Act, 21 U.S.C. 802.
* * * * *
7. Section 880.607 is amended by removing the word ``or'' from
paragraph (b)(1)(ii); by redesignating paragraph (b)(1)(iii) as
(b)(1)(iv); by amending paragraphs (b)(2) and (c)(2) by removing the
references to ``(b)(1)(iii)'' and by adding in their places
``(b)(1)(iv)''; and by adding a new paragraph (b)(1)(iii); to read as
follows:
Sec. 880.607 Termination of tenancy and modification of leases.
* * * * *
(b) * * *
(1) * * *
(iii) Any criminal activity that threatens the health, safety, or
right to peaceful enjoyment of the premises by other residents; any
criminal activity that threatens the health, safety, or right to
peaceful enjoyment of their residences by persons residing in the
immediate vicinity of the premises; any criminal activity that
threatens the health, or safety of any on-site property management
staff responsible for managing the premises; or any drug-related
criminal activity on or near such premises, engaged in by a resident,
any member of the resident's household, or any guest or other person
under the resident's control shall be grounds for termination of
tenancy.
* * * * *
PART 884--SECTION 8 HOUSING ASSISTANCE PAYMENTS PROGRAM, NEW
CONSTRUCTION SET-ASIDE FOR SECTION 515 RURAL RENTAL HOUSING
PROJECTS
8. The authority citation for 24 CFR part 884 continues to read as
follows:
Authority: 42 U.S.C. 1437a, 1437c, 1437f and 3535(d), and 13611-
13619.
9. Section 884.102 is amended by adding, in alphabetical order, a
definition of ``Drug-related criminal activity'', to read as follows:
Sec. 884.102 Definitions.
* * * * *
Drug-related criminal activity. The illegal manufacture, sale,
distribution, use or possession with the intent to manufacture, sell,
distribute, or use, of a controlled substance as defined in section 102
of the Controlled Substances Act, 21 U.S.C. 802.
* * * * *
10. Section 884.216 is amended by designating the current paragraph
as paragraph (a), and by adding a new paragraph (b), to read as
follows:
Sec. 884.216 Termination of tenancy.
* * * * *
(b) Any criminal activity that threatens the health, safety, or
right to peaceful enjoyment of the premises by other residents; any
criminal activity that threatens the health, safety, or right to
peaceful enjoyment of their residences by persons residing in the
immediate vicinity of the premises; any criminal activity that
threatens the health, or safety of any on-site property management
staff responsible for managing the premises; or any drug-related
criminal activity on or near such premises; or any drug-related
criminal activity on or near such premises, engaged in by a resident,
any member of the resident's household, or any guest or other person
under the resident's control shall be grounds for termination of
tenancy.
Dated: May 31, 1996.
Nicholas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 96-22775 Filed 9-5-96; 8:45 am]
BILLING CODE 4210-27-P
Complete official Federal Register PDF
FR Doc. 96-22773 Airworthiness Directives; Textron Lycoming Model TIO-540-S1AD Reciprocating Engines
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Page 47051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22773]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
14 CFR Part 39
[Docket No. 91-ANE-29; Amendment 39-9470; AD 91-21-01 R1]
RIN 2120-AA64
Airworthiness Directives; Textron Lycoming Model TIO-540-S1AD
Reciprocating Engines
AGENCY: Federal Aviation Administration, DOT.
ACTION: Final rule; correction.
-----------------------------------------------------------------------
SUMMARY: This document makes a correction to Airworthiness Directive
(AD) 91-21-01 R1 applicable to Textron Lycoming Model TIO-540-S1AD
reciprocating engines that was published in the Federal Register on
June 7, 1996 (61 FR 29003). The reference to the New York Aircraft
Certification Office in Note 3 following the paragraph describing the
procedure for obtaining an alternative method of compliance was
omitted. This document corrects that omission. In all other respects,
the original document remains the same.
EFFECTIVE DATE: September 6, 1996.
FOR FURTHER INFORMATION CONTACT: Richard Fiesel, Aerospace Engineer,
New York Aircraft Certification Office, FAA, Engine and Propeller
Directorate, 10 Fifth St., 3rd Floor, Valley Stream, NY 11581-1200;
telephone (516) 256-7504, fax (516) 568-2716.
SUPPLEMENTARY INFORMATION: A final rule airworthiness directive
applicable to Textron Lycoming Model TIO-540-S1AD reciprocating
engines, was published in the Federal Register on June 7, 1996 (61 FR
29003). The following correction is needed:
Sec. 39.13 [Corrected]
On page 29005, in the first column, in the Compliance Section, in
Note 3 of paragraph (c), in the fourth line, ``obtained from.'' is
corrected to read ``obtained from the New York Aircraft Certification
Office''.
Issued in Burlington, MA, on August 28, 1996.
Jay J. Pardee,
Manager, Engine and Propeller Directorate, Aircraft Certification
Service.
[FR Doc. 96-22773 Filed 9-5-96; 8:45 am]
BILLING CODE 4910-13-P
Complete official Federal Register PDF
FR Doc. 96-22762 Federal Motor Vehicle Safety Standards; Compressed Natural Gas Fuel Container Integrity
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47086-47089]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22762]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
National Highway Traffic Safety Administration
49 CFR Part 571
[Docket No. 93-02; Notice 14]
RIN 2127-AF14
Federal Motor Vehicle Safety Standards; Compressed Natural Gas
Fuel Container Integrity
AGENCY: National Highway Traffic Safety Administration (NHTSA),
Department of Transportation (DOT).
ACTION: Final rule, petitions for reconsideration.
-----------------------------------------------------------------------
SUMMARY: In response to petitions for reconsideration, this document
amends certain labeling requirements in Standard No. 304, Compressed
Natural Gas Fuel Container Integrity. Specifically, this document
modifies the labeling requirements with respect to the inspection
interval and deletes reference to certain pamphlets. The amendments
harmonize Standard No. 304 with voluntary industry and international
standards, without any detriment to safety.
DATES: Effective date: The amendment in this document becomes effective
December 2, 1996. Prior to December 2, 1996, a manufacturer is not
required to comply with S7.4(g), which specifies a labeling requirement
regarding container inspections and the appropriate interval between
them.
Petitions for reconsideration: Any petition for reconsideration of
this rule must be received by NHTSA no later than October 21, 1996.
ADDRESSES: Petitions for reconsideration of this rule should refer to
the above mentioned docket number and be submitted to: Administrator,
National Highway Traffic Safety Administration, 400 Seventh Street,
SW., Washington, DC 20590.
FOR FURTHER INFORMATION CONTACT:
For non legal issues: Mr. Charles Hott, National Highway Traffic
Safety Administration, 400 Seventh Street, SW., Washington, DC 20590
(Telephone 202-366-0247).
For legal issues: Mr. Marvin L. Shaw, NCC-20, Rulemaking Division,
Office of Chief Counsel, National Highway Traffic Safety
Administration, 400 Seventh Street, SW., Washington, DC 20590 (202-366-
2992).
SUPPLEMENTARY INFORMATION:
I. Regulatory Background
On September 26, 1994, NHTSA published a final rule establishing
Standard No. 304, Compressed Natural Gas Fuel Container Integrity. (59
FR 49021) In addition to container performance requirements, the
Standard also specifies labeling requirements. Each CNG container
manufacturer must permanently label each of its containers with the
following information: (1) The statement that ``If there is a question
about the proper use, installation, or maintenance of this container,
contact [CNG fuel container manufacturer's name, address, and telephone
number]''; (2) the month and year in which the container was
manufactured;
[[Page 47087]]
(3) the maximum service pressure; and (4) the symbol ``DOT,'' which
represents the manufacturer's certification that the container complies
with all the standard's requirements. Manufacturers have been required
to label each CNG container manufactured on and after March 26, 1995,
with this information.
On November 24, 1995, NHTSA published a final rule that amended
S7.4 of Standard No. 304 to require CNG containers to be labeled with
the following additional information:
(1) The container designation (Type 1, 2, 3, or 4),
(2) The statement ``CNG ONLY,''
(3) The statement: ``This container should be visually inspected
after a motor vehicle accident or fire and at least every 12 months for
damage and deterioration in accordance with the Compressed Gas
Association (CGA) guidelines C-6 and C-6.1 for Type 1 containers and C-
6.2 for Types 2, 3, and 4 containers.''
(4) The statement: ``Do Not Use After ____________,'' inserting the
year that is the 15th year beginning after the year in which the
container is manufactured.
(60 FR 57943)
In that final rule, NHTSA also amended the bonfire test
requirements that evaluate pressure release and announced its decision
to terminate rulemaking about additional performance requirements for
CNG containers that the agency had proposed.
NHTSA received petitions for reconsideration from the American
Automobile Manufacturers Association (AAMA), Ford, Consumers Gas,
Powertech (a research and development laboratory), and CNG container
manufacturers, including NGV Systems, Pressed Steel Tank (PST), and
Lincoln Composites (Lincoln).
The petitioners requested changes to the labeling requirements and
the bonfire test requirements in Standard No. 304. In today's final
rule, the agency responds to issues associated with the labeling of CNG
containers. The agency will respond to the petitions addressing the
bonfire test at a later date. The agency believes that it is
appropriate to respond to the petitions in two separate notices, given
the need to provide guidance to manufacturers attempting to comply with
the September 1, 1996 effective date for the labeling of new CNG
containers.
II. Agency Decision on Container Labeling
A. Inspection Interval
NHTSA stated that a one-year interval for visual inspection of a
container's exterior reduces the possibility that damage caused by
external factors would go undetected, a situation that could lead to
container failure. Among the external factors that can damage a
container are scratches and gouges and exposure to caustic substances
and fluids such as acid, road salt, and gasoline. The agency based this
earlier decision on a NGVC document recommending a one year inspection
interval.1
---------------------------------------------------------------------------
\1\ NGVC is currently redrafting the voluntary industry
standard to specify a 36 month inspection interval.
---------------------------------------------------------------------------
NHTSA received several petitions for reconsideration requesting
that the container inspection interval be every 36 months instead of
every 12 months. Lincoln, Powertech, PST, AAMA, Consumers Gas, and Ford
believed that a 12-month inspection period was inappropriate. Lincoln,
Powertech, PST, and AAMA stated that the soon-to-be-issued updated NGV
standard recommended a 36-month inspection interval. These petitioners
further stated that a 36-month inspection interval is specified in the
Canadian standard and the draft ISO standard.
Consumers Gas stated that it has been operating natural gas powered
vehicles for over ten years and have not had a problem with the
integrity of vehicle containers. It visually inspects its containers
every three years. The company believes that more frequent inspection
would increase the possibility of damaging a container because the
container must be removed from the vehicle for a thorough inspection.
It also believed that an annual inspection would increase the risk of
reducing the environmental coating on the outside of the container.
Consumers Gas was also concerned about the costs associated with
inspecting CNG fuel containers annually.
Powertech stated that all international inspection standards
specify a 36-month interval between inspections. Based on its review of
in-service ruptures of CNG containers since 1974, that company stated
these failures would not have been prevented had a one year visual
inspection been used.
Lincoln stated that its recently completed 12-month inspection
program on 96 CNG vehicles in the Atlanta area showed no indication of
unexpected damage 2 to the CNG fuel containers. Based on this
field experience, Lincoln concluded that a 12-month inspection interval
would provide little safety benefit. Lincoln favored the adoption of a
36-month, 36,000 mile inspection requirement which would harmonize the
U.S. requirement with the requirements of other standard-setting
countries and organizations. Lincoln stated that a 12-month inspection
requirement would not have prevented the two publicized container
failures involving two different GM trucks because, in each case, the
truck's container had sustained damage prior to installation.
---------------------------------------------------------------------------
\2\ Lincoln did not explain what it meant by the phrase
``unexpected damage.''
---------------------------------------------------------------------------
AAMA stated that the 12-month interval for visual inspection
requirement is inconsistent with other CNG container inspection
requirements. That organization requested that the interval be revised
to every 36 months or after an accident or fire for external damage and
deterioration.
PST stated that the inspection interval should be 36-months with
the manufacturer having the option of specifying shorter intervals
based on the design and construction of the container.
Based on the available information, NHTSA has decided to amend S7.4
to require that each CNG container be visually inspected for damage or
deterioration after a motor vehicle accident or fire and at least every
36 months or 36,000 miles, whichever comes first. Among the factors
that can damage a container are scratches and gouges and exposure to
caustic substances and fluids such as acid, road salt, and gasoline.
The agency notes that the new inspection schedule is consistent with
international and industry standards. Based on the comments, the agency
believes that a 12-month, 12,000 mile inspection interval would provide
little safety benefit to the vehicle owners. While visual inspection of
a CNG container may detect some conditions that indicate a potential
failure, the agency agrees with the petitioners that a 12 month, 12,000
mile inspection interval would be excessive. The agency notes that a
12-month inspection interval would not have prevented the two
publicized GM container failures because they were caused by stress
corrosion cracking which is internal to the container and therefore
would not have been identifiable during a visual inspection of the
container's exterior.
B. Inspection Pamphlets
In the November 1995 final rule, NHTSA stated that the regulation
must reference inspection information about the in-use safety of CNG
containers. The agency further stated that the current CGA pamphlets
provide valuable inspection information to help assure
[[Page 47088]]
fuel container safety for Type 1, 2, and 3 containers.
PST and AAMA stated that referencing the CNG pamphlets on the
container label is confusing and not beneficial. PST stated that a
container's label should refer only to those CGA pamphlets that are
relevant to that specific container. For example, a reference to
pamphlet C-6.1 on a steel container could be confusing since that
pamphlet is for aluminum containers. AAMA stated that the inspection
procedures referenced in the pamphlets include inspections, such as
interior and hydrostatic testing, that necessitate the removal of the
CNG containers from the vehicle, and the use of specialized test
equipment and personnel. AAMA stated that such testing is not needed to
conduct a visual inspection, like the one specified by the CNG
container label.
After further analyzing the available information, NHTSA has
decided that it is inappropriate at this time to require reference to
any of the CGA pamphlets on the container's label. As AAMA stated, it
would be difficult for users to comply with the requirements in these
pamphlets which direct an inspector to remove a CNG container. The
agency further agrees with AAMA that the inspection procedures
referenced in the CGA pamphlets may be confusing to a mechanic because
it specifies that the CNG container be inspected by a container tester
registered with the U.S. Department of Transportation or Canadian
Transport Commission. NHTSA notes that the CNG container industry is in
the process of revising the inspection pamphlets to clarify the
reinspection interval for CNG containers used as vehicle fuel tanks.
C. Other Issues
PST stated that the minimum character size for the label should be
reduced to \5/32\ inch because the added wording regarding the
recommended periodic inspection of fuel containers would increase the
label's size. PST stated that there is no functional need for the label
to be legible for distances greater than a few feet. PST stated that
larger labels are more costly and more difficult to apply on a CNG
container, and that a smaller label can more easily conform to the
surface for adhesion.
Lincoln does not agree that the cost of this rulemaking is solely
the cost of the label. That manufacturer stated that the rulemaking's
true cost should reflect the costs of implementing the change from a
36-month to 12-month inspection interval and that this would make this
rulemaking significant.
NHTSA notes that the letter height requirements were addressed in
the final rule published July 24, 1995. In that rulemaking, the agency
changed the letter height requirement from 12.7 mm (0.50 inch) to 6.35
mm (0.25 inch) which was consistent with the comments from Chrysler and
Structural Composite Industries. The agency stated in that rulemaking
that it would be inappropriate to reduce the letter height even more
because the lettering would be too small to be visible at various
locations on CNG vehicles. The agency notes that these issues have
already been addressed in both the July 24, 1995 final rule and in the
November 24, 1995 final rule. Since PST did not provide any new
information on label content or the letter height requirement to
justify a change, NHTSA is not making any change.
NHTSA notes that today's amendment of Standard No. 304 with respect
to the labeling requirement render moot Lincoln's concerns about the
added costs associated with an annual inspection interval.
III. Rulemaking Analyses and Notices
A. Executive Order 12866 (Federal Regulation) and DOT Regulatory
Policies and Procedures
NHTSA has considered the impact of this rulemaking action under
Executive Order 12866 and the Department of Transportation's regulatory
policies and procedures. This rulemaking document was not reviewed
under E.O. 12866, ``Regulatory Planning and Review.'' Further, this
action has been determined to be ``nonsignificant'' under the
Department of Transportation's regulatory policies and procedures. The
agency has not prepared a Final Regulatory Evaluation (FRE) because the
impacts of these amendments are so minimal as not to warrant
preparation of a full regulatory evaluation. The amendments made in
today's final rule are requirements related to the labeling of CNG
vehicles and containers, and as such do not result in significant
increases in cost. In the FRE for Standard No. 304, the agency stated
``The consumer cost for a label on each CNG fuel container certifying
that the container meets the proposed equipment requirements is
estimated to be in the range of $0.06 to $0.11 per label. This includes
the cost of the label plus labor costs for attachment.'' The changes
made by this final rule do not change that estimate.
B. Regulatory Flexibility Act
NHTSA has also considered the effects of this rulemaking action
under the Regulatory Flexibility Act. Based upon the agency's
evaluation, I certify that this rule will not have a significant
economic impact on a substantial number of small entities. As noted
above, the amendments will result in only a very nominal cost increase
resulting from adding the additional labeling information. Further,
information available to the agency indicates that businesses
manufacturing CNG fuel containers are not small businesses.
C. Executive Order 12612 (Federalism)
NHTSA has analyzed this rulemaking action in accordance with the
principles and criteria contained in Executive Order 12612. NHTSA has
determined that the rule will not have sufficient Federalism
implications to warrant the preparation of a Federalism Assessment.
D. National Environmental Policy Act
In accordance with the National Environmental Policy Act of 1969,
NHTSA has considered the environmental impacts of this rule. The agency
has determined that this rule will have no adverse impact on the
quality of the human environment.
E. Civil Justice Reform
This rulemaking does 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, except to the extent that the State requirement imposes a
higher level of performance and applies only to vehicles procured for
the State's use. 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, Rubber and rubber
products, Tires.
In consideration of the foregoing, the agency is amending Standard
No. 304; Compressed Natural Gas Fuel Container Integrity, part 571 at
Title 49 of the Code of Federal Regulations as follows:
PART 571--[AMENDED]
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.
[[Page 47089]]
2. Section 571.304 is amended by revising S7.4(g) to read as
follows:
Sec. 571.304 Standard No. 304, Compressed Natural Gas Fuel Container
Integrity.
* * * * *
S7.4 * * *
(g) The statement: ``This container should be visually inspected
after a motor vehicle accident or fire and at least every 36 months or
36,000 miles, whichever comes first, for damage and deterioration.
* * * * *
Issued on: August 30, 1996.
Donald C. Bischoff,
Executive Director.
[FR Doc. 96-22762 Filed 9-5-96; 8:45 am]
BILLING CODE 4910-59-P
Complete official Federal Register PDF
FR Doc. 96-22760 Fisheries of the Exclusive Economic Zone off Alaska; Scallop Fishery; Closure in Registration Area D
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47090-47091]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22760]
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
50 CFR Part 679
[Docket No. 960502124-6190-02; I.D. 083096D]
Fisheries of the Exclusive Economic Zone off Alaska; Scallop
Fishery; Closure in Registration Area D
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Closure.
-----------------------------------------------------------------------
SUMMARY: NMFS is closing the scallop fishery in all districts of
Scallop Registration Area D (Yakutat) other than District 16. This
action is necessary to prevent exceeding the scallop total allowable
catch (TAC) in this area.
EFFECTIVE DATE: 1200 hrs, Alaska local time (A.l.t.), September 4,
1996, until 2400 hrs, A.l.t., December 31, 1996.
FOR FURTHER INFORMATION CONTACT: Andrew Smoker, 907-586-7228.
SUPPLEMENTARY INFORMATION: The scallop fishery in the exclusive
economic zone off Alaska is managed by NMFS according to the Fishery
Management Plan for Scallop Fishery off Alaska (FMP) prepared by the
North Pacific Fishery Management Council under authority of the
Magnuson Fishery Conservation and Management Act. Fishing for scallops
is governed by regulations appearing at 50 CFR parts 600 and 679.
In accordance with Sec. 679.62(b) the 1996 scallop TAC for all
districts of Scallop Registration Area D other than District 16 was
established by the Final 1996 Harvest Specifications of Scallops (61 FR
38099, July 23, 1996) as 195,000 lb (88,451 kg) shucked meat.
The Director, Alaska Region, NMFS, has determined, in accordance
with 679.62(c), that the scallop TAC for all districts of Scallop
Registration Area D
[[Page 47091]]
other than District 16 has been reached. Therefore, NMFS is prohibiting
the taking and retention of scallops in all districts of Scallop
Registration Area D other than District 16 from September 4, 1996,
through 2400 hrs, A.l.t., December 31, 1996.
Classification
This action is taken under Sec. 679.62 and is exempt from review
under E.O. 12866.
Authority: 16 U.S.C. 1801 et seq.
Dated: August 30, 1996.
Donald J. Leedy,
Acting Director, Office of Sustainable Fisheries, National Marine
Fisheries Service.
[FR Doc. 96-22760 Filed 9-3-96; 2:35pm]
BILLING CODE 3510-22-F
Complete official Federal Register PDF
FR Doc. 96-22748 Fisheries Off West Coast States and in the Western Pacific; Pacific Coast Groundfish Fishery; Trip Limit Reductions
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47089-47090]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22748]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric Administration
50 CFR Part 660
[Docket No. 951227306-5306-01; I.D. 082996C]
Fisheries Off West Coast States and in the Western Pacific;
Pacific Coast Groundfish Fishery; Trip Limit Reductions
AGENCY: National Marine Fisheries Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA), Commerce.
ACTION: Fishing restrictions; request for comments.
-----------------------------------------------------------------------
SUMMARY: NMFS announces further restrictions to the Pacific Coast
groundfish fisheries for widow rockfish and yellowtail rockfish. These
actions are authorized by regulations implementing the Pacific Coast
Groundfish Fishery Management Plan (FMP), which governs the groundfish
fishery off Washington, Oregon, and California. These restrictions are
intended to keep landings as close as possible to the 1996 harvest
guidelines for these species.
DATES: Effective from 0001 hours (local time) September 1, 1996, until
the effective date of the 1997 annual specifications and management
measures for the Pacific Coast groundfish fishery, which will be
published in the Federal Register. Comments will be accepted through
September 23, 1996.
ADDRESSES: Submit comments to William Stelle, Jr., Director, Northwest
Region (Regional Director), National Marine Fisheries Service, 7600
Sand Point Way NE., BIN-C15700, Seattle, WA 98115-0070; or Hilda Diaz-
Soltero, Director, Southwest Region, National Marine Fisheries Service,
501 West Ocean Blvd., Suite 4200, Long Beach, CA 90802-4213.
FOR FURTHER INFORMATION CONTACT: William L. Robinson at 206-526-6140;
or Rodney McInnis at 310-980-4040.
SUPPLEMENTARY INFORMATION: The following changes to routine management
measures for widow and yellowtail rockfishes were recommended by the
Pacific Fishery Management Council (Council), in consultation with the
States of Washington, Oregon, and California, at its August 21-23,
1996, meeting in Portland, OR.
Widow rockfish. Widow rockfish currently are managed under a 2-
month cumulative trip limit of 70,000 lb (31,752 kg). The best
available information at the August 1996 Council meeting indicated that
3,426 mt of widow rockfish had been taken through July 31, 1996, and
that the 6,500-mt harvest guideline would be reached by mid-November
1996, if the rate of landings is not slowed. The Council recommended
that the 2-month cumulative trip limit for widow rockfish be reduced in
September-October 1996 from 70,000 lb (31,752 kg) to 50,000 lb (22,680
kg) coastwide to keep landings within the harvest guideline in 1996.
The Council also recommended reverting to 1-month cumulative trip
limits of 25,000 lb (11,340 kg) during November and December 1996 to
provide greater flexibility managing this species at the end of the
year. If landings are not sufficiently curtailed, trip limits may be
reduced further, or landings prohibited, in November and/or December
1996.
Yellowtail rockfish. Yellowtail rockfish is one component of the
Sebastes complex, and is managed with different harvest guidelines and
trip limits north and south of Cape Lookout, OR (45 deg.20'15'' N.
lat.). South of Cape Mendocino, CA (40 deg.30' N. lat.) there is no
specific harvest guideline or trip limit for yellowtail rockfish, other
than the overall limit for the Sebastes complex. The northern harvest
guideline for yellowtail rockfish (which includes the U.S. portion of
the Vancouver area plus the Columbia area north of Cape Lookout) is
3,590 mt, and the southern harvest guideline (for the Columbia area
south of Cape Lookout plus the Eureka area) is 2,580 mt.
The best available information at the August 1996 Council meeting
indicated that 2,139 mt of yellowtail rockfish had been taken north of
Cape Lookout through July 31, 1996, and that the 3,590-mt harvest
guideline for this area would be reached by late October or early
November if the rate of landings is not slowed. The Council recommended
an immediate reduction in the 2-month cumulative trip limit, from
32,000 lb (14,515 kg) to 20,000 lb (9,072 kg) for yellowtail rockfish
north of Cape Lookout in September-October 1996. In addition, as for
widow rockfish, the Council recommended reverting to 1-month cumulative
trip limits, that are half the 2-month cumulative trip limits, during
November and December 1996 to provide greater flexibility managing this
species at the end of the year. The 1-month cumulative trip limits also
apply to the Sebastes complex and canary rockfish, another major
component of the complex, north of Cape Mendocino, for consistency with
the limits for yellowtail rockfish. Consistency is necessary to
accommodate special provisions implemented by the States of Oregon and
Washington that enable fishers to operate on both sides of Cape Lookout
and keep the larger, southern limit for yellowtail rockfish and the
Sebastes complex. These provisions would be impossible to implement if
a 1-month limit applied north of the line and a 2-month limit applied
south. If landings are not sufficiently curtailed, trip limits may be
reduced further, or landings prohibited, in November and/or December
1996.
At its October 1996 meeting, the Council will review the progress
of these and other groundfish fisheries and may recommend changes to
the limits announced herein. Any changes approved by NMFS will be
announced in the Federal Register.
NMFS action. NMFS concurs with the Council's recommendations,
which are intended to keep landings of widow rockfish and yellowtail
rockfish within their 1996 harvest guidelines.
The 60-percent monthly limits in the limited entry fishery apply
only in conjunction with 2-month cumulative trip limits, and therefore
are not a part of the 1-month cumulative trip limits established for
November and December 1996.
The trip limit changes apply to both the limited entry and open
access fisheries, including exempt trawl gear used to harvest pink
shrimp and prawns. In addition, as stated in the annual management
measures at 61 FR 279 (January 4, 1996), ``A vessel operating in the
open access fishery must not exceed any trip limit, frequency limit,
and/or size limit for the open access fishery; or for the same gear
and/or subarea in the limited entry fishery; or, in any calendar month,
50
[[Page 47090]]
percent of any 2-month cumulative trip limit for the same gear and/or
subarea in the limited entry fishery, called the '50-percent monthly
limit.'''
The annual management measures published at 61 FR 279, January 4,
1996, as amended, are modified as follows:
1. Paragraphs IV.B.(1) and (2) of the annual management measures
for widow rockfish are revised to read as follows:
B.(1) Limited entry fishery.
(a) September-October 1996. The cumulative trip limit for widow
rockfish is 50,000 lb (22,680 kg) per vessel for the 2-month period.
The 60-percent monthly limit is 30,000 lb (13,608 kg).
(b) November-December 1996. The cumulative trip limit for widow
rockfish is 25,000 lb (11,340 kg) per vessel per 1-month period.
(2) Open access fishery. Within the limits at paragraph IV.I. for
the open access fishery, the cumulative monthly trip limit for widow
rockfish during September-December 1996 is 25,000 lb (11,340 kg) per
vessel per 1-month period.
2. Paragraphs IV.C.(2)(a)(i) and (ii) of the annual management
measures for yellowtail rockfish and the Sebastes complex are revised
to read as follows:
C.(2)(a) Cumulative trip limits.
(i) North of Cape Lookout.
(A) September-October 1996. The cumulative trip limit for the
Sebastes complex taken and retained north of Cape Lookout is 70,000 lb
(31,752 kg) per vessel for the 2-month period. Within this cumulative
trip limit for the Sebastes complex, no more than 20,000 lb (9,072 kg)
may be yellowtail rockfish taken and retained north of Cape Lookout,
and no more than 18,000 lb (8,165 kg) may be canary rockfish.
(B) November-December 1996. The cumulative trip limit for the
Sebastes complex taken and retained north of Cape Lookout is 35,000 lb
(15,876 kg) per vessel per 1-month period. Within this cumulative trip
limit for the Sebastes complex, no more than 10,000 lb (4,536 kg) may
be yellowtail rockfish taken and retained north of Cape Lookout, and no
more than 9,000 lb (4,082 kg) may be canary rockfish.
(ii) Cape Lookout to Cape Mendocino.
(A) September-October 1996. The cumulative trip limit for the
Sebastes complex taken and retained between Cape Lookout and Cape
Mendocino remains at 100,000 lb (45,359 kg) per vessel for the 2-month
period. Within this cumulative trip limit for the Sebastes complex, no
more than 70,000 lb (31,752 kg) may be yellowtail rockfish taken and
retained between Cape Lookout and Cape Mendocino, and no more than
18,000 lb (8,165 kg) may be canary rockfish.
(B) November-December 1996. The cumulative trip limit for the
Sebastes complex taken and retained between Cape Lookout and Cape
Mendocino is 50,000 lb (22,680 kg) per vessel per 1-month period.
Within this cumulative trip limit for the Sebastes complex, no more
than 35,000 lb (15,876 kg) may be yellowtail rockfish taken and
retained between Cape Lookout and Cape Mendocino, and no more than
9,000 lb (4,082 kg) may be canary rockfish.
3. Paragraph IV.C.(2)(a)(iv) of the annual management measures for
yellowtail rockfish and the Sebastes complex is revised to read as
follows:
(iv) The 60-percent monthly limits for September-October 1996 are:
For the Sebastes complex, 42,000 lb (19,051 kg) north of Cape Lookout,
60,000 lb (27,216 kg) between Cape Lookout and Cape Mendocino, and
120,000 lb (54,431 kg) south of Cape Mendocino; for yellowtail
rockfish, 12,000 lb (5,443 kg) north of Cape Lookout, and 42,000 lb
(19,051 kg) between Cape Lookout and Cape Mendocino; for bocaccio,
36,000 lb (16,329 kg) south of Cape Mendocino; and, for canary
rockfish, 10,800 lb (4,899 kg) coastwide.
4. Paragraph IV.C.(3)(b) of the annual management measures for
yellowtail rockfish and the Sebastes complex is revised to read as
follows:
C.(3)(b) Open access fishery. If smaller than the limits at
paragraph IV.I. of the annual management measures, the following
cumulative monthly trip limits apply (within the limits at paragraph
IV.I.) during September-December 1996: For the Sebastes complex, 35,000
lb (15,876 kg) north of Cape Lookout, 50,000 lb (22,680 kg) between
Cape Lookout and Cape Mendocino, and 100,000 lb (45,359 kg) south of
Cape Mendocino; for yellowtail rockfish, 10,000 lb (4,536 kg) north of
Cape Lookout, and 35,000 lb (15,876 kg) between Cape Lookout and Cape
Mendocino; for bocaccio, 30,000 lb (13,608 kg) south of Cape Mendocino;
and, for canary rockfish, 9,000 lb (4,082 kg) coastwide.
Classification
These actions are authorized by the regulations implementing the
FMP. The determination to take these actions is based on the most
recent data available. The aggregate data upon which the determinations
are based are available for public inspection at the office of the
Director, Northwest Region, NMFS (see ADDRESSES) during business hours.
Because of the need for immediate action to slow the rate of harvest of
widow and yellowtail rockfishes, and because the public had an
opportunity to comment on the action at the August 1996 Council
meeting, NMFS has determined that good cause exists for this document
to be published without affording a prior opportunity for public
comment or a 30-day delayed effectiveness period. These actions are
taken under the authority of 50 CFR 660.323(b)(1)(i), and are exempt
from review under E.O. 12866.
Authority: 16 U.S.C. 1801 et seq.
Dated: August 30, 1996.
Donald J. Leedy
Acting Director, Office of Sustainable Fisheries, National Marine
Fisheries Service.
[FR Doc. 96-22748 Filed 8-30-96; 5:03 pm]
BILLING CODE 3510-22-F
Complete official Federal Register PDF
FR Doc. 96-22746 Modernization of Examination Methods
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47060-47064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22746]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Coast Guard
46 CFR Parts 10 and 12
[CGD 94-029]
RIN 2115-AE94
Modernization of Examination Methods
AGENCY: Coast Guard, DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
[[Page 47061]]
SUMMARY: By this final rule, the Coast Guard amends the rules that
require examinations for merchant-marine licenses and for unlicensed
ratings to be written and to be administered by it: This rule removes
references to writing and broadens the scope of those authorized to
administer the examinations. These two changes reflect the efforts of
the Coast Guard to develop testing by alternative media and, with that
testing, the use of private-sector and public-sector testing services.
The development of more effective and modern examination of applicants
for merchant-marine licenses and unlicensed ratings will enhance the
safety of the maritime environment.
DATES: This final rule is effective on October 7, 1996.
ADDRESSES: Unless otherwise indicated, documents referred to in this
preamble are available for inspection or copying at the office of the
Executive Secretary, Marine Safety Council (G-LRA-2, 3406), [CGD 94-
029], U.S. Coast Guard Headquarters, 2100 Second Street SW.,
Washington, DC 20593-0001, between 9:30 a.m. and 2:00 p.m. Monday
through Friday, except Federal holidays. The telephone number is (202)
267-1477.
FOR FURTHER INFORMATION CONTACT:
Mr. Mark C. Gould, Project Manager, Marine Personnel Qualifications
Branch (G-MOS-1), (202) 267-6890.
SUPPLEMENTARY INFORMATION:
Background and Purpose
Currently, Coast Guard rules require that applicants for merchant-
marine licenses and unlicensed ratings pass written examinations
administered by it. During the latter part of 1993, the Coast Guard
conducted meetings and discussions of a focus group, which addressed
the future of Coast Guard licensing. Specifically, the group looked at
ways to improve and modernize merchant-mariner examinations.
The report of the focus group, ``Licensing 2000 and Beyond''
(November, 1993), a copy of which is available in the public docket for
this rulemaking [CGD 94-029] where indicated under ADDRESSES above,
recommends that the Coast Guard's Marine Licensing Program adopt new
methods of verifying competency, including practical demonstrations and
the use of simulators. Practical demonstrations and simulators would
provide more effective means of testing the skills of the applicants by
requiring proper actions and reactions during real-time, real-world
scenarios. Electronic methods of examination are employed by private
sector and public-sector organizations. There is increasing user of
Third-Party or Fourth-Party testing systems that maximize the
significant benefits new technology offers. The report of the focus
group defined a ``Third Party'' as one who trains or teaches the
mariner, and a ``Fourth Party'' as someone, other than the Coast Guard
or a Third Party, who administers a test or makes a subjective judgment
about the competency of the mariner. The Coast Guard is exploring the
possibility or implementing electronic methods and the use of Third-
Party or Fourth-Party testing services.
However, 46 CFR 10.205, 10.207, 10.901, 12.05-9, 12.10-5, 12.15-9,
and 12.20-5 specify that applicants need pass written (or oral)
examinations administered by the Coast Guard. Because the Coast Guard
is considering the use of other, proved methods of proficiency testing,
which could significantly improve a very critical aspect of the Coast
Guard's qualification system, this final rule removes the terms
``written'' and ``in writing'' from the rules governing merchant-marine
examinations and makes minor revisions to authorize testing other than
by the Coast Guard.
Regulatory History
On February 23, 1995, acting on the delegated authority, among
others, of Chapters 71 (for 46 CFR Part 10) and 73 (for 46 CFR Part 12)
of Title 46 of the United States Code, the Coast Guard published in the
Federal Register [60 FR 10053] a notice of proposed rulemaking (NPRM),
entitled Modernization of Examination Methods. The Coast Guard received
eight letters commenting on the proposal. It held no public hearing.
Discussion of Comments
The Coast Guard received eight comments from various companies and
individuals. Most supported the rulemaking. One flatly opposed it, and
several expressed concern about its impact on mariners, maritime
employers, and marine educational institutions. These concerns are
addressed below.
One commentor stated that the Coast Guard does not solicit the
ideas and comments of small businesses or other small organizations to
examine the impact of proposed rules. Another insisted that it would
have an adverse economic impact on independently owned and operated
small businesses. The Coast Guard disagrees. As required by the
Administrative Procedure Act (5 U.S.C. 553) and the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.), the Coast Guard solicited
comments from the public in the NPRM [60 FR 10053], and it considered
all comments received during the comment period. In addition, it
receives advice and recommendations from the Merchant Marine Personnel
Advisory Committee (MERPAC) on a variety of matters pertaining to U.S.
merchant mariners, including standards of training and qualification.
The 19-member committee includes representatives from shipping
companies both large and small, maritime academies, proprietary marine
educators, and active mariners.
One commentor stated that this rulemaking is significant under
section 3(f) of Executive Order 12866. The Coast Guard and OMB
disagree. Because this final rule simply broadens the available methods
of administering examinations, and because it changes the rules to
allow the use of fourth-party testing in the future (beyond the
existing authorization for third-party and Coast Guard testing), it
should not harm any organization, large or small.
The specter of simulators disturbed several commentors, who adduced
five main criticisms: (1) The Coast Guard is using this rulemaking to
mandate the use of simulators as a stand-alone method to demonstrate
proficiency. (2) Simulation will be used where a student's performance
would be better ascertained by written examination. (3) Such radical
changes in the examination process should be made slowly. (4)
Simulators cannot adequately present the conditions encountered by
towboats on rivers or inland waters. (5) There are insufficient
simulators presently available for this program. These criticisms are
mistaken.
(1) This rulemaking was undertaken to permit, rather than mandate,
the use of simulators as an option to demonstrate proficiency. There is
no intention to mandate the use of simulators as a sole means of
demonstrating proficiency.
(2) Some subjects (meeting and passing, navigation involving
traffic, and the like) are ideally suited to simulation because the
evaluator can guage the timeliness and adequacy of the student's
response. Others (tides and currents, employment of navigational
equipment, and the like) are indeed better suited for a multiple-choice
examination and use of reference materials. The use of simulators will
be allowed only where it affords a clear advantage over written
examinations.
(3) Because the Coast Guard is permitting, rather than mandating,
the use of simulators and practical demonstration in addition to
written examinations, changes can be introduced gradually. The Coast
Guard
[[Page 47062]]
intends to retain written examinations for the foreseeable future.
(4) There is, in fact, one third-party training course approved by
the Coast Guard for towboats that uses simulators for part of its
curriculum, and uses them to good effect. This is simply another option
available to the license candidate.
(5) Because the use of simulators as one part of testing is merely
one option available to the license candidate, the number of courses
approved by the Coast Guard and now available to the public that use
simulators is irrelevant.
A related matter, the 1995 Amendments to the International
Convention on Standards of Training, Certification and Watchkeeping for
Seafarers, 1978 (STCW), will affect virtually all phases of the system
used in the United States to train, test, evaluate, license, certify
and document merchant mariners for service on seagoing vessels. The
Amendments will require both written examinations and practical
demonstrations of skills and will promote the use of simulators. They
are the subject of a separate rulemaking [CGD 95-062], an NPRM which
appears at 61 FR 13284 (March 26, 1996).
One commentor opposed the Coast Guard's accepting successful
completion of a course, approved by the Coast Guard and offered by a
third-party company, that combines the use of simulators and written
examinations, instead of an examination administered by the Coast
Guard. The commentor felt that the written examination would be
compromised. The Coast Guard disagrees. It will conduct independent
visits and audits, under the authority of 46 CFR 10.303(f), to ensure
that the conditions for Coast Guard approval are maintained. It may
also administer partial examinations to applicants who have already
successfully completed these courses so it can monitor whether training
facilities are meeting their training objectives. Under the current
rules (46 CFR 10.301) applicants who successfully complete certain
approved courses offered by third-party trainers throughout the
country, including administration of final examinations, are exempt
from the requirement to pass examinations administered by the Coast
Guard. There is no reason to amend or limit application of these rules,
as long as adequate oversight is maintained.
One commentor stated that the Coast Guard should expand the role of
the third-party training companies so that completion of their approved
courses would satisfy major portions of licensing and documentation
examinations. The Coast Guard agrees. Experience gained in recent years
has convinced the Coast Guard that, under the right conditions and
guidelines, a Coast Guard examination is unnecessary, if the candidate
is subject to a rigorous program of evaluation by competent assessors.
Five commentors expressed support for the concept of fourth-party
testing, but felt that Coast Guard testing should remain in place as a
check against cost increases in private-sector testing. The Coast Guard
agrees that this is a valid concern. The Coast Guard is maintaining its
testing system.
One commentor stated that no third-party or fourth-party testing
should be allowed unless proctored by professional mariners. In
addition, the commentor cautioned the Coast Guard about third-party and
fourth-party training or testing organizations' selling their services.
The Coast Guard does not believe that these concerns warrant changes to
the NPRM. There are currently more than 100 third-party training
organizations that offer courses approved by the Coast Guard and that
teach and examine applicants for licenses or merchant mariners'
documents. In most instances, the applicants then must pass
examinations administered by the Coast Guard. The operations of these
organizations are overseen on a regular basis by Coast Guard personnel
of local Regional Examination Centers (RECs). At least some of the
personnel in each REC have military sea time, and several are former
professional merchant mariners. Coast Guard personnel of Marine Safety
Offices, reservists, and auxiliarists with river or seagoing experience
may oversee these operations as well. For fourth-party testing,
professional expertise in maritime matters is not relevant. Fourth-
party testing organizations merely proctor and grade multiple-choice
examinations for their employers. Any fourth-party testing organization
involved in direct assessment of candidates will be subject to Coast
Guard approval, including confirmation of the professional credentials
of the staff involved in assessment.
One commentor had several questions concerning fourth-party
testing. Although the Coast Guard is not implementing such testing in
the immediate future, changes made by this final rule do enable the
Coast Guard to implement the use or partial use of such testing in the
future. Fourth-party testing may serve as a second alternative to
traditional examinations administered by the Coast Guard, the first
being third-party training with testing. The Coast Guard could, for
example, submit a data bank of questions to the fourth-party examiner,
who would randomly generate examinations. The only contact that fourth-
party testers would then have with the course or student would be to
administer and grade the examinations. Other approaches to fourth-party
testing may emerge from increased use of simulators.
One commentor asked whether Coast Guard would dictate objectives of
learning and methods of determining competency to the training
companies, and whether it would dictate the curriculum. It currently
has course-approval guidelines for most courses required by its rules.
These guidelines, authorized by 46 CFR 10.302, describe the desired
learning objectives but not the methods of determining competency.
Although the Coast Guard does not dictate the curriculum, it will not
approve it unless the information contained in the guidelines is
imparted to the student. Although it does not anticipate imposing rigid
requirements for the assessment of competency, it will take into
account methods and criteria of assessment in its approval of courses
permitted by this final rule.
One commentor expressed concern about organizations and courses
which exist solely to assist the applicant in memorizing the answers to
the questions in the bank of Coast Guard examinations and actually
teach the applicant nothing. The use of simulators and practical
demonstration of proficiency in certain topics will tend to eliminate
this questionable method of examination preparation.
A maritime educational institution suggested that the Coast Guard
issue each original license and each raise in grade or increase in
scope as a nonrenewable temporary document, which would expire in five
years unless replaced by a permanent license based on compliance with
STCW. In contrast, a maritime educator suggested that each eligible
student, upon graduation from a Federal or State maritime academy,
automatically receive a license as a third mate or third assistant
engineer. Whatever their merits, both comments lie well beyond the
scope of this final rule, which merely removes the requirement that
licensing examinations be written and allows other entities to
administer them.
One commentor stated that this final rule should require the
functional use of the English language. The Coast Guard agrees. Title
46 CFR 10.201(c) requires that ``an applicant for a license must
demonstrate an ability to speak and understand English as found in the
navigation rules, aids to navigation publications, emergency equipment
[[Page 47063]]
instructions, machinery instructions, and radiotelephone communications
instructions.'' That rule remains unchanged by this. Likewise, the
current rules regarding examinations for able seamen [46 CFR 12.05-
9(b)], lifeboatmen [46 CFR 12.10-5(b)], and qualified members of the
engine department [46 CFR 12.15-9(a)] all require that the examinations
be conducted in the English language. These rules continue to be
necessary to ensure that personnel in these critical positions will
sufficiently understand orders that may come down under the stress of
an emergency. The ability to understand such orders can make the
critical difference in life-threatening situations. Therefore, these
rules, too, remain unchanged by this.
In sum: The NPRM proposed to remove the terms ``written'' and ``in
writing'' from the rules governing examinations administered by the
Coast Guard for merchant mariners seeking licenses and raises of grade
[46 CFR 10.205(i)(1), 10.207(d)(1), 10.217(a) (1) and (2), and
10.901(a)], and for applicants seeking to fill unlicensed ratings [46
CFR 12.05-9 (a) and (b), 12.10-5 (a) and (b), 12.15-9 (a) and (c), and
12.20-5]. (The last of these, 46 CFR 12.20-5, along with the rest of
the subpart, 12.20, to which it belonged, was removed by a supervening
Interim Rule on Tankermen [60 FR 17134 (April 4, 1995)].) The NPRM also
proposed to let the Coast Guard Officer in Charge, Marine Inspection
(OCMI), authorize the examination of applicants by private-sector and
public-sector testing services. These two changes reflect the Coast
Guard's efforts to develop more modern, efficient, and effective
methods of examination.
Regulatory Evaluation
This final 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 from this rule to be so minimal that a full Regulatory
Evaluation under paragraph 10e of the regulatory policies and
procedures of DOT is unnecessary. This rule will impose no costs on
industry.
Small Entities
Under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.), the
Coast Guard must consider the economic impact on small entities of a
rule for which an NPRM is required. ``Small entities'' may include (1)
Small businesses and not-for-profit organizations that are
independently owned and operated and are not dominant in their fields
and (2) governmental jurisdictions with populations of less than
50,000. As the Discussion of Comments makes clear, this final rule will
place no additional costs on the public. 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 final rule contains no collection-of-information requirements
under the Paper Reduction Act (44 U.S.C. 3501 et seq.).
Federalism
The Coast Guard has analyzed this final rule under the principles
and criteria contained in Executive Order 12612 and has determined that
it does not have sufficient implications for federalism to warrant the
preparation of a Federalism Assessment. The authority to develop and
administer examinations for merchant mariners' licenses and other
documents has been committed to the Coast Guard by Federal statutes. If
State or local governments ever did purport to regulate these
examinations, the Coast Guard would move to pre-empt their acts for the
sake of uniformity under the Commerce Clause of the Constitution; but
the issue promises to remain hypothetical.
Environment
The Coast Guard considered the environmental impact of this final
rule and concluded that, under paragraph 2.B.2.e(34)(c) of Commandant
Instruction M16475.1B, this rule is categorically excluded from further
environmental documentation. The rule clearly has no environmental
impact. A ``Categorical Exclusion Determination'' is available in the
docket for inspection or copying where indicated under ADDRESSES.
List of Subjects
46 CFR Part 10
Reporting and recordkeeping requirements, schools, seamen.
46 CFR Part 12
Reporting and recordkeeping requirements, seamen.
For the reasons set out in the preamble, the Coast Guard amends 46
CFR parts 10 and 12 as follows:
PART 10--LICENSING OF MARITIME PERSONNEL
1. The authority citation for part 10 is revised to read as
follows:
Authority: 31 U.S.C. 9701, 46 U.S.C. 2103, 2110; 46 U.S.C.
Chapter 71; 49 CFR 1.45, 1.46; Sec. 10.107 also issued under the
authority of 44 U.S.C. 3507.
2. In Sec. 10.205, paragraph (i)(1) is revised to read as follows:
Sec. 10.205 Requirements for original licenses and certificates of
registry.
* * * * *
(i) Professional Examination. (1) When the OCMI finds the
applicant's experience and training to be satisfactory and the
applicant is eligible in all other respects, the OCMI will authorize
the examination in accordance with the following requirements:
(i) Any applicant for a deck or engineer license limited to vessels
not exceeding 500 gross tons, or a license limited to uninspected
fishing-industry vessels, may request an oral-assisted examination in
lieu of any written or other textual examination. If there are textual
questions that the applicant has difficulty reading and understanding,
the OCMI will offer the oral-assisted examination. Each license based
on an oral-assisted examination is limited to the specific route and
type of vessel upon which the applicant obtained the majority of
service.
(ii) The general instructions for administration of examinations
and the lists of subjects for all licenses appear in Subpart I of this
part. The OCMI will place in the applicant's file a record indicating
the subjects covered.
* * * * *
3. In Sec. 10.207, paragraph (d)(1) is revised to read as follows:
Sec. 10.207 Requirements for raise of grade of license.
* * * * *
(d) Professional Examination. (1)(i) When the OCMI finds an
applicant's experience and training for raise of grade to be
satisfactory and the applicant is eligible in all other respects, the
OCMI will authorize the examination. Oral-assisted examinations may be
administered in accordance with Sec. 10.205(i)(1). The OCMI will place
in the applicant's file a record indicating the subjects covered.
(ii) The general instructions for administration of examinations
and the lists of subjects for all licenses appear in Subpart I of this
part.
* * * * *
[[Page 47064]]
4. In Sec. 10.217, the second sentences of paragraphs (a) (1) and
(2) are revised to read as follows:
Sec. 10.217 Examination procedures and denial of licenses.
(a)(1) * * * The examination fee set out in Sec. 10.109 must be
paid before the applicant may take the first examination section. * * *
* * * * *
(2) * * * The examination fee set out in Sec. 10.109 must be paid
before the applicant may take the first examination section. * * *
* * * * *
5. In Sec. 10.901, paragraph (a) is revised to read as follows:
Sec. 10.901 General provisions.
(a) Each applicant for any license listed in this part shall pass
examinations on the appropriate subjects listed in this subpart, except
as noted in Sec. 10.903(b).
* * * * *
PART 12--CERTIFICATION OF SEAMEN
6. The authority citation for part 12 continues to read as follows:
Authority: 31 U.S.C. 9701; 46 U.S.C. 2103, 2110, 7301, 7701; 49
CFR 1.46.
7. In Sec. 12.05-9, paragraph (a) and the introductory text of
paragraph (b) are revised to read as follows:
Sec. 12.05-9 Examination and demonstration of ability.
(a) Before an applicant is certified as an able seaman, he or she
shall prove to the satisfaction of the Coast Guard by oral or other
means of examination, and by actual demonstration, his or her knowledge
of seamanship and the ability to carry out effectively all the duties
that may be required of an able seaman, including those of a
lifeboatman. The applicant shall demonstrate that he or she:
(1) Has been trained in all the operations connected with the
launching of lifeboats and liferafts, and in the use of oars;
(2) Is acquainted with the practical handling of boats; and
(3) Is capable of taking command of the boat's crew.
(b) The examination, whether administered orally or by other means,
must be conducted only in the English language and must consist of
questions regarding:
* * * * *
8. In Sec. 12.10-5, paragraph (a) and the introductory text of
paragraph (b) are revised to read as follows:
Sec. 12.10-5 Examination and demonstration of ability.
(a) Before an applicant is certified as a lifeboatman, he or she
shall prove to the satisfaction of the Coast Guard by oral or other
means of examination, and by actual demonstration, his or her knowledge
of seamanship and the ability to carry out effectively all the duties
that may be required of a lifeboatman. The applicant shall demonstrate
that he or she:
(1) Has been trained in all the operations connected with the
launching of lifeboats and liferafts, and in the use of oars;
(2) Is acquainted with the practical handling of boats; and
(3) Is capable of taking command of the boat's crew.
(b) The examination, whether administered orally or by other means,
must be conducted only in the English language and must consist of
questions regarding:
* * * * *
9. In Sec. 12.15-9, the first sentence of paragraph (a), and
paragraph (c), are revised to read as follows:
Sec. 12.15-9 Examination requirements.
(a) Each applicant for certification as a qualified member of the
engine department in the rating of oiler, watertender, fireman, deck
engineer, refrigeration engineer, junior engineer, electrician, or
machinist shall be examined orally or by other means and only in the
English language on the subjects listed in paragraph (b) of this
section. * * *
* * * * *
(c) Each applicant for certification as a qualified member of the
engine department in the rating of pumpman shall, by oral or other
examination, demonstrate sufficient knowledge of the subjects peculiar
to that rating to satisfy the Officer in Charge, Marine Inspection,
that he or she is qualified to perform the duties of that rating.
* * * * *
Dated: August 15, 1996.
J.C. Card,
Rear Admiral, U.S. Coast Guard, Chief, Marine Safety and Environmental
Protection.
[FR Doc. 96-22746 Filed 9-5-96; 8:45 am]
BILLING CODE 4910-14-M
Complete official Federal Register PDF
FR Doc. 96-22687 Airworthiness Directives; Pilatus Britten-Norman Ltd. (formerly Britten-Norman) BN-2A and BN2A MK. 111 Series Airplanes
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47049-47051]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22687]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
14 CFR Part 39
[Docket No. 96-CE-16-AD; Amendment 39-9748; AD 96-18-21]
RIN 2120-AA64
Airworthiness Directives; Pilatus Britten-Norman Ltd. (formerly
Britten-Norman) BN-2A and BN2A MK. 111 Series Airplanes
AGENCY: Federal Aviation Administration, DOT.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This amendment supersedes Airworthiness Directive (AD) 75-26-
15, which currently requires repetitively inspecting the aileron mass
balance clamp unit attachment for looseness on Pilatus Britten-Norman
Ltd. (Pilatus Britten-Norman) BN-2A and BN2A MK. 111 series airplanes,
and modifying the aileron and mass balance clamp unit if any looseness
is found. The Federal Aviation Administration's policy on aging
commuter-class aircraft is to eliminate or, in certain instances,
reduce the number of certain repetitive short-interval inspections when
improved parts or modifications are available. This action retains the
repetitive inspections required by AD 75-26-15, and requires modifying
the aileron and mass balance unit (at a certain time) as terminating
action for the repetitive inspection requirement. The actions specified
in this AD are intended to prevent failure of the aileron mass balance
attachment, which could result in loss of control of the airplane.
DATES: Effective October 25, 1996.
The incorporation by reference of certain publications listed in
the regulations is approved by the Director of the Federal Register as
of October 25, 1996.
ADDRESSES: Service information that applies to this AD may be obtained
from Pilatus Britten-Norman Limited, Bembridge, Isle of Wight, United
Kingdom PO35 5PR; telephone 44-1983 872511; facsimile 44-1983 873246.
This information may also be examined at the Federal Aviation
Administration (FAA), Central Region, Office of the Assistant Chief
Counsel, Attention: Rules Docket 96-CE-16-AD, Room 1558, 601 E. 12th
Street, Kansas City, Missouri 64106; or at the Office of the Federal
Register, 800 North Capitol Street, NW., suite 700, Washington, DC.
FOR FURTHER INFORMATION CONTACT: Mr. Tom Rodriguez, Program Officer,
Brussels Aircraft Certification Division, FAA, Europe, Africa, and
Middle East Office, c/o American Embassy, B-1000 Brussels, Belgium;
telephone (32 2) 508.2717; facsimile (32 2) 230.6899; or Mr. Jeffrey
Morfitt, Project Officer, Small Airplane Directorate, Airplane
Certification Service, FAA, 1201 Walnut, suite 900, Kansas City,
Missouri 64106; telephone (816) 426-6932; facsimile (816) 426-2169.
SUPPLEMENTARY INFORMATION:
Events Leading to This Action
A proposal to amend part 39 of the Federal Aviation Regulations (14
CFR part 39) to include an AD that would apply to Pilatus Britten-
Norman BN-2A and BN2A MK. 111 series airplanes was published in the
Federal Register on May 9, 1996 (61 FR 21146). The action proposed to
supersede AD 75-26-15 with a new AD that would (1) retain the
requirements of repetitively inspecting the aileron mass balance clamp
unit
[[Page 47050]]
attachment for looseness and modifying any aileron and mass balance
unit immediately where looseness is found; and (2) require modifying
the aileron and mass balance unit (at a certain time) if not previously
required. The modification would terminate the need for the repetitive
inspections of the aileron and mass balance unit attachment.
Accomplishment of the proposed actions would continue to be in
accordance with Britten-Norman Service Bulletin No. BN-2/SB.67, Issue
1, dated October 24, 1973.
Interested persons have been afforded an opportunity to participate
in the making of this amendment. No comments were received on the
proposed rule or the FAA's determination of the cost to the public.
The FAA's Determination
After careful review of all available information related to the
subject presented above, the FAA has determined that air safety and the
public interest require the adoption of the rule as proposed except for
minor editorial corrections. The FAA has determined that these minor
corrections will not change the meaning of the AD and will not add any
additional burden upon the public than was already proposed.
Cost Impact
The FAA estimates that 109 airplanes in the U.S. registry will be
affected by this AD, that it will take approximately 10 workhours
(inspection: 1 workhour; modification: 9 workhours) per airplane to
accomplish the action, and that the average labor rate is approximately
$60 an hour. Parts cost approximately $160 per airplane. Based on these
figures, the total cost impact of this AD on U.S. operators is
estimated to be $82,840. This figure only takes into account the cost
of the initial inspection and inspection-terminating modification and
does not take into account the cost of repetitive inspections. The FAA
has no way of determining the number of repetitive inspections each of
the owners/operators will incur over the life of the affected
airplanes.
This figure is also based on the assumption that no affected
airplane owner/operator has accomplished the required modification.
This action eliminates the repetitive inspections required by AD 75-26-
15. The FAA has no way of determining the operational levels of each
individual operator of the affected airplanes, and subsequently cannot
determine the repetitive inspection costs that would be eliminated by
this action. The FAA estimates these costs to be substantial over the
long term.
Pilatus Britten-Norman does not know the number of parts
distributed to the affected airplane owners/operators. Numerous sets of
parts were sent out to the owners/operators of the affected airplanes,
but over the years Pilatus Britten-Norman has not retained these
records. The company believes that most of the affected airplanes
already have the required inspection-terminating modification
incorporated.
The FAA's Aging Commuter Class Aircraft Policy
This AD is part of the FAA's aging commuter airplane policy, which
briefly states that, when a modification exists that could eliminate or
reduce the number of required critical inspections, the modification
should be incorporated.
The intent of the FAA's aging commuter airplane program is to
ensure safe operation of airplanes that are in commercial service
without adversely impacting private operators. Of the approximately 109
airplanes in the U.S. registry that would be affected by this AD, the
FAA has determined that approximately 25 percent are operated in
scheduled passenger service by 11 different operators. A significant
number of the remaining 75 percent are operated in other forms of air
transportation such as air cargo and air taxi.
This action allows 1,000 hours time-in-service (TIS) after the
effective date of the AD before mandatory accomplishment of the design
modification. The average utilization of the fleet for those airplanes
in commercial commuter service is approximately 25 to 50 hours TIS per
week. Based on these figures, operators of airplanes involved in
commercial operation will have to accomplish the modification within 5
to 10 months after this AD becomes effective. For private owners, who
typically operate between 100 to 200 hours TIS per year, this allows 5
to 10 years before the required modification becomes mandatory. The
time it would take those in air cargo/air taxi operations before this
action becomes mandatory is unknown because of the wide variation
between each airplane used in this service. The exact numbers would
fall somewhere between the average for commuter operators and private
operators.
Regulatory Impact
The regulations adopted herein will not have substantial direct
effects 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. Therefore, in
accordance with Executive Order 12612, it is determined that this final
rule does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
For the reasons discussed above, I certify that this action (1) is
not a ``significant regulatory action'' under Executive Order 12866;
(2) is not a ``significant rule'' under DOT Regulatory Policies and
Procedures (44 FR 11034, February 26, 1979); and (3) will not have a
significant economic impact, positive or negative, on a substantial
number of small entities under the criteria of the Regulatory
Flexibility Act. A copy of the final evaluation prepared for this
action is contained in the Rules Docket. A copy of it may be obtained
by contacting the Rules Docket at the location provided under the
caption ADDRESSES.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation safety, Incorporation by
reference, Safety.
Adoption of the Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration amends part 39 of
the Federal Aviation Regulations (14 CFR part 39) as follows:
PART 39--AIRWORTHINESS DIRECTIVES
1. The authority citation for part 39 continues to read as follows:
Authority: 49 USC 106(g), 40113, 44701.
Sec. 39.13 [Amended]
2. Section 39.13 is amended by removing Airworthiness Directive
(AD) 75-26-15, Amendment 39-2464, and by adding a new AD to read as
follows:
96-18-21 Pilatus Britten-Norman: Amendment 39-9748; Docket No. 96-
CE-16-AD. Supersedes AD 75-26-15, Amendment 39- 2464. Applicability:
Models BN-2, BN-2A, BN-2A-6, BN-2A-8, BN-2A-2, BN-2A-9, BN-2A-3, BN-
2A-20, BN-2A-21, BN-2A-26, BN-2A-27, BN2A MK. 111, BN2A MK. 111-2,
and BN2A MK. 111-3 airplanes (all serial numbers), certificated in
any category.
Note 1: This AD applies to each airplane identified in the
preceding applicability provision, regardless of whether it has been
modified, altered, or repaired in the area subject to the
requirements of this AD. For airplanes that have been modified,
altered, or repaired so that the performance of the requirements of
this AD is affected, the owner/operator must request approval for an
[[Page 47051]]
alternative method of compliance in accordance with paragraph (f) of
this AD. The request should include an assessment of the effect of
the modification, alteration, or repair on the unsafe condition
addressed by this AD; and, if the unsafe condition has not been
eliminated, the request should include specific proposed actions to
address it.
Compliance: Required as indicated in the body of this AD, unless
already accomplished.
To prevent failure of the aileron mass balance attachment, which
could result in loss of control of the airplane, accomplish the
following:
(a) Prior to the first flight of each day after the effective
date of this AD (see NOTE 2 of this AD), inspect the attachment of
the aileron mass balance clamp unit for looseness in accordance with
the ``Inspection'' section of Britten-Norman Service Bulletin (SB)
No. BN-2/SB.67, Issue 1, dated October 24, 1973.
Note 2: The ``prior to first flight of each day after the
effective date of this AD'' compliance time required by paragraph
(a) of this AD is exactly the same as required by AD 75-26-15
(superseded by this AD).
(b) If a loose attachment of the aileron mass balance clamp unit
is found during any of the inspections required by this AD, prior to
further flight, modify the aileron and mass balance clamp unit in
accordance with the ``b. Sequence of Operations'' section of
Britten-Norman SB No. BN-2/SB.67, Issue 1, dated October 24, 1973.
(c) Within the next 1,000 hours time-in-service after the
effective date of this AD, unless already accomplished as specified
and required by paragraph (b) of this AD, modify the aileron and
mass balance clamp unit in accordance with the ``b. Sequence of
Operations'' section of Britten-Norman SB No. BN-2/SB.67, Issue 1,
dated October 24, 1973.
(d) Accomplishing the modification required by paragraph (b) or
(c) of this AD is considered terminating action for the repetitive
inspection requirement of this AD.
(e) Special flight permits may be issued in accordance with
sections 21.197 and 21.199 of the Federal Aviation Regulations (14
CFR 21.197 and 21.199) to operate the airplane to a location where
the requirements of this AD can be accomplished.
(f) An alternative method of compliance or adjustment of the
initial or repetitive compliance times that provides an equivalent
level of safety may be approved by the Manager, Brussels Aircraft
Certification Division, Europe, Africa, Middle East office, FAA, c/o
American Embassy, 1000 Brussels, Belgium. The request should be
forwarded through an appropriate FAA Maintenance Inspector, who may
add comments and then send it to the Manager, Brussels Aircraft
Certification Division. Alternative methods of compliance approved
in accordance with AD 75-26-15 (superseded by this action) are not
considered approved as alternative methods of compliance with this
AD.
Note 3: Information concerning the existence of approved
alternative methods of compliance with this AD, if any, may be
obtained from the Brussels Aircraft Certification Division.
(g) The inspections and modification required by this AD shall
be done in accordance with Britten-Norman Service Bulletin No. BN-2/
SB.67, Issue 1, dated October 24, 1973. This incorporation by
reference was approved by the Director of the Federal Register in
accordance with 5 U.S.C. 552(a) and 1 CFR part 51. Copies may be
obtained from Pilatus Britten-Norman Limited, Bembridge, Isle of
Wight, United Kingdom PO35 5PR. Copies may be inspected at the FAA,
Central Region, Office of the Assistant Chief Counsel, Room 1558,
601 E. 12th Street, Kansas City, Missouri, or at the Office of the
Federal Register, 800 North Capitol Street, NW., suite 700,
Washington, DC.
(h) This amendment (39-9748) supersedes AD 75-26-15, Amendment
39-2464.
(i) This amendment (39-9748) becomes effective on October 25,
1996.
Issued in Kansas City, Missouri, on August 29,1996.
Henry A. Armstrong,
Acting Manager, Small Airplane Directorate, Aircraft Certification
Service.
[FR Doc. 96-22687 Filed 9-5-96; 8:45 am]
BILLING CODE 4910-13-P
Complete official Federal Register PDF
FR Doc. 96-22656 State Implementation Plan: Washington; Withdrawal
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Page 47055]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22656]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[WA47-7120; FRL-5605-7]
State Implementation Plan: Washington; Withdrawal
AGENCY: Environmental Protection Agency.
ACTION: Final rule; withdrawal.
-----------------------------------------------------------------------
SUMMARY: Due to an adverse comment, EPA is withdrawing the effective
date for the approval of the attainment demonstration portion of the
Puget Sound carbon monoxide (CO) State Implementation Plan (SIP) for
Washington State, submitted by the Washington Department of Ecology for
the purpose of documenting attainment of the national ambient air
quality standards (NAAQS) for CO to satisfy certain federal
requirements for an approvable nonattainment area CO SIP for the Puget
Sound nonattainment area. The original action was published in the
Federal Register on July 25, 1996, as a direct final rule, 61 FR 38597.
As stated in the Federal Register document, if adverse or critical
comments were received by August 26, 1996, the effective date would be
delayed and timely notice would be published in the Federal Register.
Therefore, due to receiving an adverse comment within the comment
period, EPA is withdrawing the final rule and will address the comments
received in a subsequent final rule based on the proposed rule also
published on July 25, 1996, 61 FR 38683. EPA will not institute a
second comment period on this document.
EFFECTIVE DATE: This withdrawal is effective on September 6, 1996.
FOR FURTHER INFORMATION CONTACT: Montel Livingston, Office of Air
Quality (OAQ-107), EPA, Seattle, Washington 98101, (206) 553-0180.
SUPPLEMENTARY INFORMATION: See the information provided in the direct
final rule located in the final rules section of the July 25, 1996
Federal Register, and in the short informational document located in
the proposed rule section of the July 25, 1996 Federal Register.
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Carbon monoxide,
Incorporation by Reference, Intergovernmental relations, Reporting and
recordkeeping requirements.
Dated: August 27, 1996.
Charles Findley,
Acting Regional Administrator.
[FR Doc. 96-22656 Filed 9-5-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-22655 State Implementation Plan: Washington; Withdrawal
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Page 47055]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22655]
=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[WA43-7116; FRL-5605-8]
State Implementation Plan: Washington; Withdrawal
AGENCY: Environmental Protection Agency.
ACTION: Final rule; withdrawal.
-----------------------------------------------------------------------
SUMMARY: Due to an adverse comment, EPA is withdrawing the effective
date for the approval of the Inspection and Maintenance (I/M) State
Implementation Plan (SIP) for Washington State, submitted by the
Washington Department of Ecology to satisfy the requirements of
sections 182(b)(4) and 182(c)(3) of the Clean Air Act as amended and
Federal I/M rule 40 CFR part 51, subpart S. The original action was
published in the Federal Register on July 23, 1996, as a direct final
rule, 61 FR 38086. As stated in the Federal Register document, if
adverse or critical comments were received by August 22, 1996, the
effective date would be delayed and timely notice would be published in
the Federal Register. Therefore, due to receiving an adverse comment
within the comment period, EPA is withdrawing the final rule and will
address the comments received in a subsequent final rule based on the
proposed rule also published on July 23, 1996, 61 FR 38129. EPA will
not institute a second comment period on this document.
EFFECTIVE DATE: This withdrawal is effective on September 6, 1996.
FOR FURTHER INFORMATION CONTACT: Montel Livingston, Office of Air
Quality (OAQ-107), EPA, Seattle, Washington 98101, (206) 553-0180.
SUPPLEMENTARY INFORMATION: See the information provided in the direct
final rule located in the final rules section of the July 23, 1996
Federal Register, and in the short informational document located in
the proposed rule section of the July 23, 1996 Federal Register.
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Carbon monoxide,
Hydrocarbons, Incorporation by Reference, Nitrogen dioxide, Ozone,
Volatile organic compounds.
Dated: August 27, 1996.
Charles Findley,
Acting Regional Administrator.
[FR Doc. 96-22655 Filed 9-5-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-22654 Acquisition Regulation
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47064-47065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22654]
=======================================================================
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ENVIRONMENTAL PROTECTION AGENCY
[FRL-5602-4]
48 CFR Parts 1506, 1534, 1536, 1542, 1545, and 1552
Acquisition Regulation
AGENCY: Environmental Protection Agency.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The Environmental Protection Agency (EPA) is removing from the
EPA Acquisition Regulation (EPAAR) (48 CFR Chapter 15) its coverage for
conduct of surveys; implementing OMB Circular A-109, Major Systems
Acquisitions; special aspects of sealed bidding in construction
contracting; additive or deductive items; indirect cost rates; and
management of Government property in the possession of contractors.
EFFECTIVE DATE: September 6, 1996.
FOR FURTHER INFORMATION CONTACT: Louise Senzel, Environmental
Protection Agency, Office of Acquisition Management (3802F), 401 M
Street, SW, Washington, D.C. 20460. Telephone: (202) 260-6204.
SUPPLEMENTARY INFORMATION:
A. Background
This final rule eliminates from the EPAAR coverage on conduct of
market surveys, implementation of OMB Circular A-109 on Major Systems
Acquisitions, special aspects of sealed bidding in construction
contracting, additive or deductive items, indirect cost rates, and
management of Government property in the possession of contractors. The
coverage is obsolete, for which new FAR coverage is available; the
coverage is duplicative of OMB Circular A-109; or the coverage includes
procedures internal to EPA, unnecessary for inclusion in the EPAAR.
Codification of the Agency's internal procedures is unnecessary, since
they have no significant cost or administrative impact on contractors
or offerors. Consequently, EPA will retain any implementing guidance
and internal procedures in an internal directive, where necessary.
B. Executive Order 12866
The final rule is not a significant regulatory action for the
purposes of Executive Order 12866; therefore, no review is required by
the Office of Information and Regulatory Affairs.
[[Page 47065]]
C. Paperwork Reduction Act
The Paperwork Reduction Act does not apply because this final rule
does not contain information collection requirements that require the
approval of OMB under the Paperwork Reduction Act of 1980 (44 U.S.C.
3501 et seq.)
D. Regulatory Flexibility Act
The EPA certifies that this final rule does not exert a significant
economic impact on a substantial number of small entities. The
requirements to contractors under the final rule impose no reporting,
record-keeping, or any compliance costs.
E. Unfunded Mandates
This final rule will not impose unfunded mandates on state or local
entities, or others.
List of Subjects in 48 CFR Parts 1506, 1534, 1536, 1542, 1545, and
1552
Government procurement.
Authority: The provisions of this regulation are issued under 5
U.S.C. 301; Sec. 205(c),63 Stat. 390, as amended, 40 U.S.C. 486(c).
Therefore, 48 CFR Chapter 15 is amended as set forth below:
1. The authority for Parts 1506, 1536, 1542, 1545, and 1552,
continue to read as follows:
Authority: Sec. 205(c), 63 stat. 390, as amended, 40 U.S.C.
486(c).
Subpart 1506.371--[Removed]
2. Subpart 1506.371 is removed in its entirety.
PART 1534--[REMOVED]
3. Part 1534 is Removed in its entirety.
Subpart 1536.3--[Removed]
4. Subpart 1536.3 (Secs. 1536.303 and 1536.303-70) is removed in
its entirety.
1536.570 [Removed]
5. Section 1536.570 is removed in its entirety.
1542.705-1 [Removed]
6. Section 1542.705-1 is removed in its entirety.
Subpart 1545.5-[Removed]
7. Subpart 1545.5 (Sec. 1545.502) is removed in its entirety.
1552.236-71 [Removed]
8. Section 1552.236-71 is removed in its entirety.
Dated: August 19, 1996.
Betty L. Bailey,
Director, Office of Acquisition Management.
[FR Doc. 96-22654 Filed 9-5-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-22650 National Oil and Hazardous Substances Contingency Plan; National Priorities List Update
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Page 47060]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22650]
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ENVIRONMENTAL PROTECTION AGENCY
[FRL-5604-9]
40 CFR Part 300
National Oil and Hazardous Substances Contingency Plan; National
Priorities List Update
AGENCY: Environmental Protection Agency.
ACTION: Notice of deletion of Whiteford Sales & Service, Inc., site
from the National Priorities List.
-----------------------------------------------------------------------
SUMMARY: The U.S. Environmental Protection Agency (EPA) Region 5
announces the deletion of the Whiteford Sales & Service, Inc., (WSS)
site from the National Priorities List (NPL). The NPL is Appendix B of
40 CFR Part 300 which is 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 of 1980 (CERCLA), as amended. This action is being
taken by EPA and the State of Indiana because it has been determined
that all appropriate Fund-financed responses at the WSS site under
CERCLA have been implemented, that the WSS site poses no significant
threat to public health or the environment, and that no further clean-
up action at the site is appropriate.
EFFECTIVE DATE: September 6, 1996.
FOR FURTHER INFORMATION CONTACT: Mary Tierney, U.S. EPA Region 5 (SR-
6J), 77 W. Jackson Blvd., Chicago, IL 60604; (312) 886-4785.
Information on the site is available at the local information
repository located at: The St. Joseph County Public Library, Main
Branch, 122 W. Wayne St., South Bend, Indiana. Requests for copies of
documents should be directed in writing to the Regional Docket Office.
The contact for the Regional Docket Office is E. Levy, U.S. EPA Region
5 (MRI-13J), 77 W. Jackson Blvd., Chicago, IL 60604.
SUPPLEMENTARY INFORMATION: The site to be deleted from the NPL is the
Whiteford Sales & Service, Inc. (WSS) site located within the city
limits of South Bend, St. Joseph County, IN, approximately 1 and \1/2\
miles southwest of downtown. A Notice of Intent to Delete for the site
was published on May 3, 1996 in the Federal Register (61 FR 19889). The
closing date for public comments on the Notice of Intent to Delete was
June 3, 1996. EPA received no comments and, therefore, no
Responsiveness Summary was prepared.
EPA identifies sites that appear to present a significant risk to
public health, welfare, or the environment, and maintains the NPL as
the list of those sites. Sites on the NPL may be the subject of
Hazardous Substance Response Trust Fund (Fund) financed remedial
actions. As described in Sec. 300.425(e)(3) of the NCP, sites deleted
from the NPL remain eligible for additional Fund-financed remedial
actions in the unlikely event that conditions at the site warrant such
actions. 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 potection, Air pollution control, chemicals,
Hazardous substances, Hazardous waste, Intergovernmental relations,
Penalties, Reporting and recordkeeping requirements, Superfund, Water
pollution control, Water supply.
Dated: August 13, 1996.
David A. Ullrich,
Acting Regional Administrator.
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
site ``Whiteford Sales & Service/Nationalease, South Bend, Indiana''.
[FR Doc. 96-22650 Filed 9-5-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-22645 Approval and Promulgation of Implementation Plans; Designation of Areas for Air Quality Planning Purposes; Wyoming; Corrections
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47058-47060]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22645]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 52 and 81
[FRL-5560-4]
Approval and Promulgation of Implementation Plans; Designation of
Areas for Air Quality Planning Purposes; Wyoming; Corrections
AGENCY: Environmental Protection Agency (EPA).
ACTION: Direct final rulemaking.
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SUMMARY: EPA is promulgating corrections to the State Implementation
Plan (SIP) for the State of Wyoming regarding the State's ambient
standards for fluorides and hydrogen sulfide and the State's odor
control regulation. EPA has determined that these rules were
erroneously incorporated into the SIP. EPA is removing these rules from
the approved Wyoming SIP because the rules do not have a reasonable
connection to the national ambient air quality standards (NAAQS) and
related air quality goals of the Clean Air Act. The intended effect of
this correction to the SIP is to make the SIP consistent with the
requirements of the Clean Air Act, as amended in 1990 (``the Act''),
regarding EPA action on SIP submittals and SIPs for national primary
and secondary ambient air quality standards.
In addition, EPA is amending the boundary description for the
``Powder River Basin'' PM-10 unclassifiable area in 40 CFR 81.351. EPA
promulgated revisions to 40 CFR 81.351 in a November 3, 1995
rulemaking, and EPA erroneously published an incorrect boundary
description for the Powder River Basin area. This document corrects
that error.
DATES: This action will become effective on November 5, 1996, unless
adverse comments are received within 30 days of publication. If the
effective date is delayed, timely notice will be published in the
Federal Register.
ADDRESSES: Copies of the documents relative to this action are
available for inspection during normal business hours at the following
location: Air Program, Environmental Protection Agency, Region VIII,
999 18th Street, Suite 500, Denver, Colorado 80202-2466.
FOR FURTHER INFORMATION CONTACT: Vicki Stamper, 8P2-A, Environmental
Protection Agency, Region VIII, 999 18th Street, Suite 500, Denver,
Colorado 80202-2466, (303) 312-6445.
SUPPLEMENTARY INFORMATION:
I. Corrections to SIP
The Act was first amended in 1970. At this time, a large number of
SIPs were submitted to EPA to fulfill the new Federal requirements. In
many cases, states and districts submitted their entire programs,
including many elements not required pursuant to the Act. Due to
resource constraints at that time, EPA's review of these submittals
focused primarily on the required technical, legal, and enforcement
elements of the submittals. At the time, EPA did not perform a detailed
review of the numerous provisions submitted, to determine if each
provision was related to protection of the NAAQS. Provisions approved
as part of states' SIPs should generally be related to attainment and
maintenance of the NAAQS, consistent with the authority in section 110
of the Act under which these plans are approved by EPA.
During a recent review of the contents of the Wyoming SIP, EPA
determined that three provisions of the State's rules were approved as
part of the SIP which did not have a reasonable connection to the
NAAQS-related air quality goals of the Act. These State rules include
the ambient standard for hydrogen sulfide in Section 7 of the Wyoming
Air Quality Standards and Regulations (WAQSR), the 1972 version of the
ambient standard for fluorides in Section 11 of the WAQSR,1 and
the odor control rules in Section 16 of the WAQSR. In addition,
documents included in the State's November 19, 1993 title V operating
permit program submittal indicated that the State did not consider
these three rules part of the federally-approved SIP. EPA consequently
notified the State of this discrepancy in a June 26, 1995 letter and
offered to correct the SIP pursuant to section 110(k)(6) of the Act by
removing these three rules from the SIP, since they are not reasonably
connected to the NAAQS-related air quality goals of the Act. The State
responded in a letter dated September 19, 1995 requesting that EPA
remove these three provisions from the approved SIP.
\1\ Section 11 of the WAQSR was amended by the State in 1986,
but that version was never submitted to, or approved by, EPA as part
of the SIP for Wyoming.
---------------------------------------------------------------------------
Section 110(k)(6) of the amended Act provides: Whenever the
Administrator determines that the Administrator's action approving,
disapproving, or promulgating any plan or plan revision (or part
thereof), area designation, redesignation, classification, or
reclassification was in error, the Administrator may in the same
manner as the approval, disapproval, or promulgation revise such
action as appropriate without requiring any further submission from
the State. Such determination and the basis thereof shall be
provided to the State and public.
Since the State of Wyoming's rules for hydrogen sulfide ambient
standards, fluoride ambient standards, and odor control have no
reasonable connection to the NAAQS-related air quality goals of the Act
and since the State has requested that EPA remove these rules from the
approved SIP, EPA has found that approval of these State rules was in
error. Consequently, EPA is removing Sections 7, 11, and 16 of the
WAQSR from the approved Wyoming SIP pursuant to section 110(k)(6) of
the Act.
II. Correction of Boundary Description for the Powder River Basin
Area
On November 3, 1995, EPA promulgated revisions to the State of
Wyoming's PM-10 area designation table in 40 CFR 81.351 pursuant to the
State's adoption and EPA's approval of prevention of significant
deterioration (PSD) increments for PM-10 (see 60 FR 55800). In that
notice, EPA cited an earlier and incorrect boundary description for the
area designated as the ``Powder River Basin'' in Campbell and Converse
counties. EPA promulgated a revised boundary description for the Powder
River Basin area on September 12, 1995 (60 FR 47299), and that revised
boundary
[[Page 47059]]
should have been reflected in the November 3, 1995 rulemaking.
Therefore, this notice corrects the boundary description for the Powder
River Basin area to reflect the September 12, 1995 rulemaking.
III. Final Action
EPA is removing Sections 7, 11, and 16 of the WAQSR from the
approved Wyoming SIP pursuant to section 110(k)(6) of the Act. In
addition, EPA is correcting the boundary description for the Powder
River Basin PM-10 unclassifiable area in 40 CFR 81.351 to reflect the
boundary description promulgated for the area on September 12, 1995 (60
FR 47299).
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, EPA is proposing to correct the SIP should
adverse or critical comments be filed. Under the procedures established
in the May 10, 1994 Federal Register (59 FR 24054), this action will be
effective November 5, 1996, unless, by October 7, 1996, adverse or
critical comments are received.
If such comments are received, 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 a
proposed rule. 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 on November 5, 1996.
Nothing in this action should be construed as permitting or
allowing or establishing a precedent for any future request for
revision to any SIP. Each request for revision to a SIP shall be
considered separately in light of specific technical, economic, and
environmental factors and in relation to relevant statutory and
regulatory requirements.
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 economic 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. This action does not impose any new requirements.
Therefore, the Administrator certifies that this action will 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
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 this correction 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 corrects this
state implementation plan, pursuant to section 110(k)(6) of the Act, by
removing three State rules that were erroneously incorporated into the
SIP. Thus, this action will impose no new requirements. Accordingly, no
additional costs to State, local, or tribal governments, or to the
private sector, result from this action.
D. 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).
E. Petitions for Judicial Review
Under section 307(b)(1) of the Clean Air Act, petitions for
judicial review of this action must be filed in the United States Court
of Appeals for the appropriate circuit by November 5, 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 must 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
40 CFR Part 52
Environmental protection, Air pollution control, Particulate
matter, Reporting and recordkeeping requirements, Volatile organic
compounds.
40 CFR Part 81
Air pollution control, National parks, Wilderness areas.
Dated: August 14, 1996.
Jack W. McGraw,
Acting Regional Administrator.
Title 40, chapter I 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 ZZ--Wyoming
2. A new Sec. 52.2634 is added to read as follows:
Sec. 52.2634 Correction of approved plan.
The following rules of the Wyoming Air Quality Standards and
Regulations have been removed from the approved plan pursuant to
section 110(k)(6) of the Clean Air Act (as amended in 1990): Section 7,
Hydrogen Sulfide; Section 11, Fluorides; and Section 16, Odors.
PART 81--[AMENDED]
1. The authority citation for part 81 continues to read as follows:
[[Page 47060]]
Authority: 42 U.S.C. 7401-7671q.
2. In Sec. 81.351, the Wyoming PM-10 table is amended by revising
the entry for ``Powder River Basin'' to read as follows:
Sec. 81.351 Wyoming.
* * * * *
Wyoming--PM-10
----------------------------------------------------------------------------------------------------------------
Designation Classification
Designated area ---------------------------------------------------------------------
Date Type Date Type
----------------------------------------------------------------------------------------------------------------
* * * * * *
Campbell County (part).................... 11/15/90 Unclassifiable............ ...........
Converse County (part).
That area bounded by Township 40 through
52 North, and Ranges 69 through 73 West,
inclusive of the Sixth Principal
Meridian, Campbell and Converse Counties,
excluding the areas defined as the
Pacific Power and Light Area, the
Hampshire Energy Area, and the Kennecott/
Puron PSD Baseline Area.--Powder River
Basin.
* * * * * *
*
----------------------------------------------------------------------------------------------------------------
* * * * *
[FR Doc. 96-22645 Filed 9-5-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-22642 Acquisition Regulation; Coverage of Source Selection Process
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47065-47068]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22642]
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
48 CFR Parts 1515 and 1552
[FRL-5602-5]
Acquisition Regulation; Coverage of Source Selection Process
AGENCY: Environmental Protection Agency.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This document amends the Environmental Protection Agency (EPA)
acquisition regulation (48 CFR Chapter 15) coverage on the source
selection process. EPA is aware that Part 15 of the Federal Acquisition
Regulation is currently undergoing revision. The Agency believes that
its changes will not conflict with any subsequent revisions to Part 15.
Additionally, the Agency believes that the changes to its acquisition
regulation are needed now as an interim measure to streamline the
process and empower Contracting Officers at EPA. This rule is also
necessary to implement portions of the Federal Acquisition Streamlining
Act of 1994.
EFFECTIVE DATE: September 23, 1996.
FOR FURTHER INFORMATION CONTACT: Louise Senzel, Environmental
Protection Agency, Office of Acquisition Management (3802F), 401 M
Street, SW, Washington, D.C. 20460. Telephone: (202) 260-6204.
SUPPLEMENTARY INFORMATION:
A. Background
The proposed rule was published in the Federal Register (61 CFR
25440) on May 21, 1996, providing for a comment period until July 22,
1996.
Interested persons have been afforded an opportunity to participate
in the making of this rule. No public comments were received.
B. Executive Order 12866
This is not a significant regulatory action for the purposes of
Executive Order 12866; therefore, no review was required by the Office
of Information and Regulatory Affairs.
C. Paperwork Reduction Act
The Paperwork Reduction Act did not apply because this rule does
not contain information collection requirements that require the
approval of OMB under the Paperwork Reduction Act of 1980 (44 U.S.C.
3501 et seq.).
D. Regulatory Flexibility Act
The EPA certifies that this rule does not exert a significant
economic impact on a substantial number of small entities. The
requirements to contractors under the proposed rule impose no
reporting, record-keeping, or any compliance costs.
E. Unfunded Mandates
This rule will not impose unfunded mandates on state or local
entities, or others.
F. Regulated Entities
EPA contractors are entities potentially affected by this action.
Specifically, those entities competing under solicitations for
negotiated procurements will be affected.
------------------------------------------------------------------------
Category Regulated entity
------------------------------------------------------------------------
Industry............................ EPA contractors.
------------------------------------------------------------------------
List of Subjects in 48 CFR Part 1515 and 1552
Government procurement.
Authority: The provisions of this regulation are issued under 5
U.S.C. 301; Sec. 205(c), 63 Stat. 390, as amended, 40 U.S.C. 486(c).
Therefore, 48 CFR Chapter 15 is amended as set forth below: 1. The
authority citations for parts 1515 and 1552 continue to read as
follows:
Authority: Sec. 205(c), 63 Stat. 390, as amended, 40 U.S.C.
486(c).
1515.407 [Amended]
2. Section 1515.407 is amended by removing paragraph (a)(1), and by
redesignating paragraphs (a)(2) and (3) as (a)(1) and (2).
3. Section 1515.604 is amended by revising paragraphs (a), (c), and
(d) to read as follows:
1515.604 Responsibilities and Duties.
* * * * *
(a) Source Selection Official. The Source Selection Official (SSO)
is the official responsible for overall management of the source
selection process. Duties of the SSO include, but are not limited to,
appointing members and chairpersons of the Source Evaluation Board, the
Technical Evaluation Panel (TEP), and the Business Evaluation Panel
(BEP); and approving solicitation related documents. However, the
Contracting Officer is responsible for approving amendments to
solicitation documents. The SSO may waive in writing the requirement in
1515.612(a)(1)(v) for at least one member of the TEP to be an
individual not involved in managing the
[[Page 47066]]
current contract. The SSO also approves the competitive range
determination and makes the source selection decision.
* * * * *
(c) Technical Evaluation Panel (TEP). The Program Office has the
responsibility for developing the technical evaluation criteria and
statement of work for the solicitation. The TEP has the responsibility
for evaluating the technical aspects of the offerors' technical
proposals. Based on the recommendation of the Program Office, the SSO
has the discretion of assigning this evaluation responsibility to the
Project Officer, if appropriate, or to the TEP. When offerors' past
performance is evaluated as part of the technical proposal evaluation
process, the past performance evaluation shall be conducted by the TEP,
or by the Contracting Officer and the Project Officer. Based on input
from the Project Officer, the Contracting Officer has the discretion of
assigning this responsibility to the TEP or to the Contracting Officer
and Project Officer.
(d) Business Evaluation Panel (BEP). (1) Outside of the technical
review, the Contracts Office has the lead for reviewing solicitation
evaluation criteria and the Statement of Work from a business
perspective; evaluating the business, pricing, and contractual aspects
of the offerors' business and technical proposals; and examining other
factors such as the responsibility of the offerors. Based on the
recommendation of the Contracting Officer, the SSO has the discretion
to designate these responsibilities to the Contracting Officer or
designating a BEP. Sections 1515.612(a)(1) (vi) and (vii) are
applicable only when the SSO has designated a BEP.
(2) When no BEP is convened, the Contracting Officer shall perform
a preliminary cost evaluation of each offeror's cost/price proposal to
identify any cost elements that appear unreasonable or questionable.
When cost analysis is employed, the Contracting Officer shall perform a
detailed cost analysis of the business proposal which includes an
evaluation of the offeror's subcontracting program, management
structure, and any other relevant factors which may prevent award to an
offeror. This analysis may be included in a separate report, in the
competitive range determination, or in the pre/post-negotiation
memorandum.
4. Section 1515.604-70 is amended by adding paragraph (c) to read
as follows:
1515.604-70 Personal conflicts of interest.
* * * * *
(c) Each EPA employee (including special employees (as defined by
1503.600-71 (b)) involved in source evaluation and selection is
required to comply with the Office of Government Ethics ethics
provisions at 5 CFR Part 2635.
5. Section 1515.605 is amended by revising paragraphs (a), (b), and
adding (c) to read as follows:
1515.605 Evaluation Factors.
* * * * *
(a) The Contracting Officer shall insert the provisions at
1552.215-70, ``EPA Source Evaluation and Selection Procedures--
Negotiated Procurement'' and either: the provision in 1552.215-71,
``Evaluation Factors for Award,'' where all evaluation factors other
than cost or price when combined are significantly more important than
cost or price; or the provision in Alternate I to 1552.215-71, where
all evaluation factors other than cost or price when combined are
significantly less important than cost or price; or the provision in
Alternate II to 1552.215-71, where award will be made to the offeror
with the lowest-evaluated cost or price whose technical proposal meets
the minimum needs of the Government; or the provision in Alternate III
where all evaluation factors other than cost or price when combined are
approximately equal to cost or price. The Contracting Officer may use
provisions substantially the same as 1552.215-71, Alternate I to
1552.215-71, Alternate II to 1552.215-71, or Alternate III to 1552.215-
71 without requesting a deviation to the EPAAR.
(b) Technical evaluation criteria should be prepared in accordance
with FAR 15.605 and inserted into paragraph (b) of the provision at
1552.215-71, Alternate I, and Alternate III. If technical evaluation
criteria are used in Alternate II, the criteria should be prepared in
accordance with FAR 15.605 and inserted into paragraph (b). When past
performance is to be used as an evaluation factor, the Contracting
Officer must develop criteria for evaluating past performance and
include such criteria in section M of the solicitation.
(c) Evaluation Methodologies. Evaluation criteria may be developed
using methodologies other than numerical scoring, e.g., adjectival
ratings or color scoring. The relative importance of the evaluation
criteria must be clearly identified in the solicitation. The
Contracting Officer should identify and prepare evaluation criteria
consistent with FAR 15.605.
* * * * *
6. Section 1515.608 is amended by revising paragraphs (a)(1);
adding paragraph (a)(3); by revising paragraphs (b)(1)(ii) and
(b)(2)(i); by adding paragraph (b)(3); by removing paragraph (c) and by
redesignating paragraphs (d) and (e) as (c) and (d), to read as
follows:
1515.608 Proposal evaluation.
(a) * * *
(1) Technical proposals shall be evaluated solely on the factors
specified in the solicitation and in accordance with FAR 15.608.
Additionally, the evaluation of technical proposals (including past
performance factors) shall be accomplished using the scoring plan shown
below or one specifically developed for the solicitation. Contracting
Officers may request that the TEP also indicate whether proposals are
acceptable or unacceptable, and/or whether the offerors' response to
individual criteria are acceptable or unacceptable.
Scoring Plan
------------------------------------------------------------------------
Value Descriptive statement
------------------------------------------------------------------------
0............................... The factor is not addressed, or is
totally deficient and without merit.
1............................... The factor is addressed, but contains
deficiencies and/or weaknesses that
can be corrected only by major or
significant changes to relevant
portions of the proposal, or the
factor is addressed so minimally or
vaguely that there are widespread
information gaps. In addition,
because of the deficiencies,
weaknesses, and/or information gaps,
serious concerns exist on the part of
the TEP about the offeror's ability
to perform the required work.
2............................... Information related to the factor is
incomplete, unclear, or indicates an
inadequate approach to, or
understanding of the factor. The TEP
believes there is question as to
whether the offeror would be able to
perform satisfactorily.
3............................... The response to the factor is
adequate. Overall, it meets the
specifications and requirements, such
that the TEP believes that the
offeror could perform to meet the
Government's minimum requirements.
4............................... The response to the factor is good
with some superior features.
Information provided is generally
clear, and the approach is acceptable
with the possibility of more than
adequate performance.
5............................... The response to the factor is superior
in most features.
------------------------------------------------------------------------
* * * * *
(3) The goal of the technical evaluation is to understand each
offeror's proposal and to assess each
[[Page 47067]]
proposal relative to the specified evaluation factors. The TEP
report(s) should address any perceived strengths, as well as any
perceived weaknesses or deficiencies, and risks associated with the
offerors' performance. Scores may or may not change from the initial
evaluation to the supplemental evaluation, depending on the offerors'
response to interrogatories. The supplemental TEP report must explain
the rationale for no change in score, as well as any decrease or
increase in score as a result of the offerors' response to
interrogatories.
(b) * * *
(1) * * *
(ii) Any interrogatories the Contracting Officer should submit to
offerors to clarify their technical proposals to address any
weaknesses, deficiencies, or questions associated with their technical
proposals. The Contracting Officer may review the technical proposals
and TEP evaluation, and submit any additional interrogatories deemed
appropriate.
(2)(i) A statement that the respective technical evaluation panel
members are free from actual or potential personal conflicts of
interest, and are in compliance with the Office of Government Ethics
ethics provisions at 5 CFR Part 2635.
* * * * *
(3) The Contracting Officer may release the cost/price proposals to
the entire TEP or solely to the TEP Chairperson, after the TEP has
completed its evaluation of initial proposals. The TEP or Chairperson
should evaluate cost/price proposals to determine whether the offerors'
cost/price proposals adequately reflect their technical proposals and
the requirements of the solicitation, and demonstrate that the proposed
price or cost provides an adequate understanding of the requirements of
the solicitation. Any inconsistencies between the proposals and the
solicitation requirements should be identified. Any inconsistencies
between the cost and technical proposals should also be identified.
7. Section 1515.609 is amended by revising paragraph (c) to read as
follows:
1515.609 Competitive Range.
* * * * *
(c)(1) When a single proposal is the only proposal in the
competitive range, as part of the required discussion in the
competitive range determination, Contracting Officers shall address at
a minimum the following factors: Whether the requirement could have
been broken up into smaller components; whether the solicitation
provided adequate response time; whether the requirement could have
been satisfied with reduced staffing levels (discussion may be combined
with the first factor); and if applicable, whether the work required
on-site could otherwise be performed at a contractor's facility,
avoiding the cost and logistical implications of relocating employees.
(2) In cases where only a single proposal has been received and a
competitive range determination has not been prepared, the discussion
of the reasons for receipt of the single proposal which otherwise would
be contained in the competitive range determination shall be included
in the source selection document. The discussion in the source
selection document at a minimum shall address the factors referenced in
paragraph (c)(1) of this section.
(3) The Contracting Officer shall provide a copy of the competitive
range determination or source selection document to the Competition
Advocate after approval of the determination or document by the
designated Source Selection Official.
8. Section 1515.611 is revised to read as follows:
1515.611 Best and final offers.
The Contracting Officer shall establish a common cut-off date for
receipt of revised proposals and/or confirmations of negotiations (best
and final offers) upon completion of negotiations.
9. Section 1515.612 is amended by revising paragraphs (a)(1)(iii),
(iv) and (v); and by adding paragraph (c) to read as follows:
1515.612 Formal source selection.
(a) * * *
(1) * * *
(iii) SEB Membership--The SSO will determine the organizational
levels of the individuals to serve on the SEB.
(iv) TEP Chairperson--The SSO will determine, based on the
recommendation of the requesting program office, the Chairperson of the
TEP. For recompetes or follow-on contracts, the Chairperson should
normally not be the incumbent contract's Project Officer.
(v) TEP Membership--At least two members, in addition to the
Project Officer, who are knowledgeable of the procurement's technical
aspects. If the procurement is a follow-on to an existing contract, at
least one of the TEP members should be someone who is not involved in
managing the current contract, preferably from outside of the program
division which originated the requirement. See 1515.604(a) for waiver
of this requirement.
* * * * *
(c) Source Selection Plan. No separate source selection plan is
required. The Contracting Officer may include the information required
by FAR 15.612(c) in the individual acquisition plan.
10. Section 1552.215-70 is revised to read as follows:
1552.215-70 EPA Source Selection and Selection Procedures--Negotiated
Procurements (SEP 1996)
As prescribed in 1515.605, insert the following provision.
EPA SOURCE SELECTION AND SELECTION PROCEDURES--NEGOTIATED PROCUREMENTS
(SEP 1996)
(a) The Government will perform source selection in accordance
with FAR Part 15 and the EPA Source Evaluation and Selection
Procedures in EPAAR Part 1515 (48 CFR Part 1515). The significant
features of this procedure are:
(1) The Government will perform either cost analysis or price
analysis of the offeror's cost/business proposal in accordance with
FAR Parts 15 and 31, as appropriate. In addition, the Government
will also evaluate proposals to determine contract cost or price
realism.
Cost or price realism relates to an offeror's demonstrating that
the proposed cost or price provides an adequate reflection of the
offeror's understanding of the requirements of this solicitation,
i.e., that the cost or price is not unrealistically low or
unreasonably high.
(2) The Government will evaluate technical proposals as
specified in 1552.215-71, Evaluation Factors for Award.
(b) In addition to evaluation of the previously discussed
elements, the Government will consider in any award decision the
responsibility factors set forth in FAR Part 9.
(End of Provision)
11. Section 1552.215-71 is revised as follows:
1552.215-71 Evaluation Factors for Award.
As prescribed in 1515.605, insert one of the following provisions.
EVALUATION FACTORS FOR AWARD (SEP 1996)
(a) The Government will make award to the responsible offeror(s)
whose offer conforms to the solicitation and is most advantageous to
the Government, cost or price and other factors considered. For this
solicitation, all evaluation factors other than cost or price when
combined are significantly more important than cost or price.
(b) Technical Evaluation Criteria:
----------------------------------------------------------------------
----------------------------------------------------------------------
(End of Provision)
EVALUATION FACTORS FOR AWARD (SEP 1996)
ALTERNATE I (SEP 96)
(a) The Government will make award to the responsible offeror(s)
whose offer conforms
[[Page 47068]]
to the solicitation and is most advantageous to the Government, cost
or price, and other factors considered. For this solicitation, all
evaluation factors other than cost or price when combined are
significantly less important than cost or price.
(b) Technical Evaluation Criteria:
----------------------------------------------------------------------
----------------------------------------------------------------------
(End of Provision)
EVALUATION FACTORS FOR AWARD--PROPOSAL MEETS THE MINIMUM NEEDS OF THE
GOVERNMENT WITH THE LOWEST EVALUATED COST/PRICE
ALTERNATE II (SEP 1996)
(a) The Government will make award to the lowest-evaluated cost
or price, technically acceptable, responsible offeror whose offer
meets the minimum needs of the Government. In the event that there
are two or more technically acceptable, equal price (cost) offers,
the Government will consider other factors, as listed below in
descending order of importance:
----------------------------------------------------------------------
----------------------------------------------------------------------
(b) Technical Evaluation Criteria:
----------------------------------------------------------------------
----------------------------------------------------------------------
(End of Provision)
EVALUATION FACTORS FOR AWARD (SEP 1996)
ALTERNATE III (SEP 96)
(a) The Government will make award to the responsible offeror(s)
whose offer conforms to the solicitation and is most advantageous to
the Government, cost or price, and other factors considered. For
this solicitation, all evaluation factors other than cost or price
when combined are approximately equal to cost or price.
(b) Technical Evaluation Criteria:
----------------------------------------------------------------------
----------------------------------------------------------------------
(End of Provision)
Sec. 1552.215-72 [Removed]
12. Section 1552.215-72 is removed.
Dated: August 21, 1996.
John C. Gherardini III,
Acting Director, Office of Acquisition Management.
[FR Doc. 96-22642 Filed 9-5-96; 8:45 am]
BILLING CODE 6560-50-P
Complete official Federal Register PDF
FR Doc. 96-22575 Airworthiness Directives; Bell Helicopter Textron, A Division of Textron Canada Ltd. Model 222, 222B, 222U, and 230 Helicopters
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47041-47046]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22575]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
[Docket No. 96-SW-08-AD; Amendment 39-9740; AD 96-18-15]
RIN 2120-AA64
Airworthiness Directives; Bell Helicopter Textron, A Division of
Textron Canada Ltd. Model 222, 222B, 222U, and 230 Helicopters
AGENCY: Federal Aviation Administration, DOT.
ACTION: Final rule; request for comments.
-----------------------------------------------------------------------
SUMMARY: This amendment supersedes an existing airworthiness directive
(AD) 96-01-08, which superseded Priority Letter AD 95-23-02, both of
which were applicable to certain serial-numbered Bell Helicopter
Textron, A Division of Textron Canada Ltd. (BHT) Model 222, 222B, 222U,
and 230 helicopters, that currently requires an initial check of both
surfaces of each tail rotor blade (blade) for cracks; an inspection of
the blade skin if a crack of a specified size or location is found in
the paint; and replacement of the blade if a crack is found in the
blade skin. This AD requires the same actions as required by the
existing AD, but expands the applicability to include additional blade
part numbers (P/N). This amendment is prompted by three incidents in
which a crack developed in the stainless steel blade skins due to
sanding marks on the blades that occurred during the manufacturing
process on BHT Model 230 helicopters, which are similar in design to
the Model 222, 222B and 222U helicopters. The actions specified by this
AD are intended to prevent failure of a blade due to a fatigue crack,
loss of the tail rotor and tail rotor gear box, and subsequent loss of
control of the helicopter.
DATES: Effective September 23, 1996.
Comments for inclusion in the Rules Docket must be received on or
before November 5, 1996.
ADDRESSES: Submit comments in triplicate to the Federal Aviation
Administration (FAA), Office of the Assistant Chief Counsel, Attention:
Rules Docket No. 96-SW-08-AD, 2601 Meacham Blvd., Room 663, Fort Worth,
Texas 76137.
FOR FURTHER INFORMATION CONTACT: Mr. Charles Harrison, Aerospace
Engineer, Rotorcraft Certification Office, Rotorcraft Directorate, FAA,
Fort Worth, Texas 76193-0170, telephone (817) 222-5447, fax (817) 222-
5960.
SUPPLEMENTARY INFORMATION: On November 3, 1995, the FAA issued priority
letter AD 95-23-02, applicable to certain serial-numbered BHT Model
222, 222B, 222U, and 230 helicopters, to require an initial check of
both surfaces of each blade for cracks; an inspection of the blade skin
if a crack of a specified size or location was found in the paint; and
replacement of the blade if a crack was found in the blade skin. That
action was prompted by two incidents in which a crack developed in the
stainless steel blade skins on BHT Model 230 helicopters. In one of
these incidents, the blade failed during flight. Subsequent
investigation revealed fatigue cracks originating from sanding marks on
the blade skin. The cracks were located just outboard of the stainless
steel blade doubler. That condition, if not corrected, could result in
failure of a blade due to a fatigue crack, loss of the tail rotor and
tail rotor gear box, and subsequent loss of control of the helicopter.
Subsequent to the issuance of the priority letter AD, the FAA issued AD
96-01-08 to publish the
[[Page 47042]]
priority letter in the Federal Register and to correct an error in the
applicability paragraph of the priority letter AD, which incorrectly
stated the serial number (S/N) of one of the affected models. The Model
230 helicopters affected by the AD include S/N 23001 through 23038. The
priority letter AD incorrectly stated S/N 23001 through 23034.
Since the issuance of AD 96-01-08, a crack has been discovered in
the tail rotor blade of another serial-numbered Model 230 helicopter,
that originated from a small indentation that occurred during the
manufacturing process. As a result of this discovery, additional part-
numbered blades have been determined to be affected.
Since the unsafe condition described is likely to exist or develop
on other BHT Model 222, 222B, 222U, and 230 helicopters of the same
type design, this AD supersedes AD 96-01-08 to require, before further
flight, an initial visual check of both painted surfaces of each blade
for cracks. If a crack of a specified size and location is found in the
paint, removal of the paint and a visual inspection using a 10-power or
higher magnifying glass is required before further flight. If this
closer inspection reveals a crack in the blade skin, replacement of the
blade with an airworthy blade is required. If no crack is found in the
blade skin, the area from which the paint was removed is coated with a
light-weight oil or an equivalent corrosion preventive compound, and
then repetitive visual checks are required at intervals not to exceed 3
hours time-in-service (TIS). The initial visual check that is required
before further flight and the repetitive checks may be performed by a
pilot, but must be entered into the aircraft records showing compliance
with paragraph (a) of this AD in accordance with sections 43.11 and
91.417 (a)(2)(v) of the Federal Aviation Regulations (14 CFR sections
43.11 and 91.417 (a)(2)(v)). This AD allows a pilot to perform this
check because it involves only a visual check for cracking in the
painted surface of the blade skin, and can be performed equally well by
a pilot or a mechanic.
Since a situation exists that requires the immediate adoption of
this regulation, it is found that notice and opportunity for public
comment hereon are impracticable, and that good cause exists for making
this amendment effective in less than 30 days.
Comments Invited
Although this action is in the form of a final rule that involves
requirements affecting flight safety and, thus, was not preceded by
notice and an opportunity for public comment, comments are invited on
this rule. Interested persons are invited to comment on this rule by
submitting such written data, views, or arguments as they may desire.
Communications should identify the Rules Docket number and be submitted
in triplicate to the address specified under the caption ADDRESSES. All
communications received on or before the closing date for comments will
be considered, and this rule may be amended in light of the comments
received. Factual information that supports the commenter's ideas and
suggestions is extremely helpful in evaluating the effectiveness of the
AD action and determining whether additional rulemaking action would be
needed.
Comments are specifically invited on the overall regulatory,
economic, environmental, and energy aspects of the rule that might
suggest a need to modify the rule. All comments submitted will be
available, both before and after the closing date for comments, in the
Rules Docket for examination by interested persons. A report that
summarizes each FAA-public contact concerned with the substance of this
AD will be filed in the Rules Docket.
Commenters wishing the FAA to acknowledge receipt of their comments
submitted in response to this rule must submit a self-addressed,
stamped postcard on which the following statement is made: ``Comments
to Docket No. 96-SW08-AD.'' The postcard will be date stamped and
returned to the commenter.
The regulations adopted herein will not have substantial direct
effects 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. Therefore, in
accordance with Executive Order 12612, it is determined that this final
rule does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
The FAA has determined that this regulation is an emergency
regulation that must be issued immediately to correct an unsafe
condition in aircraft, and that it is not a ``significant regulatory
action'' under Executive Order 12866. It has been determined further
that this action involves an emergency regulation under DOT Regulatory
Policies and Procedures (44 FR 11034, February 26, 1979). If it is
determined that this emergency regulation otherwise would be
significant under DOT Regulatory Policies and Procedures, a final
regulatory evaluation will be prepared and placed in the Rules Docket.
A copy of it, if filed, may be obtained from the Rules Docket at the
location provided under the caption ADDRESSES.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation safety, Safety.
Adoption of the Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration amends part 39 of
the Federal Aviation Regulations (14 CFR part 39) as follows:
PART 39--AIRWORTHINESS DIRECTIVES
1. The authority citation for part 39 continues to read as follows:
Authority: 49 USC 106(g), 40113, 44701.
Sec. 39.13 [Amended]
2. Section 39.13 is amended by adding the following new
airworthiness directive (AD), Amendment 39-9740, to read as follows:
AD 96-18-15 Bell Helicopter Textron, a Division of Textron Canada
Ltd.: Amendment 39-9740. Docket No. 96-SW08-AD. Supersedes AD 96-01-
08, issued December 21, 1995, Docket No. 95-SW-33-AD.
Applicability: Model 222 helicopters, serial numbers (S/N) 47006
through 47089, and Model 222B helicopters, S/N 47131 through 47156,
with tail rotor blades, part numbers (P/N) 222-016-001-101, -107, -
111, -113, -115, and -119; Model 222U helicopters, S/N 47501 through
47574, with tail rotor blades, P/N 222-016-001-107, -111, and -115;
and Model 230 helicopters, S/N 23001 through 23038, with tail rotor
blades, P/N 222-016-001-111 and -115, installed, certificated in any
category.
Note 1: This AD applies to each helicopter identified in the
preceding applicability provision, regardless of whether it has been
modified, altered, or repaired in the area subject to the
requirements of this AD. For helicopters that have been modified,
altered, or repaired so that the performance of the requirements of
this AD is affected, the owner/operator must use the authority
provided in paragraph (g) to request approval from the FAA. This
approval may address either no action, if the current configuration
eliminates the unsafe condition, or different actions necessary to
address the unsafe condition described in this AD. Such a request
should include an assessment of the effect of the changed
configuration on the unsafe condition addressed by this AD. In no
case does the presence of any modification, alteration, or repair
remove any helicopter from the applicability of this AD.
Compliance: Required before further flight, unless accomplished
previously. To prevent failure of a tail rotor blade (blade) due to
a fatigue crack (see Figure 1), loss of the tail rotor and tail
rotor gear box, and subsequent
[[Page 47043]]
loss of control of the helicopter, accomplish the following:
(a) Clean the painted surfaces of the blades in an area
approximately 6 inches spanwise on either side of the doubler tip.
Visually check both surfaces of each blade for cracks by pushing the
blade tip away from the surface being checked until it contacts the
flapping stop and then holding the blade firmly against the stop.
Pay particular attention to the area reaching from the doubler tip
to 1 inch outboard, centering on an area 2 inches aft of the blade
leading edge (see Figure 2).
(b) The visual check required by paragraph (a) may be performed
by an owner/operator (pilot) holding at least a private pilot
certificate, and must be entered into the aircraft records showing
compliance with paragraph (a) of this AD in accordance with sections
43.11 and 91.417(a)(2)(v) of the Federal Aviation Regulations (14
CFR sections 43.11 and 91.417(a)(2)(v)).
(c) If the visual check described in paragraph (a) reveals any
crack outboard of the doubler tip (Station 14.250), or any chordwise
crack inboard of the doubler tip that is longer than 1 inch (see
Figure 3), accomplish the following:
(1) Remove the paint from the skin in the cracked area using the
following procedures (see Figure 4):
Note 2: Paint cracking that follows the contour of the doubler
is common and requires no action.
(2) Using a 180 or 220 grit abrasion paper, sand by hand with
spanwise strokes until greenish- or yellow-colored primer or bare
metal begins to be exposed.
(3) Using spanwise or circular sanding motions, continue hand-
sanding the remaining greenish- or yellow-colored primer in the
cracked area using a 320 or 400 grit paper until sufficient metal
has been exposed to allow inspection (see area indicated in Figure
4).
(d) Inspect the blade skin for cracks in the area that was
exposed in accordance with paragraph (c) using a 10-power or higher
magnifying glass.
(1) If no crack is found in the blade skin, coat the bare metal
area with a light-weight oil or an equivalent corrosion preventive
compound.
(2) If any crack is discovered, remove the blade and replace it
with an airworthy blade.
(e) Perform the requirements of this AD upon installation of a
replacement blade.
(f) Perform the visual checks of paragraph (a) of this AD and
the subsequent inspections, if appropriate, at intervals not to
exceed 3 hours TIS.
Note 3: A light-weight oil or equivalent corrosion preventive
compound may be applied after accomplishing the repetitive
requirements of paragraph (f) of this AD.
BILLING CODE 4910-13-U
[[Page 47044]]
[GRAPHIC] [TIFF OMITTED] TR06SE96.001
[[Page 47045]]
[GRAPHIC] [TIFF OMITTED] TR06SE96.002
BILLING CODE 4910-13-C
[[Page 47046]]
(g) An alternative method of compliance or adjustment of the
compliance time that provides an acceptable level of safety may be
used if approved by the Manager, Rotorcraft Certification Office,
Rotorcraft Directorate, FAA. Operators shall submit their requests
through an FAA Principal Maintenance Inspector, who may concur or
comment and then send it to the Manager, Rotorcraft Certification
Office.
Note 4: Information concerning the existence of approved
alternative methods of compliance with this AD, if any, may be
obtained from the Rotorcraft Certification Office.
(h) Special flight permits to accomplish the requirements of
this AD will not be issued.
(i) This amendment becomes effective on September 23, 1996.
Issued in Fort Worth, Texas, on August 26, 1996.
Daniel P. Salvano,
Manager, Rotorcraft Directorate, Aircraft Certification Service.
[FR Doc. 96-22575 Filed 9-5-96; 8:45 am]
BILLING CODE 4910-13-U
Complete official Federal Register PDF
FR Doc. 96-22574 Airworthiness Directives; Bell Helicopter Textron, Inc. Model 204B Helicopters
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47046-47047]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22574]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
14 CFR Part 39
[Docket No. 96-SW-07-AD; Amendment 39-9739; AD 96-12-25]
RIN 2120-AA64
Airworthiness Directives; Bell Helicopter Textron, Inc. Model
204B Helicopters
AGENCY: Federal Aviation Administration, DOT.
ACTION: Final rule; request for comments.
-----------------------------------------------------------------------
SUMMARY: This document publishes in the Federal Register an amendment
adopting Airworthiness Directive (AD) AD 96-12-25 which was sent
previously to all known U.S. owners and operators of Bell Helicopter
Textron, Inc. (BHTI) Model 204B helicopters by individual letters. This
AD requires a visual inspection of each tail rotor (T/R) blade (blade)
for peeling, flaking, or bubbling paint that may indicate corrosion; an
inspection for corrosion, if necessary; and replacement of the T/R
blade with an airworthy blade if corrosion is discovered. This
amendment is prompted by an FAA determination, based on the
manufacturer's data, that certain serial-numbered T/R blades were
manufactured with internal leading edge doublers fabricated from clad
aluminum instead of bare aluminum material. The actions specified by
this AD are intended to prevent debonding of the main spar internal
leading edge doubler, which could lead to failure of a T/R blade and
subsequent loss of control of the helicopter.
DATES: Effective September 23, 1996, to all persons except those
persons to whom it was made immediately effective by priority letter AD
96-12-25 issued on June 5, 1996, which contained the requirements of
this amendment.
Comments for inclusion in the Rules Docket must be received on or
before November 5, 1996.
ADDRESSES: Submit comments in triplicate to the Federal Aviation
Administration (FAA), Office of the Assistant Chief Counsel, Attention:
Rules Docket No. 96-SW-07-AD, 2601 Meacham Blvd., Room 663, Fort Worth,
Texas 76137.
The applicable service information may be obtained from Bell
Helicopter Textron, Inc., P.O. Box 482, Fort Worth, Texas 76101.
FOR FURTHER INFORMATION CONTACT: Mr. Charles Harrison, Aerospace
Engineer, Rotorcraft Certification Office, 2601 Meacham Blvd., Fort
Worth, Texas 76137, telephone (817) 222-5447, fax (817) 222-5960.
SUPPLEMENTARY INFORMATION: On June 5, 1996, the FAA issued priority
letter AD 96-12-25, applicable to BHTI Model 204B helicopters, serial
numbers (S/N) 2001 through 2070 and S/N 2196 through 2199, which
requires a visual inspection of each T/R blade for peeling, flaking, or
bubbling paint that may indicate corrosion; an inspection for
corrosion, if necessary; and, replacement of the T/R blade with an
airworthy blade if corrosion is discovered. That action was prompted by
an FAA determination, based on the manufacturer's data, that certain
serial-numbered T/R blades were manufactured with internal leading edge
doublers fabricated from clad aluminum instead of bare aluminum
material. This condition, if not corrected, could result in debonding
of the main spar internal leading edge doubler, which could lead to
failure of a T/R blade and subsequent loss of control of the
helicopter.
Since the unsafe condition described is likely to exist or develop
on other BHTI Model 204B helicopters of the same type design, the FAA
issued priority letter AD 96-12-25, to prevent debonding of the main
spar internal leading edge doubler, which could lead to failure of a T/
R blade and subsequent loss of control of the helicopter. The AD
requires, within 10 hours time-in-service (TIS) after the effective
date of this AD, and thereafter at intervals of not more than 7
calendar days, a visual inspection of each T/R blade for peeling,
flaking, or bubbling paint, or corrosion along the bond lines viewed
from the root and tip ends of the blade, and at the abrasion strip bond
line on both sides of the blade from the root to the tip. If peeling,
flaking, or bubbling paint is discovered, the paint in the affected
area must be removed and the blade must be inspected for corrosion. If
corrosion is discovered in the affected areas, the blade must be
removed and replaced with an airworthy blade.
Since it was found that immediate corrective action was required,
notice and opportunity for prior public comment thereon were
impracticable and contrary to the public interest, and good cause
existed to make the AD effective immediately by individual letters
issued on June 5, 1996 to all known U.S. owners and operators of BHTI
Model 204B helicopters. These conditions still exist, and the AD is
hereby published in the Federal Register as an amendment to section
39.13 of the Federal Aviation Regulations (14 CFR 39.13) to make it
effective to all persons.
Comments Invited
Although this action is in the form of a final rule that involves
requirements affecting flight safety and, thus, was not preceded by
notice and an opportunity for public comment, comments are invited on
this rule. Interested persons are invited to comment on this rule by
submitting such written data, views, or arguments as they may desire.
Communications should identify the Rules Docket number and be submitted
in triplicate to the address specified under the caption ``ADDRESSES.''
All communications received on or before the closing date for comments
will be considered, and this rule may be amended in light of the
comments received. Factual information that supports the commenter's
ideas and suggestions is extremely helpful in evaluating the
effectiveness of the AD action and determining whether additional
rulemaking action would be needed.
Comments are specifically invited on the overall regulatory,
economic, environmental, and energy aspects of the rule that might
suggest a need to modify the rule. All comments submitted will be
available, both before and after the closing date for comments, in the
Rules Docket for examination by interested persons. A report that
summarizes each FAA-public contact concerned with the substance of this
AD will be filed in the Rules Docket.
Commenters wishing the FAA to acknowledge receipt of their comments
submitted in response to this rule must submit a self-addressed,
stamped postcard on which the following statement is made: ``Comments
to
[[Page 47047]]
Docket No. 96SW-07-AD.'' The postcard will be date stamped and returned
to the commenter.
The regulations adopted herein will not have substantial direct
effects 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. Therefore, in
accordance with Executive Order 12612, it is determined that this final
rule does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
The FAA has determined that this regulation is an emergency
regulation that must be issued immediately to correct an unsafe
condition in aircraft, and that it is not a ``significant regulatory
action'' under Executive Order 12866. It has been determined further
that this action involves an emergency regulation under DOT Regulatory
Policies and Procedures (44 FR 11034, February 26, 1979). If it is
determined that this emergency regulation otherwise would be
significant under DOT Regulatory Policies and Procedures, a final
regulatory evaluation will be prepared and placed in the Rules Docket.
A copy of it, if filed, may be obtained from the Rules Docket at the
location provided under the caption ADDRESSES.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation safety, Safety.
Adoption of the Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration amends part 39 of
the Federal Aviation Regulations (14 CFR part 39) as follows:
PART 39--AIRWORTHINESS DIRECTIVES
1. The authority citation for part 39 continues to read as follows:
Authority: 49 USC 106(g), 40113, 44701.
Sec. 39.13 [Amended]
2. Section 39.13 is amended by adding a new airworthiness directive
to read as follows:
AD 96-12-25 Bell Helicopter Textron, Inc.: Amendment 39-9739. Docket
No. 96-SW-07-AD.
Applicability: Model 204B helicopters, serial numbers (S/N) 2001
through 2070 and S/N 2196 through 2199, with tail rotor (T/R) blade
(blade), part number (P/N) 204-011-702-015 or -121, S/N A-20262
through A-20268, A-20270 through A20282, A-20284 through A-20287, A-
20289 through A-20422, A20424 through A-20428, A-20430 through A-
20433, A-20435 through A-20464, A-20466 through A-20497, A-20499
through A21019, A-21027 through A-21031, A-21041, A-21047, A-21049
and A-21059, installed, certificated in any category.
Note 1: This AD applies to each helicopter identified in the
preceding applicability provision, regardless of whether it has been
modified, altered, or repaired in the area subject to the
requirements of this AD. For helicopters that have been modified,
altered, or repaired so that the performance of the requirements of
this AD is affected, the owner/operator must use the authority
provided in paragraph (d) to request approval from the FAA. This
approval may address either no action, if the current configuration
eliminates the unsafe condition, or different actions necessary to
address the unsafe condition described in this AD. Such a request
should include an assessment of the effect of the changed
configuration on the unsafe condition addressed by this AD. In no
case does the presence of any modification, alteration, or repair
remove any helicopter from the applicability of this AD.
Compliance: Required as indicated, unless accomplished
previously.
To prevent debonding of the main spar internal leading edge
doubler, which could lead to failure of a T/R blade and subsequent
loss of control of the helicopter, accomplish the following:
(a) Within 10 hours time-in-service (TIS) after the effective
date of this AD, and thereafter at intervals of not more than 7
calendar days, clean each T/R blade using a mild detergent and water
to remove soot and grime.
(b) Visually inspect each T/R blade for peeling, flaking, or
bubbling paint, or corrosion along the bond lines viewed from the
root and tip ends of the blade, and at the abrasion strip bond line
on both sides of the blade from the root to the tip.
(c) If the visual inspection indicates peeling, flaking, or
bubbling paint, remove the paint from the affected area and perform
a visual inspection for corrosion.
(1) If no corrosion is noted, refinish the blade.
(2) If corrosion is noted in the bond lines of the affected
areas, remove the blade and replace it with an airworthy blade.
Replacement with an airworthy blade that has a serial number not
listed in the Applicability section of this AD constitutes a
terminating action for this AD.
Note 2: Bell Helicopter Textron, Inc. ASB No. 204-96-48,
Revision A, dated February 12, 1996, pertains to this AD.
(d) An alternative method of compliance or adjustment of the
compliance time that provides an acceptable level of safety may be
used if approved by the Manager, Rotorcraft Certification Office,
Rotorcraft Directorate, FAA. Operators shall submit their requests
through an FAA Principal Maintenance Inspector, who may concur or
comment and then send it to the Manager, Rotorcraft Certification
Office.
Note 3: Information concerning the existence of approved
alternative methods of compliance with this AD, if any, may be
obtained from the Rotorcraft Certification Office.
(e) Special flight permits may be issued in accordance with
sections 21.197 and 21.199 of the Federal Aviation Regulations (14
CFR 21.197 and 21.199) to operate the helicopter to a location where
the requirements of this AD can be accomplished.
(f) This amendment becomes effective on September 23, 1996, to
all persons except those persons to whom it was made immediately
effective by priority letter AD 96-12-25, issued June 5, 1996, which
contained the requirements of this amendment.
Issued in Fort Worth, Texas, on August 26, 1996.
Daniel P. Salvano,
Manager, Rotorcraft Directorate, Aircraft Certification Service.
[FR Doc. 96-22574 Filed 9-5-96; 8:45 am]
BILLING CODE 4910-13-U
Complete official Federal Register PDF
FR Doc. 96-22573 Airworthiness Directives; Bell Helicopter Textron, Inc. Manufactured Model AH-1, HH-1K, TH-1F, TH-1L, UH-1A, UH-1B, UH-1E, UH- 1F, UH-1H, UH-1L, and UH-1P Helicopters
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47047-47049]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22573]
-----------------------------------------------------------------------
DEPARTMENT OF TRANSPORTATION
14 CFR Part 39
[Docket No. 96-SW-11-AD; Amendment 39-9741; AD 96-12-26 ]
RIN 2120-AA64
Airworthiness Directives; Bell Helicopter Textron, Inc.
Manufactured Model AH-1, HH-1K, TH-1F, TH-1L, UH-1A, UH-1B, UH-1E, UH-
1F, UH-1H, UH-1L, and UH-1P Helicopters
AGENCY: Federal Aviation Administration, DOT.
ACTION: Final rule; request for comments.
-----------------------------------------------------------------------
SUMMARY: This document publishes in the Federal Register an amendment
adopting Airworthiness Directive (AD) AD 96-12-26 which was sent
previously to all known U.S. owners and operators of Bell Helicopter
Textron, Inc. (BHTI) manufactured Model AH-1, HH-1K, TH-1F, TH-1L, UH-
1A, UH-1B, UH-1E, UH-1F, UH-1H, UH-1L, and UH-1P helicopters by
individual letters. This AD requires a visual inspection of each tail
rotor (T/R) blade (blade) for peeling, flaking, or bubbling paint that
may indicate corrosion; an inspection for corrosion, if necessary; and
replacement of the T/R blade with an airworthy blade if corrosion is
discovered. This amendment is prompted by an FAA determination, based
on the manufacturer's data, that certain serial-numbered T/R blades
were manufactured with internal leading edge doublers fabricated from
clad aluminum instead of bare aluminum material. The actions specified
by this AD are intended to prevent debonding of the main spar internal
leading edge doubler, which could lead to failure of a T/R blade and
subsequent loss of control of the helicopter.
[[Page 47048]]
DATES: Effective September 23, 1996, to all persons except those
persons to whom it was made immediately effective by priority letter AD
96-12-26 issued on June 5, 1996, which contained the requirements of
this amendment.
Comments for inclusion in the Rules Docket must be received on or
before November 5, 1996.
ADDRESSES: Submit comments in triplicate to the Federal Aviation
Administration (FAA), Office of the Assistant Chief Counsel, Attention:
Rules Docket No. 96-SW-11-AD, 2601 Meacham Blvd., Room 663, Fort Worth,
Texas 76137.
The applicable service information may be obtained from Bell
Helicopter Textron, Inc., P.O. Box 482, Fort Worth, Texas 76101.
FOR FURTHER INFORMATION CONTACT: Mr. Charles Harrison, Aerospace
Engineer, Rotorcraft Certification Office, 2601 Meacham Blvd., Fort
Worth, Texas 76137, telephone (817) 222-5447, fax (817) 222-5960.
SUPPLEMENTARY INFORMATION: On June 5, 1996, the FAA issued priority
letter AD 96-12-26, applicable to BHTI-manufactured Model AH-1, HH-1K,
TH-1F, TH-1L, UH-1A, UH-1B, UH-1E, UH-1F, UH-1H, UH-1L, and UH-1P
helicopters, which requires a visual inspection of each T/R blade for
peeling, flaking, or bubbling paint that may indicate corrosion; an
inspection for corrosion, if necessary; and, replacement of the T/R
blade with an airworthy blade if corrosion is discovered. That action
was prompted by an FAA determination, based on the manufacturer's data,
that certain serial-numbered T/R blades were manufactured with internal
leading edge doublers fabricated from clad aluminum instead of bare
aluminum material. This condition, if not corrected, could result in
debonding of the main spar leading edge doubler, which could lead to
failure of a T/R blade and subsequent loss of control of the
helicopter.
Since the unsafe condition described is likely to exist or develop
on other BHTI-manufactured Model AH-1, HH-1K, TH-1F, TH-1L, UH-1A, UH-
1B, UH-1E, UH-1F, UH-1H, UH-1L, and UH-1P helicopters of the same type
design, the FAA issued priority letter AD 96-12-26, to inspect for
debonding of the main spar internal leading edge doubler, which could
lead to failure of a T/R blade and subsequent loss of control of the
helicopter. The AD requires, within 10 hours time-in-service (TIS)
after the effective date of this AD, and thereafter at intervals of not
more than 7 calendar days, a visual inspection of the each T/R blade
for peeling, flaking, or bubbling paint that may indicate corrosion, or
corrosion along the bond lines viewed from the root and tip ends of the
blade, and at the abrasion strip bond line on both sides of the blade
from the root to the tip. If peeling, flaking, or bubbling paint is
discovered, the paint in the affected area must be removed and the
blade must be inspected for corrosion. If corrosion is discovered in
the affected areas, the blade must be removed and replaced with an
airworthy blade.
Since it was found that immediate corrective action was required,
notice and opportunity for prior public comment thereon were
impracticable and contrary to the public interest, and good cause
existed to make the AD effective immediately by individual letters
issued on June 5, 1996 to all known U.S. owners and operators of BHTI-
manufactured Model AH-1, HH-1K, TH-1F, TH-1L, UH-1A, UH-1B, UH-1E, UH-
1F, UH-1H, UH-1L, and UH-1P helicopters. These conditions still exist,
and the AD is hereby published in the Federal Register as an amendment
to section 39.13 of the Federal Aviation Regulations (14 CFR 39.13) to
make it effective to all persons.
Comments Invited
Although this action is in the form of a final rule that involves
requirements affecting flight safety and, thus, was not preceded by
notice and an opportunity for public comment, comments are invited on
this rule. Interested persons are invited to comment on this rule by
submitting such written data, views, or arguments as they may desire.
Communications should identify the Rules Docket number and be submitted
in triplicate to the address specified under the caption ADDRESSES. All
communications received on or before the closing date for comments will
be considered, and this rule may be amended in light of the comments
received. Factual information that supports the commenter's ideas and
suggestions is extremely helpful in evaluating the effectiveness of the
AD action and determining whether additional rulemaking action would be
needed.
Comments are specifically invited on the overall regulatory,
economic, environmental, and energy aspects of the rule that might
suggest a need to modify the rule. All comments submitted will be
available, both before and after the closing date for comments, in the
Rules Docket for examination by interested persons. A report that
summarizes each FAA-public contact concerned with the substance of this
AD will be filed in the Rules Docket.
Commenters wishing the FAA to acknowledge receipt of their comments
submitted in response to this rule must submit a self-addressed,
stamped postcard on which the following statement is made: ``Comments
to Docket No. 96SW-11-AD.'' The postcard will be date stamped and
returned to the commenter.
The regulations adopted herein will not have substantial direct
effects 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. Therefore, in
accordance with Executive Order 12612, it is determined that this final
rule does not have sufficient federalism implications to warrant the
preparation of a Federalism Assessment.
The FAA has determined that this regulation is an emergency
regulation that must be issued immediately to correct an unsafe
condition in aircraft, and that it is not a ``significant regulatory
action'' under Executive Order 12866. It has been determined further
that this action involves an emergency regulation under DOT Regulatory
Policies and Procedures (44 FR 11034, February 26, 1979). If it is
determined that this emergency regulation otherwise would be
significant under DOT Regulatory Policies and Procedures, a final
regulatory evaluation will be prepared and placed in the Rules Docket.
A copy of it, if filed, may be obtained from the Rules Docket at the
location provided under the caption ADDRESSES.
List of Subjects in 14 CFR Part 39
Air transportation, Aircraft, Aviation safety, Safety.
Adoption of the Amendment
Accordingly, pursuant to the authority delegated to me by the
Administrator, the Federal Aviation Administration amends part 39 of
the Federal Aviation Regulations (14 CFR part 39) as follows:
PART 39--AIRWORTHINESS DIRECTIVES
1. The authority citation for part 39 continues to read as follows:
Authority: 49 USC 106(g), 40113, 44701.
[[Page 47049]]
Sec. 39.13 [Amended]
2. Section 39.13 is amended by adding a new airworthiness directive
to read as follows:
AD 96-12-26 California Department of Forestry; Erickson Air Crane
Co.; Garlick Helicopters; Hawkins and Powers Aviation, Inc.;
International Helicopters, inc.; Smith Helicopters; Southwest
Florida Aviation; West Coast Fabrications; Western International
Aviation, Inc.; Williams Helicopter Technology, Inc.; and UNC
Helicopters: Amendment 39-9741. Docket No. 96-SW-11-AD.
Applicability: Bell Helicopter Textron, Inc.manufactured Model
AH-1, HH-1K, TH-1F, TH-1L, UH-1A, UH-1B, UH-1E, UH-1F, UH-1H, UH-1L,
and UH-1P helicopters, with tail rotor (T/R) blade (blade), part
number (P/N) 204-011-702-015 or -121, serial numbers (S/N) A-20262
through A-20268, A-20270 through A-20282, A-20284 through A-20287,
A-20289 through A-20422, A-20424 through A-20428, A-20430 through A-
20433, A-20435 through A-20464, A-20466 through A-20497, A-20499
through A-21019, A-21027 through A-21031, A-21041, A-21047, A-21049
and A-21059, installed, certificated in any category.
Note 1: This AD applies to each helicopter identified in the
preceding applicability provision, regardless of whether it has been
modified, altered, or repaired in the area subject to the
requirements of this AD. For helicopters that have been modified,
altered, or repaired so that the performance of the requirements of
this AD is affected, the owner/operator must use the authority
provided in paragraph (d) to request approval from the FAA. This
approval may address either no action, if the current configuration
eliminates the unsafe condition, or different actions necessary to
address the unsafe condition described in this AD. Such a request
should include an assessment of the effect of the changed
configuration on the unsafe condition addressed by this AD. In no
case does the presence of any modification, alteration, or repair
remove any helicopter from the applicability of this AD.
Compliance: Required as indicated, unless accomplished
previously.
To prevent debonding of the main spar internal leading edge
doubler, which could lead to failure of a T/R blade and subsequent
loss of control of the helicopter, accomplish the following:
(a) Within 10 hours time-in-service (TIS) after the effective
date of this AD, and thereafter at intervals of not more than 7
calendar days, clean each T/R blade using a mild detergent and water
to remove soot and grime.
(b) Visually inspect each T/R blade for peeling, flaking, or
bubbling paint, or corrosion along the bond lines viewed from the
root and tip ends of the blade, and at the abrasion strip bond line
on both sides of the blade from the root to the tip.
(c) If the visual inspection indicates peeling, flaking, or
bubbling paint, remove the paint from the affected area and perform
a visual inspection for corrosion.
(1) If no corrosion is noted, refinish the blade.
(2) If corrosion is noted in the bond lines of the affected
areas, remove the blade and replace it with an airworthy blade.
Replacement with an airworthy blade that has a serial number not
listed in the Applicability section of this AD constitutes a
terminating action for this AD.
Note 2: Bell Helicopter Textron, Inc. ASB No. 204-9648, Revision
A, dated February 12, 1996, which pertains to Model 204B
helicopters, also pertains to this AD.
(d) An alternative method of compliance or adjustment of the
compliance time that provides an acceptable level of safety may be
used if approved by the Manager, Rotorcraft Certification Office,
Rotorcraft Directorate, FAA. Operators shall submit their requests
through an FAA Principal Maintenance Inspector, who may concur or
comment and then send it to the Manager, Rotorcraft Certification
Office.
Note 3: Information concerning the existence of approved
alternative methods of compliance with this AD, if any, may be
obtained from the Rotorcraft Certification Office.
(e) Special flight permits may be issued in accordance with
sections 21.197 and 21.199 of the Federal Aviation Regulations (14
CFR 21.197 and 21.199) to operate the helicopter to a location where
the requirements of this AD can be accomplished.
(f) This amendment becomes effective on September 23, 1996, to
all persons except those persons to whom it was made immediately
effective by priority letter AD 96-12-26, issued June 5, 1996, which
contained the requirements of this amendment.
Issued in Fort Worth, Texas, on August 26, 1996.
Daniel P. Salvano,
Manager, Rotorcraft Directorate, Aircraft Certification Service.
[FR Doc. 96-22573 Filed 9-5-96; 8:45 am]
BILLING CODE 4910-13-U
Complete official Federal Register PDF
FR Doc. 96-22546 Risk-Based Capital Standards: Market Risk
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47358-47378]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22546]
[[Page 47357]]
_______________________________________________________________________
Part IV
Department of the Treasury
Office of the Comptroller of the Currency
12 CFR Part 3
Federal Reserve System
12 CFR Parts 208 and 225
Federal Deposit Insurance Corporation
12 CFR Part 325
_______________________________________________________________________
Risk-Based Capital Standards: Market Risk; Joint Final Rule
Federal Register / Vol. 61, No. 174 / Friday, September 6, 1996 /
Rules and Regulations
[[Page 47358]]
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 3
[Docket No. 96-18]
RIN 1557-AB14
FEDERAL RESERVE SYSTEM
12 CFR Parts 208 and 225
[Regulations H and Y; Docket No. R-0884]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Part 325
RIN 3064-AB64
Risk-Based Capital Standards: Market Risk
AGENCIES: Office of the Comptroller of the Currency, Treasury; Board of
Governors of the Federal Reserve System; and Federal Deposit Insurance
Corporation.
ACTION: Joint final rule.
-----------------------------------------------------------------------
SUMMARY: The Office of the Comptroller of the Currency (OCC), the Board
of Governors of the Federal Reserve System (Board), and the Federal
Deposit Insurance Corporation (FDIC) (collectively, the Agencies) are
amending their respective risk-based capital standards to incorporate a
measure for market risk to cover all positions located in an
institution's trading account and foreign exchange and commodity
positions wherever located. The final rule implements an amendment to
the Basle Capital Accord that sets forth a supervisory framework for
measuring market risk. The effect of the final rule is that any bank or
bank holding company (institution) regulated by the OCC, the Board, or
the FDIC, with significant exposure to market risk must measure that
risk using its own internal value-at-risk model, subject to the
parameters contained in this final rule, and must hold a commensurate
amount of capital.
DATES: Effective date: January 1, 1997.
Compliance date: Mandatory compliance January 1, 1998.
FOR FURTHER INFORMATION CONTACT:
OCC: Margot Schwadron, Financial Analyst, Roger Tufts, Senior
Economic Advisor, or Christina Benson, Capital Markets Specialist,
Office of the Chief National Bank Examiner (202/874-5070). For legal
issues, Andrew Gutierrez, Attorney, or Ron Shimabukuro, Senior
Attorney, Legislative and Regulatory Activities Division (202/874-
5090), Office of the Comptroller of the Currency, 250 E Street, SW,
Washington, D.C. 20219.
Board: Roger Cole, Deputy Associate Director (202/452-2618), James
Houpt, Assistant Director (202/452-3358), Barbara Bouchard, Supervisory
Financial Analyst (202/452-3072), Division of Banking Supervision and
Regulation; or Stephanie Martin, Senior Attorney (202/452-3198), Legal
Division. For the Hearing impaired only, Telecommunication Device for
the Deaf (TDD), Dorothea Thompson (202/452-3544), Federal Reserve
Board, 20th and C Streets, NW, Washington, D.C. 20551.
FDIC: William A. Stark, Assistant Director (202/898-6972), Miguel
Browne, Deputy Assistant Director (202/898-6789), Kenton Fox, Senior
Capital Markets Specialist (202/898-7119), Division of Supervision;
Jamey Basham, Counsel (202/898-7265), Legal Division, Federal Deposit
Insurance Corporation, 550 17th Street, NW, Washington, D.C. 20429.
SUPPLEMENTARY INFORMATION:
I. Background
The Agencies' risk-based capital standards are based upon
principles contained in the July 1988 agreement entitled
``International Convergence of Capital Measurement and Capital
Standards'' (Accord). The Accord, developed by the Basle Committee on
Banking Supervision (Committee) and endorsed by the central bank
governors of the Group of Ten (G-10) countries,1 provides a
framework for assessing an institution's capital adequacy by weighting
its assets and off-balance-sheet exposures on the basis of counterparty
credit risk. In April 1995, the Committee issued a consultative
proposal to amend the Accord and require institutions to measure and
hold capital to cover their exposure to market risk, specifically,
market risk associated with foreign exchange and commodity positions,
and with debt and equity positions located in the trading
account.2
---------------------------------------------------------------------------
\1\ The G-10 countries are Belgium, Canada, France, Germany,
Italy, Japan, Netherlands, Sweden, Switzerland, the United Kingdom,
and the United States. The Committee is comprised of representatives
of the central banks and supervisory authorities from the G-10
countries and Luxembourg. The Agencies each adopted risk-based
capital standards implementing the Accord in 1989.
\2\ Market risk consists of general market risk and specific
risk. General market risk refers to changes in the market value of
on-balance-sheet assets and liabilities and off-balance-sheet items
resulting from broad market movements, such as changes in the
general level of interest rates, equity prices, foreign exchange
rates, and commodity prices. Specific risk refers to changes in the
market value of individual positions due to factors other than broad
market movements and includes such risks as the credit risk of an
instrument's issuer.
---------------------------------------------------------------------------
Market Risk Proposal
On July 25, 1995, the Agencies published a joint proposal to amend
their respective risk-based capital standards in accordance with the
Committee's consultative proposal (60 FR 38082) (market risk proposal).
Under the market risk proposal, an institution with significant trading
activity must calculate a capital charge for market risk using either
its own internal risk measurement model (internal models approach) or a
risk-weighting process developed by the Committee (standardized
approach). The market risk proposal requires an institution to
integrate the market risk capital charge into its risk-based capital
ratios used for supervisory purposes no later than year-end 1997.
The proposed internal models approach requires an institution to
employ an internal model to calculate daily value-at-risk (VAR)
measures 3 for each of four risk categories: interest rates,
equity prices, foreign exchange rates, and commodity prices, including
related options in each category. For regulatory capital purposes, the
market risk proposal requires an institution to calibrate VAR measures
to a ten-day movement in rates and prices and a 99 percent confidence
level. An institution must base its VAR measures upon rates and prices
observed over a period of at least one year. In deriving the overall
VAR measure, an institution could take into account historical
correlations within a risk category (e.g., between interest rates), but
not across risk categories (e.g., not between interest rates and equity
prices); in other words, the overall VAR measure equals the sum of the
VAR measures for each risk category. An institution's capital charge
for general market risk equals the greater of (1) the previous day's
overall VAR measure, or (2) the average of the preceding 60 days'
overall VAR measures multiplied by a factor of three (the
multiplication factor). Moreover, the market risk proposal requires an
institution to hold additional capital for specific risk associated
with debt and equity positions in the trading account to the extent
that its internal model does not incorporate that risk.
---------------------------------------------------------------------------
\3\ The VAR measure represents an estimate of the amount by
which an institution's positions in a risk category could decline
due to general market movements during a given holding period,
measured with a specified confidence level.
---------------------------------------------------------------------------
Under the market risk proposal, an institution's supervisor
evaluates its internal modeling and risk management process to ensure
that the institution is,
[[Page 47359]]
in fact, using its internal model for risk management purposes, that
the calculation of VAR for capital purposes conforms with the specified
quantitative criteria, and that the risk management process meets
certain qualitative criteria, such as requiring independent model
validations 4 and having an independent risk management unit. The
market risk proposal allows an institution's supervisor to increase its
multiplication factor (which applies to the 60-day VAR average) if
backtesting results suggest problems with the institution's internal
model or risk management process.
---------------------------------------------------------------------------
\4\ The proposed qualitative criteria identify backtesting and
stress testing as two model validation techniques. Backtests provide
information about the accuracy of an internal model by comparing an
institution's daily VAR measures to its corresponding daily trading
profits and losses. Stress tests provide information about the
impact of adverse market events on an institution's positions.
---------------------------------------------------------------------------
The standardized approach, the market risk proposal's alternative
to the internal models approach, requires an institution to apply
certain uniform techniques to calculate a capital charge for the
general market risk of positions in the four risk categories, as well
as for the specific risk of debt and equity positions located in the
trading account. The total capital charge is the sum of the capital
charges for each risk category.
An institution supports its market risk capital charges using a
combination of Tier 1 and Tier 2 capital instruments (as defined in the
credit risk-based capital standards), as well as a proposed new type of
capital (Tier 3). Generally, Tier 3 capital consists of short-term
subordinated debt subject to certain criteria, including a lock-in
provision that prevents the issuer from repaying the debt even at
maturity if the issuer's risk-based capital ratio is less than 8.0
percent following the payment.
In December 1995, the G-10 Governors endorsed a final amendment to
the Accord adopting, with some modification, the Committee's market
risk consultative proposal. At that same time, the Committee issued
supervisory guidance specifying the effect of backtesting results on an
institution's multiplication factor.
Backtesting Proposal
On March 7, 1996, the Agencies published for public comment a joint
proposal on backtesting (61 FR 9114) (backtesting proposal) that
reflected the Committee's backtesting guidance. The backtesting
proposal requires an institution to compare its daily net profits and
losses for the most recent 250 business days to the corresponding daily
VAR measures generated for internal risk management purposes, using a
99 percent confidence level and a one-day period of rate and price
movement. Each day for which a net trading loss exceeds the
corresponding VAR measure is counted as an exception. An institution
with five or more exceptions is presumed to have an inaccurate internal
model and must increase its multiplication factor from three up to a
maximum of four, depending on the number of exceptions. The backtesting
proposal requires an institution to begin backtesting one year after it
begins to calculate market risk capital charges. The delayed effective
date for backtesting provides an institution with sufficient time to
accumulate the required data for 250 business days.
II. Comment Summary
Market Risk Proposal
Together, the Agencies received 33 public comments on the market
risk proposal. Commenters strongly supported the proposed internal
models approach.5 Most commenters believed that approach provides
greater accuracy in measuring market risk than the standardized
approach and creates incentives for institutions to continue improving
their risk modeling and management techniques. Nevertheless, most
commenters stated that the proposed modeling constraints were
unnecessarily rigid and, especially when combined with the
multiplication factor of three, result in excessive capital charges.
The following discussion summarizes the responses to the Agencies'
specific questions about the proposal.
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\5\ Early versions of the Basle Committee's market risk
amendment did not allow for the use of internal models to determine
capital charges.
---------------------------------------------------------------------------
General Topics
The Agencies asked commenters about the proposed criteria for
determining which institutions must calculate capital charges for
market risk. As proposed, the rule applied to: (1) Any institution with
total assets exceeding $5 billion and either trading activity totaling
at least 3 percent of total assets or the notional amount of trading
account derivative contracts in excess of $5 billion; and (2) any
institution with total assets of $5 billion or less and trading
activity representing at least 10 percent of total assets. Commenters
generally agreed that an institution with significant exposure to
market risk should hold capital against that exposure. However, some
believed it inappropriate to use the notional amount of trading account
derivative contracts as a criterion. Further, some objected to
different criteria for institutions of different asset size.
The Agencies asked about the burden associated with applying the
market risk measure to both banks and bank holding companies and, with
regard to bank holding companies, the burden associated with applying
the measure both with and without Section 20 subsidiaries. The Agencies
received mixed comments on the bank and bank holding company issue.
Some believed the measure should apply only at the bank holding company
level, pointing out that market risk usually is managed on a
consolidated basis at the bank holding company level. Some favored
applying the measure at the bank level. Others believed that an
institution should have a choice, depending on how it manages risk.
Most commenters discussing the Section 20 subsidiary issue supported
applying the rule on a fully consolidated basis (i.e., including
Section 20 subsidiaries).
The Agencies also asked whether to allow an institution to choose
either the standardized or internal models approaches, whether to allow
an institution to combine the two approaches for different risk
categories, and whether the two approaches result in similar capital
charges. While some commenters supported the flexibility of choosing
between the internal models and standardized approaches, those
commenters who anticipated that they would be subject to the market
risk capital requirements indicated that they intend to use only the
internal models approach. Other commenters thought that a choice of
approaches could be useful in certain situations, for example, when an
institution suddenly meets the applicability criteria but does not have
a completely developed internal model. Several commenters expressed
concerns about the accuracy of the standardized approach and urged its
elimination. The few commenters that addressed the question about
combining the two approaches supported the flexibility that this could
provide. A few commenters stated that capital charges would be higher
under the internal models approach than under the standardized
approach.6
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\6\ The summary does not include comments on particular issues
that might arise in applying the standardized approach (other than
comments on specific risk) because, as discussed below, the Agencies
have decided not to adopt the standardized approach in the final
rule. Public comments are available from the Board's and OCC's
Freedom of Information Office and the FDIC's Reading Room.
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[[Page 47360]]
The Internal Models Approach
The market risk proposal imposed several quantitative standards on
VAR measures used for regulatory capital purposes. The Agencies asked
about the potential burden associated with these standards and whether
the resulting capital charge sufficiently covered market risk.
Commenters overwhelmingly responded that the proposed modeling
constraints were unnecessarily rigid and would result in an excessive
capital charge. Many commenters suggested the Agencies allow an
institution to use the same internal modeling parameters for regulatory
capital purposes as for internal risk management.
Modeling Constraints. With regard to the proposed modeling
constraints, a few commenters supported basing capital charges on a
ten-day period of rate and price movements. Others indicated that the
period was too long, with most suggesting a one-day period. Some
commenters objected to any specified period. Several commenters opposed
the proposed 99 percent confidence level, noting that many institutions
use lower confidence levels. Others supported the proposed level and
still others suggested that regulators should not specify a confidence
level.
Many commenters strongly asserted that the proposed multiplication
factor of three was too high and suggested, instead, a minimum factor
of one. Most of these commenters believed that the proposal did not
adequately explain the rationale for a multiplication factor greater
than one. Several asked for clarification about how the Agencies will
measure a model's accuracy and adjust an institution's multiplication
factor. They advocated objective, well-defined criteria to ensure that
the Agencies apply the rules consistently.
Commenters strongly opposed the proposal's requirement that an
institution aggregate VAR measures by simple summation across the risk
categories. They asserted that ignoring the effects of cross
correlation among risk categories overstates exposure and understates
the merits of diversified portfolios.
The Agencies asked whether to require an institution to calculate
VARs using two observation periods. Specifically, the Agencies asked
about the tradeoff between enhanced prudential coverage and additional
burden associated with requiring an institution to make two VAR
measures, one based on a short observation period and one based on a
longer (over one year) period. Most commenters believed dual
observation periods would result in unnecessary costs and operational
burden. Commenters had varying opinions about the optimal length of
time for an observation period. Some commenters suggested that the
Agencies allow an institution to choose an appropriate observation
period.
Backtesting. The Agencies asked for comments about the potential
burden associated with backtesting to evaluate the accuracy of an
institution's internal model. Commenters generally viewed backtesting
as a useful tool for model validation purposes. Most believed that
backtesting should compare an institution's VAR calculated for internal
risk management purposes (rather than for regulatory capital purposes)
with actual profits and losses. A few commenters, noting the developing
nature of backtesting generally, urged regulators not to prescribe
specific regulations, guidelines, or methodologies for backtesting.
The Agencies also asked for comment about the types of stress tests
institutions should perform as part of their internal risk management
process. Several commenters recognized generally the importance of
stress testing. These and other commenters responded that the Agencies
should allow an institution to choose its methodology. Other commenters
questioned whether a stress testing requirement was necessary.
Specific Risk. The Agencies noted that the internal models approach
requires an institution to add a specific risk capital charge
calculated using the standardized approach if its internal model does
not adequately capture specific risk, and asked what modeling
techniques the Agencies should consider when evaluating an
institution's model for specific risk. While commenters generally
agreed that an institution should integrate specific risk into its
internal model, several objected to using capital charges calculated
under the standardized approach as the benchmark for specific risk
under the internal models approach. A few commenters asked for
clarification about what constitutes sufficient integration of specific
risk into a model to avoid the add-on capital charge. Some commenters
noted that internal models that incorporate specific risk elements are
still in the development stage, and stated that the Agencies should not
include a specific risk requirement in the internal models approach.
The Agencies asked whether they should specifically define the term
``liquid and well-diversified,'' as applied to specific risk in
equities, entitling an institution to a lower capital charge under the
standardized approach. Commenters differed as to the appropriate degree
of specificity. Some preferred a qualitative definition, as proposed,
and others supported a more explicit and objective definition.
Other Issues
Some commenters raised issues not directly addressed in the
Agencies' specific questions on the market risk proposal. One commenter
suggested that an institution could determine internally whether to
classify a debt instrument as qualifying or non-qualifying for purposes
of determining the applicable specific risk weight factor (qualifying
instruments receive a lower specific risk charge than non-qualifying
instruments). Another commenter recommended a zero percent specific
risk charge for debt instruments issued by local and regional
governments. Another recommended a zero percent specific risk charge
for instruments tracking an equity index.
Several commenters said that the proposed qualitative standards for
an institution's risk management system were reasonable. One
institution noted the qualitative standards provided a comprehensive
set of guidelines. Some commenters questioned the marketability of
short-term subordinated debt included as Tier 3 capital. A few
commenters discussed the relationship between market risk and credit
risk, with some arguing that when aggregating capital charges for
credit and market risk the Agencies should permit an institution to
recognize correlations between the two types of risk.
Backtesting Proposal
Together, the Agencies received 17 public comments on the
backtesting proposal. Commenters to that proposal generally supported
backtesting as a useful component of risk management. Several expressed
concern that the proposal was unnecessarily rigid, noting that
backtesting techniques are evolving, and suggested that the Agencies
reexamine backtesting prior to implementation of the final rule. A few
commenters questioned linking backtesting results to capital
requirements. Some commenters expressed the view that the Agencies
should take into account the severity of an exception, not just the
number of exceptions. Other commenters believed that the Agencies
should base capital requirements on an overall evaluation of an
institution's risk management process and not merely on the number of
exceptions. A few commenters suggested that the Agencies retain the
[[Page 47361]]
flexibility to adjust the multiplication factor below three if an
institution's model exhibits superior performance.
Among other specific questions, the Agencies asked about the merits
and problems associated with backtesting hypothetical trading outcomes
(profits and losses) versus backtesting actual trading outcomes.7
Almost all commenters supported using actual trading outcomes for
backtesting purposes rather than hypothetical outcomes. One commenter
supported giving an institution the option of what type of outcomes it
will backtest. Commenters who supported using actual trading outcomes
believed that these results appropriately included such factors as
gains and losses from trading activity, fee income, net interest
income, and management responses to changing portfolio conditions.
Commenters who objected to using hypothetical results noted that costs
associated with creating and operating a system for determining
hypothetical results were significant. Other commenters discussed the
potential burden of requiring an institution to calculate daily profits
and losses with an unreasonable degree of exactness. They noted that
global VARs are calculated by simulating changes in all market factors
and calculating resulting changes in portfolio values. They suggested
letting an institution estimate daily profit and losses using a
consistent, reasonable methodology.
---------------------------------------------------------------------------
\7\ Generally, hypothetical outcomes are trading outcomes that
would result if the trading position as of the end of one business
day went unchanged during the next business day. Hypothetical
outcomes differ from actual outcomes because of the effects of such
items as changes in portfolio composition over the holding period,
fee income, commissions, and income from trading.
---------------------------------------------------------------------------
The Agencies asked for comment on what types of events or regime
shifts (i.e., dramatic changes in market conditions that result in
numerous exceptions in a short period of time for the same reason)
might generate exceptions that do not warrant an increase in an
institution's multiplication factor. Several commenters asserted that
the Agencies should not list the types of regime shifts in advance. Two
commenters suggested that the Agencies should treat any market-wide or
asset-class event affecting a large number of institutions as a regime
shift. Commenters suggested the following examples of regime shifts:
sudden abnormal changes in interest or exchange rates, major political
events, and natural disasters. Some commenters suggested that the
Agencies should take into account an institution's reaction to
unanticipated trading results, such as how it adapts its internal model
to take into account changed conditions. A few commenters stated the
Agencies should not penalize an institution for exceptions after it
adjusts its model.
The Agencies asked about the proposed sample size of 250
independent observations. While several commenters on this question
responded that the proposed sample size was appropriate, some believed
that an institution should have flexibility to increase or decrease the
sample size. A few commenters asserted that all institutions should use
the same sample size.
Finally, the Agencies asked whether to require an institution to
backtest against its VAR measures generated for internal risk
management purposes, or against VAR measures calculated for market risk
capital requirements. Most commenters supported the former approach.
III. Final Rule
The Agencies believe it is important for an institution with
significant market risk to measure its exposure and hold commensurate
amounts of capital. The Agencies support the market risk amendment to
the Accord and are now issuing uniform market risk standards that will
implement that amendment for institutions regulated by the Agencies.
The final rule incorporates a measure for exposure to market risk into
the Agencies' credit risk-based capital standards. By January 1, 1998,
an institution that meets the applicability criteria must use its
internal model to measure its exposure to market risk and hold capital
in support of that exposure. The Agencies concur with commenters that
an institution with significant exposure to market risk can most
accurately measure that risk using detailed information available to
the institution about its particular portfolio processed by its own
risk measurement model. The final rule does not include the proposed
standardized approach for measuring general market risk. The final rule
does retain, however, the standardized approach methodologies for
determining capital charges for specific risk, which an institution
must use as the basis for its specific risk charge for debt and equity
positions in its trading account.
The final rule supplements the existing credit risk-based capital
standards by requiring an affected institution to adjust its risk-based
capital ratio to reflect market risk. Specifically, an institution must
adjust its risk-based capital ratio to take into account the general
market risk of all positions located in its trading account and of
foreign exchange and commodity positions, wherever located.
Additionally, the institution must account for the specific risk of
debt and equity positions located in its trading account. The positions
covered by this final rule (except for foreign exchange positions
outside the trading account and over-the-counter (OTC) derivatives) are
excluded from the credit risk capital charge. Foreign exchange
positions outside the trading account and OTC derivatives are subject
to the market risk capital charge, as well as the credit risk capital
charge.
Thus, the minimum capital charge for an institution that meets the
applicability criteria is its credit risk capital charge as calculated
under the Agencies' credit risk-based capital standards (excluding the
positions previously noted) plus its measure for market risk as
calculated under this final rule. The institution's risk-based capital
ratio adjusted for market risk is its risk-based capital ratio for
purposes of prompt corrective action and other statutory and regulatory
purposes.
Subject to supervisory approval that its internal model and risk
management processes meet the final rule's regulatory criteria, an
institution may choose to comply with the final rule as early as
January 1, 1997. Any institution that voluntarily complies with the
final rule prior to January 1, 1998, must comply with all of its
provisions, except for the backtesting provisions, which apply one year
after the institution begins to comply with the other provisions of the
final rule.
Institutions Subject to the Final Rule (Section 1(b))
The Agencies agree with commenters that all institutions with
significant market risk, regardless of size, should measure their
exposure and hold appropriate levels of capital. Thus, the Agencies
have revised the applicability criteria to eliminate the differential
criteria based on total asset size. The Agencies believe that the
capital requirements are appropriate both for an institution whose
trading activity is large relative to its total assets, and for an
institution with a substantial volume of trading activity.
The final rule applies to any bank or bank holding company whose
trading activity equals 10 percent or more of its total assets, or
whose trading activity equals $1 billion or more.8 For purposes
[[Page 47362]]
of these criteria, an institution's trading activity is defined as the
sum of its trading assets and trading liabilities as reported in its
most recent Consolidated Report of Condition and Income (Call Report)
for a bank, or its most recent Y-9C Report for a bank holding company.
Total assets means quarter-end total assets as most recently reported
by the institution.
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\8\ The Federal Reserve agrees with commenters that since market
risk usually is managed on a consolidated basis at the bank holding
company level, market risk should be measured at that level for
risk-based capital purposes. Thus, the final rule applies to bank
holding companies on a fully consolidated basis. In addition,
because the Accord applies to internationally active banks, the
final rule applies to consolidated banks. The Agencies may monitor
the market risk exposure of institutions on a non-consolidated basis
to ensure that significant imbalances within an organization do not
avoid supervision.
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In addition, on a case-by-case basis, an Agency may require an
institution that does not meet the applicability criteria to comply
with the final rule if the Agency deems it necessary for safety and
soundness purposes, or may exclude an institution that meets the
applicability criteria. For example, an Agency may require an
institution with trading activity less than $1 billion and less than 10
percent of total assets, but with significant foreign exchange exposure
outside of its trading account to comply with the provisions of the
final rule. On the other hand, an Agency may exempt an institution with
trading activity that exceeds 10 percent of its total assets as a
result of accounting, operational, or similar considerations, provided
this does not raise safety and soundness concerns.
An institution that does not meet the applicability criteria may,
subject to supervisory approval, comply voluntarily with the market
risk rule, but only if it complies with all of the final rule's
provisions (e.g., the backtesting requirements, after accumulating
sufficient trading outcomes).
Covered Positions (Section 2(a))
An institution subject to the final rule must hold capital to
support its exposure to general market risk arising from fluctuations
in interest rates, equity prices, foreign exchange rates, and commodity
prices and its exposure to specific risk associated with certain debt
and equity positions. Covered positions include all positions in an
institution's trading account and foreign exchange and commodity
positions throughout the institution (whether or not in the trading
account).
For market risk capital purposes, an institution's trading account
is defined in the instructions to the Call Report. For example, the
trading account includes on- and off-balance-sheet positions in
financial instruments acquired with the intent to resell in order to
profit from short-term price or rate movements (or other price or rate
variations). An institution may include in its measure for general
market risk certain non-trading account instruments that it
deliberately uses to hedge trading positions. Those instruments are not
subject to a specific risk capital charge, but instead, remain subject
to the credit risk capital requirements. An institution may not include
items in, or exclude items from, its trading account to manipulate
associated capital charges. All positions included in the trading
account must be marked to market and reflected in an institution's
earnings statement.
The market risk capital charge applies to all of an institution's
foreign exchange and commodities positions. An institution's foreign
exchange positions include, for each currency, such items as its net
spot position (including ordinary assets and liabilities denominated in
a foreign currency), forward positions, guarantees that are certain to
be called and likely to be unrecoverable, and any other items that
react primarily to changes in exchange rates. An institution may,
subject to supervisory approval, exclude from the market risk measure
any structural positions in foreign currencies. For this purpose,
structural positions include transactions designed to hedge an
institution's capital ratios against the effect of adverse exchange
rate movements on (1) subordinated debt, equity, or minority interests
in consolidated subsidiaries and capital assigned to foreign branches
that are denominated in foreign currencies, and (2) any positions
related to unconsolidated subsidiaries and other items that are
deducted from an institution's capital when calculating its capital
base. An institution's commodity positions include all positions that
react primarily to changes in commodity prices.
Adjustment to the Risk-Based Capital Ratio Calculation (Section 3)
An institution subject to the final rule must measure its market
risk and hold capital on a daily basis to maintain an overall minimum
8.0 percent ratio of total qualifying capital to risk-weighted assets
adjusted for market risk.
Risk-Based Capital Ratio Denominator (Section 3(a))
An institution's risk-based capital ratio denominator equals its
adjusted risk-weighted assets plus its market risk equivalent assets.
Adjusted risk-weighted assets are risk-weighted assets, as determined
under the credit risk-based capital standards, less the risk-weighted
amounts of all covered positions other than foreign exchange positions
outside the trading account and OTC derivatives. Covered positions
(except for foreign exchange positions outside the trading account and
OTC derivatives) are no longer subject to a credit risk capital charge.
An institution's market risk equivalent assets equals the measure for
market risk, as determined under this final rule, multiplied by 12.5
(the reciprocal of the minimum 8.0 percent capital ratio).
Measure for Market Risk (Section 3(a)(2))
The measure for market risk consists of an institution's VAR-based
capital charge plus an add-on capital charge for specific risk.\9\ The
VAR-based capital charge is the larger of either (1) the average VAR
measure for the last 60 business days, calculated under the regulatory
criteria and increased by a multiplication factor of between three and
four; or (2) the previous day's VAR, calculated under the regulatory
criteria but without the multiplication factor. An institution's
multiplication factor is three unless its backtesting results indicate
that a higher factor is appropriate or unless the institution's
supervisor determines that another action is appropriate.
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\9\ The final rule also provides that, on a case-by-case basis,
an Agency may permit an institution to measure de minimis exposures
to market risk using other techniques, provided the exposure is
truly de minimis, the associated risk is adequately measured, and
integration of the exposure into the institution's internal model
would impose an unnecessary regulatory burden.
---------------------------------------------------------------------------
The Agencies believe this comparative approach will result in an
institution holding capital sufficient to cover peak levels of market
volatility. While the Agencies acknowledge some commenters' concerns
that a multiplication factor of three (or higher) imposes excessive
capital charges, the Agencies believe that adjustments in the final
rule to the internal models approach (e.g., requiring only a single
observation period and recognizing cross correlations among risk
categories) result in capital charges that are appropriate, given
existing industry practices. As institutions implement the final rule,
the Agencies will monitor resulting capital charges, will continue to
evaluate the appropriateness of the multiplication factor, and may
consider further refinements or adjustments to the final rule.
[[Page 47363]]
Risk-Based Capital Ratio Numerator (Section 3(b))
An institution's risk-based capital ratio numerator consists of a
combination of core (Tier 1) capital, supplemental (Tier 2) capital\10\
and a third tier of capital (Tier 3), which consists of short-term
subordinated debt that meets certain conditions. Specifically, Tier 3
capital must have an original maturity of at least two years; it must
be unsecured and fully paid up; it must be subject to a lock-in clause
that prevents the issuer from repaying the debt even at maturity if the
issuer's capital ratio is, or with repayment would become, less than
the minimum 8.0 percent risk-based capital ratio; it must not be
redeemable before maturity without the prior approval of the
institution's supervisor; and it must not contain or be covered by any
covenants, terms, or restrictions that may be inconsistent with safe
and sound banking practices. An institution may use Tier 3 capital only
to meet market risk capital requirements.
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\10\ Tier 1 and Tier 2 capital components are discussed in the
Agencies' credit risk capital standards. Generally, Tier 1 includes
common stockholder's equity, noncumulative perpetual preferred
stock, and minority equity interests in consolidated subsidiaries,
less goodwill and other deductions. Bank holding companies may
include certain amounts of cumulative perpetual preferred stock in
Tier 1. Tier 2 includes the allowance for loan and lease losses,
other preferred stock, and subordinated debt with an original
average maturity of at least five years.
---------------------------------------------------------------------------
To determine its risk-based capital ratio numerator, an institution
should first allocate Tier 1 and Tier 2 capital equal to 8.0 percent of
its risk-weighted assets (adjusted for the positions that are no longer
subject to the credit risk rules). Next, the institution should
allocate Tier 1, Tier 2, and Tier 3 capital to support its measure for
market risk. The risk-based capital ratio numerator (i.e., total
qualifying capital), is the sum of Tier 1 capital (whether or not
allocated for credit risk or market risk), Tier 2 capital (whether or
not allocated for credit risk or market risk and subject to certain
limits), and Tier 3 capital (allocated for market risk and subject to
certain limits).
The Agencies continue to believe that Tier 1 capital should
constitute a substantial proportion of an institution's total capital.
Thus, the final rule includes the existing credit risk-based capital
constraints that at least 50 percent of an institution's total
qualifying capital must be Tier 1 capital, and that term subordinated
debt (and intermediate-term preferred stock and related surplus) may
not exceed 50 percent of Tier 1 capital. In addition, the sum of Tier 2
and Tier 3 capital allocated for market risk must not exceed 250
percent of Tier 1 capital allocated for market risk. This requirement
means that an institution must support at least 28.6 percent of its
measure for market risk with Tier 1 capital.
Internal Models (Section 4)
The Agencies recognize that institutions can and will use different
assumptions and modeling techniques and that such differences often
reflect distinct business strategies and approaches to risk management.
For example, an institution may calculate VAR using internal models
based on variance-covariance matrices, historical simulations, Monte
Carlo simulations, or other statistical approaches. In all cases,
however, the model must cover the institution's material risks.\11\
While the Agencies are not specifying modeling parameters for internal
risk management purposes, the final rule does include minimum
qualitative requirements for internal risk management processes, as
well as certain quantitative requirements for the parameters and
assumptions for internal models used to measure market risk exposure
for regulatory capital purposes.
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\11\ For an institution using an externally developed or
outsource risk measurement model, the model may be used for risk-
based capital purposes provided it complies with the requirements of
the final rule, management fully understands the model, the model is
integrated into the institution's daily risk management, and the
institution's overall risk management process is sound.
---------------------------------------------------------------------------
Qualitative Requirements (Section 4(b))
The qualitative requirements reiterate several basic components of
sound risk management. For example, one of the final rule's qualitative
requirements is that an institution must have a risk control unit that
reports directly to senior management and that is independent from
business trading functions. The Agencies expect that a risk control
unit will conduct regular backtests to evaluate the model's accuracy
and stress tests to identify the impact of adverse market events on the
institution's portfolio.
The other qualitative requirements in the final rule are also
elements of sound risk management practices. For example, an
institution must have an internal model that is integrated into its
daily management, must have policies and procedures for conducting
appropriate stress tests and backtests and for responding to the
results of those tests, and must conduct independent reviews of its
risk measurement and management systems at least annually.
The Agencies agree with commenters that an institution should
develop and use stress tests appropriate to its particular situation.
Thus, the final rule does not require specific stress test
methodologies. The Agencies expect an institution to conduct stress
tests that are rigorous and comprehensive and that cover a range of
factors that could create extraordinary losses in a trading portfolio,
or make the control of risk in a portfolio difficult. The Agencies
believe stress tests should be both qualitative and quantitative,
should incorporate both market risk and liquidity aspects of market
disturbances, and should reflect the impact of an event on positions
with linear and non-linear price characteristics. Where stress tests
reveal a particular vulnerability, the institution should take
effective steps to appropriately manage those risks.
An institution's independent review of its risk management process
should include both the activities of business trading units and the
risk control unit. For example, the Agencies expect that an
institution's review would include assessing whether its risk
management system is fully integrated into the daily management process
and whether its risk management system is adequately documented. The
review should evaluate the organizational structure of the risk control
unit and analyze the approval process for risk pricing models and
valuation systems. The review should also consider the scope of market
risks captured by the risk measurement model, the accuracy and
completeness of position data, the verification of the consistency,
timeliness, and reliability of data sources used to run the internal
model, the accuracy and appropriateness of volatility and correlation
assumptions, and the validity of valuation and risk transformation
calculations.
Market Risk Factors (Section 4(c))
The final rule provides that an institution's internal model must
use risk factors that address market risk associated with interest
rates, equity prices, exchange rates, and commodity prices, including
the market risk associated with options in each of these risk
categories. Although an institution has discretion to use market risk
factors that it has determined affect the value of its positions and
the risks to which it is exposed, the Agencies expect an institution to
use sufficient risk factors to cover the risks inherent in its
portfolio.
[[Page 47364]]
For example, the Agencies believe that interest rate risk factors
should correspond to interest rates in each currency in which the
institution has interest-rate-sensitive positions. The risk measurement
system should model the yield curve using one of a number of generally
accepted approaches, such as by estimating forward rates or zero coupon
yields, and should incorporate risk factors to capture spread risk. The
yield curve should be divided into various maturity segments to capture
variation in the volatility of rates along the yield curve. For
material exposures to interest rate movements in the major currencies
and markets, modeling techniques should capture at least six segments
of the yield curve.
The risk measurement system should incorporate risk factors
corresponding to individual foreign currencies in which the
institution's positions are denominated, to each of the equity markets
in which the institution has significant positions (at a minimum, a
risk factor should capture market-wide movements in equity prices), and
to each of the commodity markets in which the institution has
significant positions. Risk factors should measure the volatilities of
rates and prices underlying option positions. An institution with a
large or complex options portfolio should measure the volatilities of
options positions by different maturities. The sophistication and
nature of the modeling techniques should correspond to the level of the
institution's exposure.
Quantitative Requirements (Section 4(d))
While an institution has flexibility in developing the precise
nature of its model for internal risk management purposes, the Agencies
continue to believe that when determining capital charges for exposure
to market risk an institution's VAR measures should meet certain
quantitative requirements. Such requirements are designed to ensure
that an institution with significant market risk holds prudential
levels of capital and that capital charges are sufficiently consistent
across institutions with similar exposures. The Agencies have
considered commenters' concerns that the proposed modeling constraints,
when combined, would result in excessive capital charges. The Agencies
believe that certain of the proposed constraints, such as a 99 percent
(one-tailed) confidence level and a ten-day movement in rates and
prices, are appropriate and therefore they have been retained in the
final rule. However, the Agencies agree with commenters that other
proposed or considered requirements are not necessary. For example, the
Agencies have determined that a dual observation period would
unnecessarily increase regulatory burden without providing a
substantial benefit. Thus, the final rule employs a single observation
period.
The Agencies also agree with commenters that, for regulatory
capital purposes, an institution should be permitted to use models that
recognize cross correlations among risk categories. The final rule
permits an institution to recognize cross correlations. The Agencies
believe this revision eliminates a significant source of rigidity in
the market risk proposal and should result in internal modeling for
capital purposes that is more consistent with observed industry
practice. The Agencies also believe this revision will appropriately
recognize and reward portfolio diversification. These adjustments to
the quantitative requirements are consistent with the final amendment
to the Accord.
The final rule contains the following quantitative requirements for
an institution's VAR measures, upon which regulatory capital
requirements are based:
(1) VAR measures must be computed each business day based on a 99
percent (one-tailed) confidence level of estimated maximum loss.
(2) VAR measures must be based on a price shock equivalent to a
ten-day movement in rates or prices. An institution may adjust VAR
measures (including VAR measures for options) based on shorter periods
to a ten-day standard (e.g., by multiplying by the square root of
time).12 The Agencies do not believe that a price or rate movement
period less than ten days is sufficient to reflect the risk associated
with options positions (or other instruments with non-linear price
characteristics), but recognize that it may be overly burdensome for an
institution to apply a ten-day price or rate movement to such positions
at this time. The Agencies expect an institution with concentrations of
options to make substantive progress in developing a modeling system
that measures the non-linear price characteristics of options positions
(or other instruments with non-linear price characteristics), over a
full ten-day period.
---------------------------------------------------------------------------
\12\ For example, under certain statistical assumptions, an
institution can estimate the ten-day price volatility of an
instrument by multiplying the volatility calculated on one-day
changes by the square root of ten (approximately 3.16).
---------------------------------------------------------------------------
(3) Internal models must include the non-linear price
characteristics of options positions and the sensitivity of the market
value of those positions to changes in the volatility of the option's
underlying rates and prices.
(4) VAR measures must be based on a minimum historical observation
period of at least one year for estimating future price and rate
changes. A model that uses a weighting scheme or other method for the
historical observation period must use an effective observation period
of at least one year. That is, the weighted average time lag of the
individual observations must be at least six months, the figure that
would prevail in an equally weighted one-year observation period.
(5) An institution must update its model data at least once every
three months and more frequently if market conditions warrant.
(6) VAR measures may incorporate empirical correlations (calculated
from historical data on rates and prices) both within broad risk
categories and across broad risk categories, subject to agreement by
the institution's supervisor that the model's system for measuring such
correlation is sound. If an institution's model does not incorporate
empirical correlations across risk categories, then the bank must
calculate the VAR measures used for regulatory capital purposes by
summing the separate VAR measures for the four broad risk categories
(i.e., interest rates, equity prices, foreign exchange rates, and
commodity prices).
The Agencies believe that, taken together, the modeling parameters
are appropriate for regulatory capital purposes and also that they are
compatible, as much as practicable, with existing modeling procedures.
During the examination process, the Agencies will review an
institution's risk management process and internal model to ensure that
the model processes all relevant data and that modeling and risk
management practices conform to the parameters and requirements of the
final rule.13
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\13\ When reviewing an institution's internal model for risk-
based capital purposes, the Agencies may consider reports and
opinions about the accuracy of the model that have been generated by
external auditors or qualified consultants.
---------------------------------------------------------------------------
Backtesting (Section 4(e))
The Agencies have considered commenters' responses to the
backtesting proposal. The Agencies believe backtesting can be a useful
tool for internal model validation, and have determined to include the
backtesting provisions in the final rule, as proposed. An institution
subject to the final rule must perform backtests of its VAR measures as
calculated for internal risk management purposes. The backtests must
compare daily VAR measures
[[Page 47365]]
calibrated to a one-day movement in rates and prices and a 99 percent
(one-tailed) confidence level against the institution's actual daily
net trading profit or loss (trading outcome) for each of the preceding
250 business days. The backtests must be performed once each
quarter.14 Net trading outcomes include such items as fees and
commissions associated with trading activities, as well as changes in
market valuations associated with changing portfolio positions.
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\14\ An institution's obligation to backtest for regulatory
capital purposes does not arise until the institution has been
subject to the final rule for 250 business days (approximately one
year) and, thus, has accumulated the requisite number of
observations to be used in backtesting.
---------------------------------------------------------------------------
An institution must identify the number of occurrences when its net
trading loss (if any) for a particular day exceeds the corresponding
daily VAR measure. In general, an institution's multiplication factor
increases incrementally beginning with five or more exceptions during
the previous 250 business days, and rises to a multiplication factor of
four for an institution with 10 or more exceptions during the period.
While the number of exceptions creates a presumption as to an
institution's multiplication factor, the institution's supervisor may
make other adjustments to the multiplication factor or may take other
appropriate actions. For example, the supervisor may exclude exceptions
that result from regime shifts, such as sudden abnormal changes in
interest rates or exchange rates, major political events, or natural
disasters. The supervisor may also consider such other factors as the
magnitude of an exception (that is, the extent of the difference
between the VAR measure and the actual trading loss), and an
institution's reaction in response to an exception.
The Agencies recognize that backtesting is evolving and acknowledge
commenters' concerns that it may not be appropriate to penalize an
institution by applying a higher multiplication factor if the
institution has refined the accuracy of its model in response to an
exception or has taken other action to improve its risk management
processes. The Agencies emphasize that they will implement the
backtesting requirements of the final rule with significant flexibility
and examiner judgment. The Agencies will continue to monitor industry
progress in developing backtesting methodologies and may consider
adjusting the backtesting requirements in the near future.
Specific Risk (Section 5)
The Agencies agree with the provisions in the final amendment to
the Accord that require an institution to hold capital in support of
the specific risk associated with debt and equity positions in an
institution's trading account. Thus, the final rule provides that an
institution must measure and hold capital in support of specific risk
associated with those positions. The capital charge for specific risk
is determined either by an institution's internal model or by the
standardized risk measurement techniques specified by the Agencies (the
standardized approach).
Standardized Approach
Under the standardized approach, the specific risk charge for debt
positions is calculated by multiplying the current market value of each
net long or short position in a trading account debt instrument by the
appropriate specific risk weighting factor as set forth in the final
rule, based on the identity of the obligor, and in the case of some
instruments such as corporate debt, on the credit rating and remaining
maturity of the instrument. An institution must risk weight derivatives
(e.g., swaps, futures, forwards, or options on certain debt
instruments) according to the relevant underlying instrument. For
example, for a forward contract, an institution must risk weight the
market value of the effective notional amount of the underlying
instrument (or index portfolio). An institution may net long and short
positions in identical debt instruments with exactly the same issuer,
coupon, currency, and maturity. An institution may also offset a
matched position in a derivative instrument and its corresponding
underlying instrument. The specific risk weighting factor for debt
instruments of OECD 15 central governments is zero percent. Other
debt instruments with qualifying ratings (essentially investment grade
corporate securities) receive risk weights ranging from 0.25 percent to
1.6 percent, depending on remaining maturity. Nonqualifying debt
instruments receive a risk weight of 8.0 percent.
---------------------------------------------------------------------------
\15\ The Organization for Economic Cooperation and Development
(OECD) is defined in the credit risk-based capital standards.
---------------------------------------------------------------------------
The specific risk charge for equity positions is based on an
institution's gross equity position for each national market. The gross
equity position is defined as the sum of all long and short equity
positions, including positions arising from derivatives such as equity
swaps, forwards, futures, and options. An institution must risk weight
the current market value of each gross equity position by the
appropriate factor. An institution must risk weight derivatives
according to the relevant underlying equity instrument. An institution
may net long and short positions in identical equity issues or indices
in each national market. An institution may also offset a matched
position in a derivative instrument and its corresponding underlying
instrument.
The specific risk charge is 8.0 percent of the gross equity
position, unless the institution's portfolio is both liquid and well-
diversified, in which case the capital charge is 4.0 percent. A
portfolio is liquid and well-diversified if: (1) it is characterized by
a limited sensitivity to price changes of any single equity or closely
related group of equity issues held in a portfolio; (2) the volatility
of the portfolio's value is not dominated by the volatility of any
individual equity issue or by equity issues from any single industry or
economic sector; (3) it contains a large number of individual equity
positions, with no single position representing a substantial portion
of the portfolio's total market value; and (4) it consists mainly of
issues traded on organized exchanges or in well-established over-the-
counter markets.
For positions in an index comprising a diversified portfolio of
equities, the specific risk charge is 2.0 percent of the net long or
short position in the index. In addition, a 2.0 percent specific risk
charge applies to only one side (long or short) in the case of certain
futures-related arbitrage strategies (for instance, long and short
positions in the same index at different dates or different market
centers, and long and short positions at the same date in different,
but similar indices). Finally, under certain conditions, futures
positions on a broadly-based index that are matched against positions
in the equities comprising the index are subject to a specific risk
charge of 2.0 percent against each side of the transaction.
Internal Models Approach
The final rule permits an institution to use its internal model to
determine capital charges for specific risk if it can demonstrate to
its supervisor that the modeling process adequately addresses elements
of specific risk for debt and/or equity positions. In particular, an
institution may use the model-based estimates of specific risk in place
of the standardized capital charge. However, if the specific risk
component of the institution's VAR measure (when multiplied by the
backtesting multiplication factor, with respect to a
[[Page 47366]]
60-day average VAR figure) is not equal to at least 50 percent of the
specific risk charge resulting from the standardized calculation, then
the institution has a specific risk add-on in the amount of the
difference. For example, if the standardized approach indicates a
specific risk charge of $100, but the institution's 60-day average VAR
figure includes only $10 for specific risk, then the institution has a
specific risk add-on of $20 (that is, 50 percent of $100 minus three
times $10). However, if the 60-day average VAR figure includes $20 from
specific risk, then the institution would have no specific risk add-on
because the VAR-based charge (three times $20) exceeds 50 percent of
$100.
An institution (in conjunction with its supervisor) must separately
determine whether its model incorporates specific risk for debt
positions and equity positions. For instance, if the model addresses
the specific risk of debt positions but not equity positions, then the
institution can use the model-based specific risk charge (subject to
the limitations described earlier) for debt positions, but must use the
full standard specific risk charge for equity positions. If, however,
the model addresses the specific risk of both debt and equity
positions, then the institution must make the comparison based on the
total specific risk figure for debt and equity positions, taking into
account any correlations between the specific risk of debt and equity
positions that are built into the model.
This treatment provides an institution with an incentive to
incorporate specific risk into its internal model, while maintaining an
overall floor on the amount of capital it must hold against specific
risk. The Agencies believe that a minimum requirement for specific risk
is useful, at least for an initial period, since methods for
incorporating specific risk into VAR models are still in a process of
development at many institutions. The Agencies will continue to study
these developments and likely will issue further guidance on these
procedures as institutions implement this final rule in the coming
months.
IV. Regulatory Flexibility Act Analysis
OCC Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act, the
OCC certifies that this final rule will not have a significant impact
on a substantial number of small business entities in accord with the
spirit and purposes of the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.). Accordingly, a regulatory flexibility analysis is not required.
The impact of this final rule on banks regardless of size is expected
to be minimal. Further, the OCC's comparison of the applicability
section of this final rule to Call Report data on all existing banks
shows that application of the rule to small banks will be the rare
exception.
Board Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act, the
Board does not believe this final rule will have a significant impact
on a substantial number of small business entities in accord with the
spirit and purposes of the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.). The Board's comparison of the applicability section of this
final rule to Call Report data on all existing banks shows that
application of the rule to small entities will be the rare exception.
Accordingly, a regulatory flexibility analysis is not required. In
addition, because the risk-based capital standards generally do not
apply to bank holding companies with consolidated assets of less than
$150 million, this rule will not affect such companies.
FDIC Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act (Pub.
L. 96-354, 5 U.S.C. 601 et seq.), it is certified that the final rule
will not have a significant impact on a substantial number of small
entities. The FDIC's comparison of the applicability section of this
final rule to Call Report data on all existing banks shows that
application of the rule to small entities will be the rare exception.
V. Paperwork Reduction Act
OCC Paperwork Reduction Act
The OCC has determined that his final rule does not increase the
regulatory paperwork burden of banking organizations pursuant to the
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.).
Board Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
Ch. 3506; 5 CFR 1320 Appendix A.1), the Board reviewed the proposed
rule under the authority delegated to the Board by the Office of
Management and Budget. No collections of information pursuant to the
Paperwork Reduction Act are contained in the final rule.
FDIC Paperwork Reduction Act
The FDIC has determined that this final rule does not contain any
collections of information as defined by the Paperwork Reduction Act
(44 U.S.C. 3501 et seq.).
VI. OCC Executive Order 12866 Determination
The OCC has determined that this final rule is not a significant
regulatory action under Executive Order 12866.
VII. OCC Unfunded Mandates Reform Act of 1995 Determination
The OCC has determined that this 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, a
budgetary impact statement is not required under section 202 of the
Unfunded Mandates Reform Act of 1995. This final rule will apply only
to a small number of national banks. Moreover, most (if not all) of
those banks already have internal VAR models that measure market risk,
thus reducing this final rule's implementation costs.
List of Subjects
12 CFR Part 3
Administrative practice and procedure, Capital, National banks,
Reporting and recordkeeping requirements, Risk.
12 CFR Part 208
Accounting, Agriculture, Banks, banking, Confidential business
information, Crime, Currency, Federal Reserve System, Mortgages,
Reporting and recordkeeping requirements, Securities.
12 CFR Part 225
Administrative practice and procedure, Banks, banking, Federal
Reserve System, Holding companies, Reporting and recordkeeping
requirements, Securities.
12 CFR Part 325
Administrative practice and procedure, Banks, banking, Capital
adequacy, Reporting and recordkeeping requirements, Savings
associations, State non-member banks.
Office of the Comptroller of the Currency
12 CFR CHAPTER I
Authority and Issuance
For the reasons set out in the joint preamble, part 3 of title 12,
chapter I of the Code of Federal Regulations is amended as follows:
PART 3--[AMENDED]
1. The authority citation for part 3 continues to read as follows:
[[Page 47367]]
Authority: 12 U.S.C. 93a, 161, 1818, 1828(n), 1828 note, 1831n
note, 1835, 3907, and 3909.
2. Section 3.6 is amended by revising paragraph (a) to read as
follows:
Sec. 3.6 Minimum capital ratios.
(a) Risk-based capital ratio. All national banks must have and
maintain the minimum risk-based capital ratio as set forth in appendix
A (and, for certain banks, in appendix B).
* * * * *
3. A new appendix B is added to part 3 to read as follows:
Appendix B to Part 3--Risk-Based Capital Guidelines; Market Risk
Adjustment
Section 1. Purpose, Applicability, Scope, and Effective Date
(a) Purpose. The purpose of this appendix is to ensure that
banks with significant exposure to market risk maintain adequate
capital to support that exposure.1 This appendix supplements
and adjusts the risk-based capital ratio calculations under appendix
A of this part with respect to those banks.
---------------------------------------------------------------------------
\1\ This appendix is based on a framework developed jointly by
supervisory authorities from the countries represented on the Basle
Committee on Banking Supervision and endorsed by the Group of Ten
Central Bank Governors. The framework is described in a Basle
Committee paper entitled ``Amendment to the Capital Accord to
Incorporate Market Risk,'' January 1996.
---------------------------------------------------------------------------
(b) Applicability. (1) This appendix applies to any national
bank whose trading activity 2 (on a worldwide consolidated
basis) equals:
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\2\ Trading activity means the gross sum of trading assets and
liabilities as reported in the bank's most recent quarterly
Consolidated Report of Condition and Income (Call Report).
---------------------------------------------------------------------------
(i) 10 percent or more of total assets; 3 or
---------------------------------------------------------------------------
\3\ Total assets means quarter-end total assets as reported in
the bank's most recent Call Report.
---------------------------------------------------------------------------
(ii) $1 billion or more.
(2) The OCC may apply this appendix to any national bank if the
OCC deems it necessary or appropriate for safe and sound banking
practices.
(3) The OCC may exclude a national bank otherwise meeting the
criteria of paragraph (b)(1) of this section from coverage under
this appendix if it determines the bank meets such criteria as a
consequence of accounting, operational, or similar considerations,
and the OCC deems it consistent with safe and sound banking
practices.
(c) Scope. The capital requirements of this appendix support
market risk associated with a bank's covered positions.
(d) Effective date. This appendix is effective as of January 1,
1997. Compliance is not mandatory until January 1, 1998. Subject to
supervisory approval, a bank may opt to comply with this appendix as
early as January 1, 1997.4
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\4\ A bank that voluntarily complies with the final rule prior
to January 1, 1998, must comply with all of its provisions.
---------------------------------------------------------------------------
Section 2. Definitions
For purposes of this appendix, the following definitions apply:
(a) Covered positions means all positions in a bank's trading
account, and all foreign exchange 5 and commodity positions,
whether or not in the trading account.6 Positions include on-
balance-sheet assets and liabilities and off-balance-sheet items.
Securities subject to repurchase and lending agreements are included
as if they are still owned by the lender.
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\5\ Subject to supervisory review, a bank may exclude structural
positions in foreign currencies from its covered positions.
\6\ The term trading account is defined in the instructions to
the Call Report.
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(b) Market risk mean
FR Doc. 96-22546 Risk-Based Capital Standards: Market Risk
s the risk of loss resulting from movements
in market prices. Market risk consists of general market risk and
specific risk components.
(1) General market risk means changes in the market value of
covered positions resulting from broad market movements, such as
changes in the general level of interest rates, equity prices,
foreign exchange rates, or commodity prices.
(2) Specific risk means changes in the market value of specific
positions due to factors other than broad market movements and
includes such risk as the credit risk of an instrument's issuer.
(c) Tier 1 and Tier 2 capital are the same as defined in
appendix A of this part.
(d) Tier 3 capital is subordinated debt that is unsecured; is
fully paid up; has an original maturity of at least two years; is
not redeemable before maturity without prior approval by the OCC;
includes a lock-in clause precluding payment of either interest or
principal (even at maturity) if the payment would cause the issuing
bank's risk-based capital ratio to fall or remain below the minimum
required under appendix A of this part; and does not contain and is
not covered by any covenants, terms, or restrictions that are
inconsistent with safe and sound banking practices.
(e) Value-at-risk (VAR) means the estimate of the maximum amount
that the value of covered positions could decline during a fixed
holding period within a stated confidence level, measured in
accordance with section 4 of this appendix.
Section 3. Adjustments to the Risk-Based Capital Ratio Calculations
(a) Risk-based capital ratio denominator. A bank subject to this
appendix shall calculate its risk-based capital ratio denominator as
follows:
(1) Adjusted risk-weighted assets. Calculate adjusted risk-
weighted assets, which equals risk-weighted assets (as determined in
accordance with appendix A of this part), excluding the risk-
weighted amounts of all covered positions (except foreign exchange
positions outside the trading account and over-the-counter
derivative positions).7
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\7\ Foreign exchange positions outside the trading account and
all over-the-counter derivative positions, whether or not in the
trading account, must be included in adjusted risk-weighted assets
as determined in appendix A of this part.
---------------------------------------------------------------------------
(2) Measure for market risk. Calculate the measure for market
risk, which equals the sum of the VAR-based capital charge, the
specific risk add-on (if any), and the capital charge for de minimis
exposure (if any).
(i) VAR-based capital charge. The VAR-based capital charge
equals the higher of:
(A) The previous day's VAR measure; or
(B) The average of the daily VAR measures for each of the
preceding 60 business days multiplied by three, except as provided
in section 4(e) of this appendix;
(ii) Specific risk add-on. The specific risk add-on is
calculated in accordance with section 5 of this appendix; and
(iii) Capital charge for de minimis exposure. The capital charge
for de minimis exposure is calculated in accordance with section
4(a) of this appendix.
(3) Market risk equivalent assets. Calculate market risk
equivalent assets by multiplying the measure for market risk (as
calculated in paragraph (a)(2) of this section) by 12.5.
(4) Denominator calculation. Add market risk equivalent assets
(as calculated in paragraph (a)(3) of this section) to adjusted
risk-weighted assets (as calculated in paragraph (a)(1) of this
section). The resulting sum is the bank's risk-based capital ratio
denominator.
(b) Risk-based capital ratio numerator. A bank subject to this
appendix shall calculate its risk-based capital ratio numerator by
allocating capital as follows:
(1) Credit risk allocation. Allocate Tier 1 and Tier 2 capital
equal to 8.0 percent of adjusted risk-weighted assets (as calculated
in paragraph (a)(1) of this section).8
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\8\ A bank may not allocate Tier 3 capital to support credit
risk (as calculated under appendix A).
---------------------------------------------------------------------------
(2) Market risk allocation. Allocate Tier 1, Tier 2, and Tier 3
capital equal to the measure for market risk as calculated in
paragraph (a)(2) of this section. The sum of Tier 2 and Tier 3
capital allocated for market risk must not exceed 250 percent of
Tier 1 capital allocated for market risk. (This requirement means
that Tier 1 capital allocated in this paragraph (b)(2) must equal at
least 28.6 percent of the measure for market risk.)
(3) Restrictions. (i) The sum of Tier 2 capital (both allocated
and excess) and Tier 3 capital (allocated in paragraph (b)(2) of
this section) may not exceed 100 percent of Tier 1 capital (both
allocated and excess).9
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\9\ Excess Tier 1 capital means Tier 1 capital that has not been
allocated in paragraphs (b)(1) and (b)(2) of this section. Excess
Tier 2 capital means Tier 2 capital that has not been allocated in
paragraph (b)(1) and (b)(2) of this section, subject to the
restrictions in paragraph (b)(3) of this section.
---------------------------------------------------------------------------
(ii) Term subordinated debt (and intermediate-term preferred
stock and related surplus) included in Tier 2 capital (both
allocated and excess) may not exceed 50 percent of Tier 1 capital
(both allocated and excess).
(4) Numerator calculation. Add Tier 1 capital (both allocated
and excess), Tier 2 capital (both allocated and excess), and Tier 3
capital (allocated under paragraph (b)(2) of this section). The
resulting sum is the bank's risk-based capital ratio numerator.
Section 4. Internal Models
(a) General. For risk-based capital purposes, a bank subject to
this appendix
[[Page 47368]]
must use its internal model to measure its daily VAR, in accordance
with the requirements of this section.10 The OCC may permit a
bank to use alternative techniques to measure the market risk of de
minimis exposures so long as the techniques adequately measure
associated market risk.
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\10\ A bank's internal model may use any generally accepted
measurement techniques, such as variance-covariance models,
historical simulations, or Monte Carlo simulations. However, the
level of sophistication and accuracy of a bank's internal model must
be commensurate with the nature and size of its covered positions. A
bank that modifies its existing modeling procedures to comply with
the requirements of this appendix for risk-based capital purposes
should, nonetheless, continue to use the internal model it considers
most appropriate in evaluating risks for other purposes.
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(b) Qualitative requirements. A bank subject to this appendix
must have a risk management system that meets the following minimum
qualitative requirements:
(1) The bank must have a risk control unit that reports directly
to senior management and is independent from business trading units.
(2) The bank's internal risk measurement model must be
integrated into the daily management process.
(3) The bank's policies and procedures must identify, and the
bank must conduct, appropriate stress tests and backtests.11
The bank's policies and procedures must identify the procedures to
follow in response to the results of such tests.
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\11\ Stress tests provide information about the impact of
adverse market events on a bank's covered positions. Backtests
provide information about the accuracy of an internal model by
comparing a bank's daily VAR measures to its corresponding daily
trading profits and losses.
---------------------------------------------------------------------------
(4) The bank must conduct independent reviews of its risk
measurement and risk management systems at least annually.
(c) Market risk factors. The bank's internal model must use risk
factors sufficient to measure the market risk inherent in all
covered positions. The risk factors must address interest rate
risk,12 equity price risk, foreign exchange rate risk, and
commodity price risk.
---------------------------------------------------------------------------
\12\ For material exposures in the major currencies and markets,
modeling techniques must capture spread risk and must incorporate
enough segments of the yield curve--at least six--to capture
differences in volatility and less than perfect correlation of rates
along the yield curve.
---------------------------------------------------------------------------
(d) Quantitative requirements. For regulatory capital purposes,
VAR measures must meet the following quantitative requirements:
(1) The VAR measures must be calculated on a daily basis using a
99 percent, one-tailed confidence level with a price shock
equivalent to a ten-business day movement in rates and prices. In
order to calculate VAR measures based on a ten-day price shock, the
bank may either calculate ten-day figures directly or convert VAR
figures based on holding periods other than ten days to the
equivalent of a ten-day holding period (for instance, by multiplying
a one-day VAR measure by the square root of ten).
(2) The VAR measures must be based on an historical observation
period (or effective observation period for a bank using a weighting
scheme or other similar method) of at least one year. The bank must
update data sets at least once every three months or more frequently
as market conditions warrant.
(3) The VAR measures must include the risks arising from the
non-linear price characteristics of options positions and the
sensitivity of the market value of the positions to changes in the
volatility of the underlying rates or prices. A bank with a large or
complex options portfolio must measure the volatility of options
positions by different maturities.
(4) The VAR measures may incorporate empirical correlations
within and across risk categories, provided that the bank's process
for measuring correlations is sound. In the event that the VAR
measures do not incorporate empirical correlations across risk
categories, then the bank must add the separate VAR measures for the
four major risk categories to determine its aggregate VAR measure.
(e) Backtesting. (1) Beginning one year after a bank starts to
comply with this appendix, a bank must conduct backtesting by
comparing each of its most recent 250 business days' actual net
trading profit or loss 13 with the corresponding daily VAR
measures generated for internal risk measurement purposes and
calibrated to a one-day holding period and a 99 percent, one-tailed
confidence level.
---------------------------------------------------------------------------
\13\ Actual net trading profits and losses typically include
such things as realized and unrealized gains and losses on portfolio
positions as well as fee income and commissions associated with
trading activities.
---------------------------------------------------------------------------
(2) Once each quarter, the bank must identify the number of
exceptions, that is, the number of business days for which the
magnitude of the actual daily net trading loss, if any, exceeds the
corresponding daily VAR measure.
(3) A bank must use the multiplication factor indicated in Table
1 of this appendix in determining its capital charge for market risk
under section 3(a)(2)(i)(B) of this appendix until it obtains the
next quarter's backtesting results, unless the OCC determines that a
different adjustment or other action is appropriate.
Table 1.--Multiplication Factor Based on Results of Backtesting
------------------------------------------------------------------------
Multiplication
Number of exceptions factor
------------------------------------------------------------------------
4 or fewer.............................................. 3.00
5....................................................... 3.40
6....................................................... 3.50
7....................................................... 3.65
8....................................................... 3.75
9....................................................... 3.85
10 or more.............................................. 4.00
------------------------------------------------------------------------
Section 5. Specific Risk
(a) Specific risk add-on. For purposes of section 3(a)(2)(ii) of
this appendix, a bank's specific risk add-on equals the standard
specific risk capital charge calculated under paragraph (c) of this
section. If, however, a bank can demonstrate to the OCC that its
internal model measures the specific risk of covered debt and/or
equity positions and that those measures are included in the VAR-
based capital charge in section 3(a)(2)(i) of this appendix, then
the bank may reduce or eliminate its specific risk add-on under this
section. The determination as to whether a model incorporates
specific risk must be made separately for covered debt and equity
positions.
(1) If a model includes the specific risk of covered debt
positions but not covered equity positions (or vice versa), then the
bank can reduce its specific risk charge for the included positions
under paragraph (b) of this section. The specific risk charge for
the positions not included equals the standard specific risk capital
charge under paragraph (c) of this section.
(2) If a model addresses the specific risk of both covered debt
and equity positions, then the bank can reduce its specific risk
charge for both covered debt and equity positions under paragraph
(b) of this section. In this case, the comparison described in
paragraph (b) of this section must be based on the total VAR-based
figure for the specific risk of debt and equity positions, taking
into account any correlations that are built into the model.
(b) VAR-based specific risk capital charge. In all cases where a
bank measures specific risk in its internal model, the total capital
charge for specific risk (i.e., the VAR-based specific risk capital
charge plus the specific risk add-on) must equal at least 50 percent
of the standard specific risk capital charge (this amount is the
minimum specific risk charge).
(1) If the portion of a bank's VAR measure that is attributable
to specific risk (multiplied by the bank's multiplication factor if
required in section 3(a)(2) of this appendix) is greater than or
equal to the minimum specific risk charge, then the bank has no
specific risk add-on and its capital charge for specific risk is the
portion included in the VAR measure.
(2) If the portion of a bank's VAR measure that is attributable
to specific risk (multiplied by the bank's multiplication factor if
required in section 3(a)(2) of this appendix) is less than the
minimum specific risk charge, then the bank's specific risk add-on
is the difference between the minimum specific risk charge and the
specific risk portion of the VAR measure (multiplied by the bank's
multiplication factor if required in section 3(a)(2) of this
appendix).
(c) Standard specific risk capital charge. The standard specific
risk capital charge equals the sum of the components for covered
debt and equity positions as follows:
(1) Covered debt positions. (i) For purposes of this section 5,
covered debt positions means fixed-rate or floating-rate debt
instruments located in the trading account and instruments located
in the trading account with values that react primarily to changes
in interest rates, including certain non-convertible preferred
stock, convertible bonds, and instruments subject to repurchase and
lending agreements. Also included are derivatives (including written
and purchased options) for which the underlying instrument is a
covered debt instrument that is subject to a non-zero specific risk
capital charge.
(A) For covered debt positions that are derivatives, a bank must
risk-weight (as
[[Page 47369]]
described in paragraph (c)(1)(iii) of this section) the market value
of the effective notional amount of the underlying debt instrument
or index portfolio. Swaps must be included as the notional position
in the underlying debt instrument or index portfolio, with a
receiving side treated as a long position and a paying side treated
as a short position; and
(B) For covered debt positions that are options, whether long or
short, a bank must risk-weight (as described in paragraph
(c)(1)(iii) of this section) the market value of the effective
notional amount of the underlying debt instrument or index
multiplied by the option's delta.
(ii) A bank may net long and short covered debt positions
(including derivatives) in identical debt issues or indices.
(iii) A bank must multiply the absolute value of the current
market value of each net long or short covered debt position by the
appropriate specific risk weighting factor indicated in Table 2 of
this appendix. The specific risk capital charge component for
covered debt positions is the sum of the weighted values.
Table 2--Specific Risk Weighting Factors for Covered Debt Positions
------------------------------------------------------------------------
Weighting
Remaining maturity factor
Category (contractual) (in
percent)
------------------------------------------------------------------------
Government \1\...................... N/A.................... 0.00
Qualifying \2\...................... 6 months or less....... 0.25
Over 6 months to 24 1.00
months.
Over 24 months......... 1.60
Other \3\........................... N/A.................... 8.00
------------------------------------------------------------------------
\1\ The ``government'' category includes all debt instruments of central
governments of OECD countries (as defined in appendix A of this part)
including bonds, Treasury bills, and other short-term instruments, as
well as local currency instruments of non-OECD central governments to
the extent the bank has liabilities booked in that currency.
\2\ The ``qualifying'' category includes debt instruments of U.S.
government-sponsored agencies (as defined in appendix A of this part),
general obligation debt instruments issued by states and other
political subdivisions of OECD countries, multilateral development
banks (as defined in appendix A of this part), and debt instruments
issued by U.S. depository institutions or OECD-banks (as defined in
appendix A of this part) that do not qualify as capital of the issuing
institution. This category also includes other debt instruments,
including corporate debt and revenue instruments issued by states and
other political subdivisions of OECD countries, that are: (1) Rated
investment grade by at least two nationally recognized credit rating
services; (2) rated investment grade by one nationally recognized
credit rating agency and not rated less than investment grade by any
other credit rating agency; or (3) unrated, but deemed to be of
comparable investment quality by the reporting bank and the issuer has
instruments listed on a recognized stock exchange, subject to review
by the OCC.
\3\ The ``other'' category includes debt instruments that are not
included in the government or qualifying categories.
(2) Covered equity positions. (i) For purposes of this section
5, covered equity positions means equity instruments located in the
trading account and instruments located in the trading account with
values that react primarily to changes in equity prices, including
voting or non-voting common stock, certain convertible bonds, and
commitments to buy or sell equity instruments. Also included are
derivatives (including written and purchased options) for which the
underlying is a covered equity position.
(A) For covered equity positions that are derivatives, a bank
must risk weight (as described in paragraph (c)(2)(iii) of this
section) the market value of the effective notional amount of the
underlying equity instrument or equity portfolio. Swaps must be
included as the notional position in the underlying equity
instrument or index portfolio, with a receiving side treated as a
long position and a paying side treated as a short position; and
(B) For covered equity positions that are options, whether long
or short, a bank must risk weight (as described in paragraph
(c)(2)(iii) of this section) the market value of the effective
notional amount of the underlying equity instrument or index
multiplied by the option's delta.
(ii) A bank may net long and short covered equity positions
(including derivatives) in identical equity issues or equity indices
in the same market.14
---------------------------------------------------------------------------
\14\ A bank may also net positions in depository receipts
against an opposite position in the underlying equity or identical
equity in different markets, provided that the bank includes the
costs of conversion.
---------------------------------------------------------------------------
(iii)(A) A bank must multiply the absolute value of the current
market value of each net long or short covered equity position by a
risk weighting factor of 8.0 percent, or by 4.0 percent if the
equity is held in a portfolio that is both liquid and well-
diversified.15 For covered equity positions that are index
contracts comprising a well-diversified portfolio of equity
instruments, the net long or short position is multiplied by a risk
weighting factor of 2.0 percent.
---------------------------------------------------------------------------
\15\ A portfolio is liquid and well-diversified if: (1) It is
characterized by a limited sensitivity to price changes of any
single equity issue or closely related group of equity issues held
in the portfolio; (2) the volatility of the portfolio's value is not
dominated by the volatility of any individual equity issue or by
equity issues from any single industry or economic sector; (3) it
contains a large number of individual equity positions, with no
single position representing a substantial portion of the
portfolio's total market value; and (4) it consists mainly of issues
traded on organized exchanges or in well-established over-the-
counter markets.
---------------------------------------------------------------------------
(B) For covered equity positions from the following futures-
related arbitrage strategies, a bank may apply a 2.0 percent risk
weighting factor to one side (long or short) of each position with
the opposite side exempt from charge:
(1) Long and short positions in exactly the same index at
different dates or in different market centers; or
(2) Long and short positions in index contracts at the same date
in different but similar indices.
(C) For futures contracts on broadly-based indices that are
matched by offsetting positions in a basket of stocks comprising the
index, a bank may apply a 2.0 percent risk weighting factor to the
futures and stock basket positions (long and short), provided that
such trades are deliberately entered into and separately controlled,
and that the basket of stocks comprises at least 90 percent of the
capitalization of the index.
(iv) The specific risk capital charge component for covered
equity positions is the sum of the weighted values.
Section 6. Reservation of Authority
The OCC reserves the authority to modify the application of any
of the provisions in this appendix to any bank, upon reasonable
justification.
Dated: August 6, 1996.
Eugene A. Ludwig,
Comptroller of the Currency.
Federal Reserve System
12 CFR CHAPTER II
For the reasons set out in the joint preamble, parts 208 and 225 of
title 12 of chapter II of the Code of Federal Regulations are amended
as follows:
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, 78l(b), 78l(g),
78l(i), 78o-4(c)(5), 78q, 78q-1, and 78w; 31 U.S.C. 5318; 42 U.S.C.
4012a, 4104a, 4104b, 4106, and 4128.
2. Section 208.13 is revised to read as follows:
Sec. 208.13 Capital Adequacy.
The standards and guidelines by which the capital adequacy of state
member banks will be evaluated by the Board are set forth in appendix A
and appendix E for risk-based capital purposes, and, with respect to
the ratios relating capital to total assets, in appendix B to part 208
and in appendix B to the Board's Regulation Y, 12 CFR part 225.
3. Appendix A is amended in the introductory text by adding a new
paragraph after the second undesignated paragraph to read as follows:
[[Page 47370]]
Appendix A to Part 208--Capital Adequacy Guidelines for State Member
Banks; Risk Based Measure
* * * * *
In addition, when certain banks that engage in trading activities
calculate their risk-based capital ratio under this appendix A, they
must also refer to appendix E of this part, which incorporates capital
charges for certain market risks into the risk-based capital ratio.
When calculating their risk-based capital ratio under this appendix A,
such banks are required to refer to appendix E of this part for
supplemental rules to determine qualifying and excess capital,
calculate risk-weighted assets, calculate market risk equivalent
assets, and calculate risk-based capital ratios adjusted for market
risk.
* * * * *
4. A new appendix E is added to read as follows:
Appendix E to Part 208--Capital Adequacy Guidelines for State Member
Banks; Market Risk Measure
Section 1. Purpose, Applicability, Scope, and Effective Date
(a) Purpose. The purpose of this appendix is to ensure that
banks with significant exposure to market risk maintain adequate
capital to support that exposure.1 This appendix supplements
and adjusts the risk-based capital ratio calculations under appendix
A of this part with respect to those banks.
---------------------------------------------------------------------------
\1\ This appendix is based on a framework developed jointly by
supervisory authorities from the countries represented on the Basle
Committee on Banking Supervision and endorsed by the Group of Ten
Central Bank Governors. The framework is described in a Basle
Committee paper entitled ``Amendment to the Capital Accord to
Incorporate Market Risk,'' January 1996.
---------------------------------------------------------------------------
(b) Applicability. (1) This appendix applies to any insured
state member bank whose trading activity 2 (on a worldwide
consolidated basis) equals:
---------------------------------------------------------------------------
\2\ Trading activity means the gross sum of trading assets and
liabilities as reported in the bank's most recent quarterly
Consolidated Report of Condition and Income (Call Report).
---------------------------------------------------------------------------
(i) 10 percent or more of total assets; 3 or
---------------------------------------------------------------------------
\3\ Total assets means quarter-end total assets as reported in
the bank's most recent Call Report.
---------------------------------------------------------------------------
(ii) $1 billion or more.
(2) The Federal Reserve may additionally apply this appendix to
any insured state member bank if the Federal Reserve deems it
necessary or appropriate for safe and sound banking practices.
(3) The Federal Reserve may exclude an insured state member bank
otherwise meeting the criteria of paragraph (b)(1) of this section
from coverage under this appendix if it determines the bank meets
such criteria as a consequence of accounting, operational, or
similar considerations, and the Federal Reserve deems it consistent
with safe and sound banking practices.
(c) Scope. The capital requirements of this appendix support
market risk associated with a bank's covered positions.
(d) Effective date. This appendix is effective as of January 1,
1997. Compliance is not mandatory until January 1, 1998. Subject to
supervisory approval, a bank may opt to comply with this appendix as
early as January 1, 1997.4
---------------------------------------------------------------------------
\4\ A bank that voluntarily complies with the final rule prior
to January 1, 1998, must comply with all of its provisions.
---------------------------------------------------------------------------
Section 2. Definitions
For purposes of this appendix, the following definitions apply:
(a) Covered positions means all positions in a bank's trading
account, and all foreign exchange 5 and commodity positions,
whether or not in the trading account.6 Positions include on-
balance-sheet assets and liabilities and off-balance-sheet items.
Securities subject to repurchase and lending agreements are included
as if they are still owned by the lender.
---------------------------------------------------------------------------
\5\ Subject to supervisory review, a bank may exclude structural
positions in foreign currencies from its covered positions.
\6\ The term trading account is defined in the instructions to
the Call Report.
---------------------------------------------------------------------------
(b) Market risk means the risk of loss resulting from movements
in market prices. Market risk consists of general market risk and
specific risk components.
(1) General market risk means changes in the market value of
covered positions resulting from broad market movements, such as
changes in the general level of interest rates, equity prices,
foreign exchange rates, or commodity prices.
(2) Specific risk means changes in the market value of specific
positions due to factors other than broad market movements and
includes such risk as the credit risk of an instrument's issuer.
(c) Tier 1 and Tier 2 capital are defined in appendix A of this
part.
(d) Tier 3 capital is subordinated debt that is unsecured; is
fully paid up; has an original maturity of at least two years; is
not redeemable before maturity without prior approval by the Federal
Reserve; includes a lock-in clause precluding payment of either
interest or principal (even at maturity) if the payment would cause
the issuing bank's risk-based capital ratio to fall or remain below
the minimum required under appendix A of this part; and does not
contain and is not covered by any covenants, terms, or restrictions
that are inconsistent with safe and sound banking practices.
(e) Value-at-risk (VAR) means the estimate of the maximum amount
that the value of covered positions could decline during a fixed
holding period within a stated confidence level, measured in
accordance with section 4 of this appendix.
Section 3. Adjustments to the Risk-Based Capital Ratio Calculations
(a) Risk-based capital ratio denominator. A bank subject to this
appendix shall calculate its risk-based capital ratio denominator as
follows:
(1) Adjusted risk-weighted assets. Calculate adjusted risk-
weighted assets, which equals risk-weighted assets (as determined in
accordance with appendix A of this part), excluding the risk-
weighted amounts of all covered positions (except foreign exchange
positions outside the trading account and over-the-counter
derivative positions).7
---------------------------------------------------------------------------
\7\ Foreign exchange positions outside the trading account and
all over-the-counter derivative positions, whether or not in the
trading account, must be included in adjusted risk weighted assets
as determined in appendix A of this part.
---------------------------------------------------------------------------
(2) Measure for market risk. Calculate the measure for market
risk, which equals the sum of the VAR-based capital charge, the
specific risk add-on (if any), and the capital charge for de minimis
exposures (if any).
(i) VAR-based capital charge. The VAR-based capital charge
equals the higher of:
(A) The previous day's VAR measure; or
(B) The average of the daily VAR measures for each of the
preceding 60 business days multiplied by three, except as provided
in section 4(e) of this appendix;
(ii) Specific risk add-on. The specific risk add-on is
calculated in accordance with section 5 of this appendix; and
(iii) Capital charge for de minimis exposure. The capital charge
for de minimis exposure is calculated in accordance with section
4(a) of this appendix.
(3) Market risk equivalent assets. Calculate market risk
equivalent assets by multiplying the measure for market risk (as
calculated in paragraph (a)(2) of this section) by 12.5.
(4) Denominator calculation. Add market risk equivalent assets
(as calculated in paragraph (a)(3) of this section) to adjusted
risk-weighted assets (as calculated in paragraph (a)(1) of this
section). The resulting sum is the bank's risk-based capital ratio
denominator.
(b) Risk-based capital ratio numerator. A bank subject to this
appendix shall calculate its risk-based capital ratio numerator by
allocating capital as follows:
(1) Credit risk allocation. Allocate Tier 1 and Tier 2 capital
equal to 8.0 percent of adjusted risk-weighted assets (as calculated
in paragraph (a)(1) of this section).8
---------------------------------------------------------------------------
\8\ A bank may not allocate Tier 3 capital to support credit
risk (as calculated under appendix A of this part).
---------------------------------------------------------------------------
(2) Market risk allocation. Allocate Tier 1, Tier 2, and Tier 3
capital equal to the measure for market risk as calculated in
paragraph (a)(2) of this section. The sum of Tier 2 and Tier 3
capital allocated for market risk must not exceed 250 percent of
Tier 1 capital allocated for market risk. (This requirement means
that Tier 1 capital allocated in this paragraph (b)(2) must equal at
least 28.6 percent of the measure for market risk.)
(3) Restrictions. (i) The sum of Tier 2 capital (both allocated
and excess) and Tier 3 capital (allocated in paragraph (b)(2) of
this section) may not exceed 100 percent of Tier 1 capital (both
allocated and excess).9
---------------------------------------------------------------------------
\9\ Excess Tier 1 capital means Tier 1 capital that has not been
allocated in paragraphs (b)(1) and (b)(2) of this section. Excess
Tier 2 capital means Tier 2 capital that has not been allocated in
paragraph (b)(1) and (b)(2) of this section, subject to the
restrictions in paragraph (b)(3) of this section.
---------------------------------------------------------------------------
(ii) Term subordinated debt (and intermediate-term preferred
stock and related
[[Page 47371]]
surplus) included in Tier 2 capital (both allocated and excess) may
not exceed 50 percent of Tier 1 capital (both allocated and excess).
(4) Numerator calculation. Add Tier 1 capital (both allocated
and excess), Tier 2 capital (both allocated and excess), and Tier 3
capital (allocated under paragraph (b)(2) of this section). The
resulting sum is the bank's risk-based capital ratio numerator.
Section 4. Internal Models.
(a) General. For risk-based capital purposes, a bank subject to
this appendix must use its internal model to measure its daily VAR,
in accordance with the requirements of this section.10 The
Federal Reserve may permit a bank to use alternative techniques to
measure the market risk of de minimis exposures so long as the
techniques adequately measure associated market risk.
---------------------------------------------------------------------------
\10\ A bank's internal model may use any generally accepted
measurement techniques, such as variance-covariance models,
historical simulations, or Monte Carlo simulations. However, the
level of sophistication and accuracy of a bank's internal model must
be commensurate with the nature and size of its covered positions. A
bank that modifies its existing modeling procedures to comply with
the requirements of this appendix for risk-based capital purposes
should, nonetheless, continue to use the internal model it considers
most appropriate in evaluating risks for other purposes.
---------------------------------------------------------------------------
(b) Qualitative requirements. A bank subject to this appendix
must have a risk management system that meets the following minimum
qualitative requirements:
(1) The bank must have a risk control unit that reports directly
to senior management and is independent from business trading units.
(2) The bank's internal risk measurement model must be
integrated into the daily management process.
(3) The bank's policies and procedures must identify, and the
bank must conduct, appropriate stress tests and backtests.11
The bank's policies and procedures must identify the procedures to
follow in response to the results of such tests.
---------------------------------------------------------------------------
\11\ Stress tests provide information about the impact of
adverse market events on a bank's covered positions. Backtests
provide information about the accuracy of an internal model by
comparing a bank's daily VAR measures to its corresponding daily
trading profits and losses.
---------------------------------------------------------------------------
(4) The bank must conduct independent reviews of its risk
measurement and risk management systems at least annually.
(c) Market risk factors. The bank's internal model must use risk
factors sufficient to measure the market risk inherent in all
covered positions. The risk factors must address interest rate
risk,12 equity price risk, foreign exchange rate risk, and
commodity price risk.
---------------------------------------------------------------------------
\12\ For material exposures in the major currencies and markets,
modeling techniques must capture spread risk and must incorporate
enough segments of the yield curve--at least six--to capture
differences in volatility and less than perfect correlation of rates
along the yield curve.
---------------------------------------------------------------------------
(d) Quantitative requirements. For regulatory capital purposes,
VAR measures must meet the following quantitative requirements:
(1) The VAR measures must be calculated on a daily basis using a
99 percent, one-tailed confidence level with a price shock
equivalent to a ten-business day movement in rates and prices. In
order to calculate VAR measures based on a ten-day price shock, the
bank may either calculate ten-day figures directly or convert VAR
figures based on holding periods other than ten days to the
equivalent of a ten-day holding period (for instance, by multiplying
a one-day VAR measure by the square root of ten).
(2) The VAR measures must be based on an historical observation
period (or effective observation period for a bank using a weighting
scheme or other similar method) of at least one year. The bank must
update data sets at least once every three months or more frequently
as market conditions warrant.
(3) The VAR measures must include the risks arising from the
non-linear price characteristics of options positions and the
sensitivity of the market value of the positions to changes in the
volatility of the underlying rates or prices. A bank with a large or
complex options portfolio must measure the volatility of options
positions by different maturities.
(4) The VAR measures may incorporate empirical correlations
within and across risk categories, provided that the bank's process
for measuring correlations is sound. In the event that the VAR
measures do not incorporate empirical correlations across risk
categories, then the bank must add the separate VAR measures for the
four major risk categories to determine its aggregate VAR measure.
(e) Backtesting. (1) Beginning one year after a bank starts to
comply with this appendix, a bank must conduct backtesting by
comparing each of its most recent 250 business days' actual net
trading profit or loss 13 with the corresponding daily VAR
measures generated for internal risk measurement purposes and
calibrated to a one-day holding period and a 99 percent, one-tailed
confidence level.
---------------------------------------------------------------------------
\13\ Actual net trading profits and losses typically include
such things as realized and unrealized gains and losses on portfolio
positions as well as fee income and commissions associated with
trading activities.
---------------------------------------------------------------------------
(2) Once each quarter, the bank must identify the number of
exceptions, that is, the number of business days for which the
magnitude of the actual daily net trading loss, if any, exceeds the
corresponding daily VAR measure.
(3) A bank must use the multiplication factor indicated in Table
1 of this appendix in determining its capital charge for market risk
under section 3(a)(2)(i)(B) of this appendix until it obtains the
next quarter's backtesting results, unless the Federal Reserve
determines that a different adjustment or other action is
appropriate.
Table 1.--Multiplication Factor Based on Results of Backtesting
------------------------------------------------------------------------
Multiplication
Number of exceptions factor
------------------------------------------------------------------------
4 or fewer.............................................. 3.00
5....................................................... 3.40
6....................................................... 3.50
7....................................................... 3.65
8....................................................... 3.75
9....................................................... 3.85
10 or more.............................................. 4.00
------------------------------------------------------------------------
Section 5. Specific Risk
(a) Specific risk add-on. For purposes of section 3(a)(2)(ii) of
this appendix, a bank's specific risk add-on equals the standard
specific risk capital charge calculated under paragraph (c) of this
section. If, however, a bank can demonstrate to the Federal Reserve
that its internal model measures the specific risk of covered debt
and/or equity positions and that those measures are included in the
VAR-based capital charge in section 3(a)(2)(i) of this appendix,
then the bank may reduce or eliminate its specific risk add-on under
this section. The determination as to whether a model incorporates
specific risk must be made separately for covered debt and equity
positions.
(1) If a model includes the specific risk of covered debt
positions but not covered equity positions (or vice versa), then the
bank can reduce its specific risk charge for the included positions
under paragraph (b) of this section. The specific risk charge for
the positions not included equals the standard specific risk capital
charge under paragraph (c) of this section.
(2) If a model addresses the specific risk of both covered debt
and equity positions, then the bank can reduce its specific risk
charge for both covered debt and equity positions under paragraph
(b) of this section. In this case, the comparison described in
paragraph (b) of this section must be based on the total VAR-based
figure for the specific risk of debt and equity positions, taking
into account any correlations that are built into the model.
(b) VAR-based specific risk capital charge. In all cases where a
bank measures specific risk in its internal model, the total capital
charge for specific risk (i.e., the VAR-based specific risk capital
charge plus the specific risk add-on) must equal at least 50 percent
of the standard specific risk capital charge (this amount is the
minimum specific risk charge).
(1) If the portion of a bank's VAR measure that is attributable
to specific risk (multiplied by the bank's multiplication factor if
required in section 3(a)(2) of this appendix) is greater than or
equal to the minimum specific risk charge, then the bank has no
specific risk add-on and its capital charge for specific risk is the
portion included in the VAR measure.
(2) If the portion of a bank's VAR measure that is attributable
to specific risk (multiplied by the bank's multiplication factor if
required in section 3(a)(2) of this appendix) is less than the
minimum specific risk charge, then the bank's specific risk add-on
is the difference between the minimum specific risk charge and the
specific risk portion of the VAR measure (multiplied by the bank's
multiplication factor if required in section 3(a)(2) of this
appendix).
[[Page 47372]]
(c) Standard specific risk capital charge. The standard specific
risk capital charge equals the sum of the components for covered
debt and equity positions as follows:
(1) Covered debt positions. (i) For purposes of this section 5,
covered debt positions means fixed-rate or floating-rate debt
instruments located in the trading account and instruments located
in the trading account with values that react primarily to changes
in interest rates, including certain non-convertible preferred
stock, convertible bonds, and instruments subject to repurchase and
lending agreements. Also included are derivatives (including written
and purchased options) for which the underlying instrument is a
covered debt instrument that is subject to a non-zero specific risk
capital charge.
(A) For covered debt positions that are derivatives, a bank must
risk-weight (as described in paragraph (c)(1)(iii) of this section)
the market value of the effective notional amount of the underlying
debt instrument or index portfolio. Swaps must be included as the
notional position in the underlying debt instrument or index
portfolio, with a receiving side treated as a long position and a
paying side treated as a short position; and
(B) For covered debt positions that are options, whether long or
short, a bank must risk-weight (as described in paragraph
(c)(1)(iii) of this section) the market value of the effective
notional amount of the underlying debt instrument or index
multiplied by the option's delta.
(ii) A bank may net long and short covered debt positions
(including derivatives) in identical debt issues or indices.
(iii) A bank must multiply the absolute value of the current
market value of each net long or short covered debt position by the
appropriate specific risk weighting factor indicated in Table 2 of
this appendix. The specific risk capital charge component for
covered debt positions is the sum of the weighted values.
Table 2.--Specific Risk Weighting Factors for Covered Debt Positions
------------------------------------------------------------------------
Weighting
Remaining maturity factor
Category (contractual) (in
percent)
------------------------------------------------------------------------
Government.......................... N/A.................... 0.00
Qualifying.......................... 6 months or less....... 0.25
Over 6 months to 24 1.00
months.
Over 24 months......... 1.60
Other............................... N/A.................... 8.00
------------------------------------------------------------------------
(A) The government category includes all debt instruments of
central governments of OECD-based countries 14 including bonds,
Treasury bills, and other short-term instruments, as well as local
currency instruments of non-OECD central governments to the extent
the bank has liabilities booked in that currency.
---------------------------------------------------------------------------
\14\ Organization for Economic Cooperation and Development
(OECD)-based countries is defined in appendix A of this part.
---------------------------------------------------------------------------
(B) The qualifying category includes debt instruments of U.S.
government-sponsored agencies, general obligation debt instruments
issued by states and other political subdivisions of OECD-based
countries, multilateral development banks, and debt instruments
issued by U.S. depository institutions or OECD-banks that do not
qualify as capital of the issuing institution.15 This category
also includes other debt instruments, including corporate debt and
revenue instruments issued by states and other political
subdivisions of OECD countries, that are:
---------------------------------------------------------------------------
\15\ U.S. government-sponsored agencies, multilateral
development banks, and OECD banks are defined in appendix A of this
part.
---------------------------------------------------------------------------
(1) Rated investment-grade by at least two nationally recognized
credit rating services;
(2) Rated investment-grade by one nationally recognized credit
rating agency and not rated less than investment-grade by any other
credit rating agency; or
(3) Unrated, but deemed to be of comparable investment quality
by the reporting bank and the issuer has instruments listed on a
recognized stock exchange, subject to review by the Federal Reserve.
(C) The other category includes debt instruments that are not
included in the government or qualifying categories.
(2) Covered equity positions. (i) For purposes of this section
5, covered equity positions means equity instruments located in the
trading account and instruments located in the trading account with
values that react primarily to changes in equity prices, including
voting or non-voting common stock, certain convertible bonds, and
commitments to buy or sell equity instruments. Also included are
derivatives (including written and purchased options) for which the
underlying is a covered equity position.
(A) For covered equity positions that are derivatives, a bank
must risk weight (as described in paragraph (c)(2)(iii) of this
section) the market value of the effective notional amount of the
underlying equity instrument or equity portfolio. Swaps must be
included as the notional position in the underlying equity
instrument or index portfolio, with a receiving side treated as a
long position and a paying side treated as a short position; and
(B) For covered equity positions that are options, whether long
or short, a bank must risk weight (as described in paragraph
(c)(2)(iii) of this section) the market value of the effective
notional amount of the underlying equity instrument or index
multiplied by the option's delta.
(ii) A bank may net long and short covered equity positions
(including derivatives) in identical equity issues or equity indices
in the same market.16
---------------------------------------------------------------------------
\16\ A bank may also net positions in depository receipts
against an opposite position in the underlying equity or identical
equity in different markets, provided that the bank includes the
costs of conversion.
---------------------------------------------------------------------------
(iii)(A) A bank must multiply the absolute value of the current
market value of each net long or short covered equity position by a
risk weighting factor of 8.0 percent, or by 4.0 percent if the
equity is held in a portfolio that is both liquid and well-
diversified.17 For covered equity positions that are index
contracts comprising a well-diversified portfolio of equity
instruments, the net long or short position is multiplied by a risk
weighting factor of 2.0 percent.
---------------------------------------------------------------------------
\17\ A portfolio is liquid and well-diversified if: (1) It is
characterized by a limited sensitivity to price changes of any
single equity issue or closely related group of equity issues held
in the portfolio; (2) the volatility of the portfolio's value is not
dominated by the volatility of any individual equity issue or by
equity issues from any single industry or economic sector; (3) it
contains a large number of individual equity positions, with no
single position representing a substantial portion of the
portfolio's total market value; and (4) it consists mainly of issues
traded on organized exchanges or in well-established over-the-
counter markets.
---------------------------------------------------------------------------
(B) For covered equity positions from the following futures-
related arbitrage strategies, a bank may apply a 2.0 percent risk
weighting factor to one side (long or short) of each position with
the opposite side exempt from charge, subject to review by the
Federal Reserve:
(1) Long and short positions in exactly the same index at
different dates or in different market centers; or
(2) Long and short positions in index contracts at the same date
in different but similar indices.
(C) For futures contracts on broadly-based indices that are
matched by offsetting positions in a basket of stocks comprising the
index, a bank may apply a 2.0 percent risk weighting factor to the
futures and stock basket positions (long and short), provided that
such trades are deliberately entered into and separately controlled,
and that the basket of stocks comprises at least 90 percent of the
capitalization of the index.
(iv) The specific risk capital charge component for covered
equity positions is the sum of the weighted values.
PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL
(REGULATION Y)
1. The authority citation for part 225 continues to read as
follows:
Authority: 12 U.S.C. 1817(j)(13), 1818, 1831i, 1831p-1,
1843(c)(8), 1844(b), 1972(l), 3106, 3108, 3310, 3331-3351, 3907, and
3909.
2. Appendix A is amended in the introductory text, by adding a new
paragraph after the second undesignated paragraph to read as follows:
Appendix A to Part 225--Capital Adequacy Guidelines for Bank Holding
Companies: Risk-Based Measure
* * * * *
In addition, when certain organizations that engage in trading
activities calculate their risk-based capital ratio under this
appendix A, they must also refer to appendix E of this part, which
incorporates capital charges for certain market risks into the risk-
based capital ratio. When calculating their risk-based capital ratio
under this appendix A, such organizations are required to refer to
[[Page 47373]]
appendix E of this part for supplemental rules to determine
qualifying and excess capital, calculate risk-weighted assets,
calculate market risk equivalent assets, and calculate risk-based
capital ratios adjusted for market risk.
* * * * *
3. A new appendix E is added to read as follows:
Appendix E to Part 225--Capital Adequacy Guidelines for Bank Holding
Companies: Market Risk Measure
Section 1. Purpose, Applicability, Scope, and Effective Date
(a) Purpose. The purpose of this appendix is to ensure that bank
holding companies (organizations) with significant exposure to
market risk maintain adequate capital to support that
exposure.1 This appendix supplements and adjusts the risk-based
capital ratio calculations under appendix A of this part with
respect to those organizations.
---------------------------------------------------------------------------
\1\ This appendix is based on a framework developed jointly by
supervisory authorities from the countries represented on the Basle
Committee on Banking Supervision and endorsed by the Group of Ten
Central Bank Governors. The framework is described in a Basle
Committee paper entitled ``Amendment to the Capital Accord to
Incorporate Market Risk,'' January 1996.
---------------------------------------------------------------------------
(b) Applicability. (1) This appendix applies to any bank holding
company whose trading activity 2 (on a worldwide consolidated
basis) equals:
---------------------------------------------------------------------------
\2\ Trading activity means the gross sum of trading assets and
liabilities as reported in the bank holding company's most recent
quarterly Y-9C Report.
---------------------------------------------------------------------------
(i) 10 percent or more of total assets; 3 or
---------------------------------------------------------------------------
\3\ Total assets means quarter-end total assets as reported in
the bank holding company's most recent Y-9C Report.
---------------------------------------------------------------------------
(ii) $1 billion or more.
(2) The Federal Reserve may additionally apply this appendix to
any bank holding company if the Federal Reserve deems it necessary
or appropriate for safe and sound banking practices.
(3) The Federal Reserve may exclude a bank holding company
otherwise meeting the criteria of paragraph (b)(1) of this section
from coverage under this appendix if it determines the organization
meets such criteria as a consequence of accounting, operational, or
similar considerations, and the Federal Reserve deems it consistent
with safe and sound banking practices.
(c) Scope. The capital requirements of this appendix support
market risk associated with an organization's covered positions.
(d) Effective date. This appendix is effective as of January 1,
1997. Compliance is not mandatory until January 1, 1998. Subject to
supervisory approval, a bank holding company may opt to comply with
this appendix as early as January 1, 1997.4
---------------------------------------------------------------------------
\4\ A bank holding company that voluntarily complies with the
final rule prior to January 1, 1998, must comply with all of its
provisions.
---------------------------------------------------------------------------
Section 2. Definitions
For purposes of this appendix, the following definitions apply:
(a) Covered positions means all positions in an organization's
trading account, and all foreign exchange 5 and commodity
positions, whether or not in the trading account.6 Positions
include on-balance-sheet assets and liabilities and off-balance-
sheet items. Securities subject to repurchase and lending agreements
are included as if still owned by the lender.
---------------------------------------------------------------------------
\5\ Subject to supervisory review, a bank may exclude structural
positions in foreign currencies from its covered positions.
\6\ The term trading account is defined in the instructions to
the Call Report.
---------------------------------------------------------------------------
(b) Market risk means the risk of loss resulting from movements
in market prices. Market risk consists of general market risk and
specific risk components.
(1) General market risk means changes in the market value of
covered positions resulting from broad market movements, such as
changes in the general level of interest rates, equity prices,
foreign exchange rates, or commodity prices.
(2) Specific risk means changes in the market value of specific
positions due to factors other than broad market movements and
includes such risk as the credit risk of an instrument's issuer.
(c) Tier 1 and Tier 2 capital are defined in appendix A of this
part.
(d) Tier 3 capital is subordinated debt that is unsecured; is
fully paid up; has an original maturity of at least two years; is
not redeemable before maturity without prior approval by the Federal
Reserve; includes a lock-in clause precluding payment of either
interest or principal (even at maturity) if the payment would cause
the issuing organization's risk-based capital ratio to fall or
remain below the minimum required under appendix A of this part; and
does not contain and is not covered by any covenants, terms, or
restrictions that are inconsistent with safe and sound banking
practices.
(e) Value-at-risk (VAR) means the estimate of the maximum amount
that the value of covered positions could decline due to market
price or rate movements during a fixed holding period within a
stated confidence level, measured in accordance with section 4 of
this appendix.
Section 3. Adjustments to the Risk-Based Capital Ratio Calculations
(a) Risk-based capital ratio denominator. An organization
subject to this appendix shall calculate its risk-based capital
ratio denominator as follows:
(1) Adjusted risk-weighted assets. Calculate adjusted risk-
weighted assets, which equals risk-weighted assets (as determined in
accordance with appendix A of this part) excluding the risk-weighted
amounts of all covered positions (except foreign exchange positions
outside the trading account and over-the-counter derivative
positions).7
---------------------------------------------------------------------------
\7\ Foreign exchange positions outside the trading account and
all over-the-counter derivative positions, whether or not in the
trading account, must be included in adjusted risk weighted assets
as determined in appendix A of this part.
---------------------------------------------------------------------------
(2) Measure for market risk. Calculate the measure for market
risk, which equals the sum of the VAR-based capital charge, the
specific risk add-on (if any), and the capital charge for de minimis
exposures (if any).
(i) VAR-based capital charge. The VAR-based capital charge
equals the higher of:
(A) The previous day's VAR measure; or
(B) The average of the daily VAR measures for each of the
preceding 60 business days multiplied by three, except as provided
in section 4(e) of this appendix;
(ii) Specific risk add-on. The specific risk add-on is
calculated in accordance with section 5 of this appendix; and
(iii) Capital charge for de minimis exposure. The capital charge
for de minimis exposure is calculated in accordance with section
4(a) of this appendix.
(3) Market risk equivalent assets. Calculate market risk
equivalent assets by multiplying the measure for market risk (as
calculated in paragraph (a)(2) of this section) by 12.5.
(4) Denominator calculation. Add market risk equivalent assets
(as calculated in paragraph (a)(3) of this section) to adjusted
risk-weighted assets (as calculated in paragraph (a)(1) of this
section). The resulting sum is the organization's risk-based capital
ratio denominator.
(b) Risk-based capital ratio numerator. An organization subject
to this appendix shall calculate its risk-based capital ratio
numerator by allocating capital as follows:
(1) Credit risk allocation. Allocate Tier 1 and Tier 2 capital
equal to 8.0 percent of adjusted risk-weighted assets (as calculated
in paragraph (a)(1) of this section).8
---------------------------------------------------------------------------
\8\ An institution may not allocate Tier 3 capital to support
credit risk (as calculated under appendix A of this part).
---------------------------------------------------------------------------
(2) Market risk allocation. Allocate Tier 1, Tier 2, and Tier 3
capital equal to the measure for market risk as calculated in
paragraph (a)(2) of this section. The sum of Tier 2 and Tier 3
capital allocated for market risk must not exceed 250 percent of
Tier 1 capital allocated for market risk. (This requirement means
that Tier 1 capital allocated in this paragraph (b)(2) must equal at
least 28.6 percent of the measure for market risk.)
(3) Restrictions. (i) The sum of Tier 2 capital (both allocated
and excess) and Tier 3 capital (allocated in paragraph (b)(2) of
this section) may not exceed 100 percent of Tier 1 capital (both
allocated and excess).9
---------------------------------------------------------------------------
\9\ Excess Tier 1 capital means Tier 1 capital that has not been
allocated in paragraphs (b)(1) and (b)(2) of this section. Excess
Tier 2 capital means Tier 2 capital that has not been allocated in
paragraph (b)(1) and (b)(2) of this section, subject to the
restrictions in paragraph (b)(3) of this section.
---------------------------------------------------------------------------
(ii) Term subordinated debt (and intermediate-term preferred
stock and related surplus) included in Tier 2 capital (both
allocated and excess) may not exceed 50 percent of Tier 1 capital
(both allocated and excess).
(4) Numerator calculation. Add Tier 1 capital (both allocated
and excess), Tier 2 capital (both allocated and excess), and Tier 3
capital (allocated under paragraph (b)(2) of this section). The
resulting sum is the organization's risk-based capital ratio
numerator.
Section 4. Internal Models
(a) General. For risk-based capital purposes, a bank holding
company subject to this appendix must use its internal model to
measure its daily VAR, in accordance with
[[Page 47374]]
the requirements of this section.10 The Federal Reserve may
permit an organization to use alternative techniques to measure the
market risk of de minimis exposures so long as the techniques
adequately measure associated market risk.
---------------------------------------------------------------------------
\10\ An organization's internal model may use any generally
accepted measurement techniques, such as variance-covariance models,
historical simulations, or Monte Carlo simulations. However, the
level of sophistication and accuracy of an organization's internal
model must be commensurate with the nature and size of its covered
positions. An organization that modifies its existing modeling
procedures to comply with the requirements of this appendix for
risk-based capital purposes should, nonetheless, continue to use the
internal model it considers most appropriate in evaluating risks for
other purposes.
---------------------------------------------------------------------------
(b) Qualitative requirements. A bank holding company subject to
this appendix must have a risk management system that meets the
following minimum qualitative requirements:
(1) The organization must have a risk control unit that reports
directly to senior management and is independent from business
trading units.
(2) The organization's internal risk measurement model must be
integrated into the daily management process.
(3) The organization's policies and procedures must identify,
and the organization must conduct, appropriate stress tests and
backtests.11 The organization's policies and procedures must
identify the procedures to follow in response to the results of such
tests.
---------------------------------------------------------------------------
\11\ Stress tests provide information about the impact of
adverse market events on a bank's covered positions. Backtests
provide information about the accuracy of an internal model by
comparing an organization's daily VAR measures to its corresponding
daily trading profits and losses.
---------------------------------------------------------------------------
(4) The organization must conduct independent reviews of its
risk measurement and risk management systems at least annually.
(c) Market risk factors. The organization's internal model must
use risk factors sufficient to measure the market risk inherent in
all covered positions. The risk factors must address interest rate
risk,12 equity price risk, foreign exchange rate risk, and
commodity price risk.
---------------------------------------------------------------------------
\12\ For material exposures in the major currencies and markets,
modeling techniques must capture spread risk and must incorporate
enough segments of the yield curve--at least six--to capture
differences in volatility and less than perfect correlation of rates
along the yield curve.
---------------------------------------------------------------------------
(d) Quantitative requirements. For regulatory capital purposes,
VAR measures must meet the following quantitative requirements:
(1) The VAR measures must be calculated on a daily basis using a
99 percent, one-tailed confidence level with a price shock
equivalent to a ten-business day movement in rates and prices. In
order to calculate VAR measures based on a ten-day price shock, the
organization may either calculate ten-day figures directly or
convert VAR figures based on holding periods other than ten days to
the equivalent of a ten-day holding period (for instance, by
multiplying a one-day VAR measure by the square root of ten).
(2) The VAR measures must be based on an historical observation
period (or effective observation period for an organization using a
weighting scheme or other similar method) of at least one year. The
organization must update data sets at least once every three months
or more frequently as market conditions warrant.
(3) The VAR measures must include the risks arising from the
non-linear price characteristics of options positions and the
sensitivity of the market value of the positions to changes in the
volatility of the underlying rates or prices. An organization with a
large or complex options portfolio must measure the volatility of
options positions by different maturities.
(4) The VAR measures may incorporate empirical correlations
within and across risk categories, provided that the organization's
process for measuring correlations is sound. In the event that the
VAR measures do not incorporate empirical correlations across risk
categories, then the organization must add the separate VAR measures
for the four major risk categories to determine its aggregate VAR
measure.
(e) Backtesting. (1) Beginning one year after a bank holding
company starts to comply with this appendix, it must conduct
backtesting by comparing each of its most recent 250 business days'
actual net trading profit or loss 13 with the corresponding
daily VAR measures generated for internal risk measurement purposes
and calibrated to a one-day holding period and a 99th percentile,
one-tailed confidence level.
---------------------------------------------------------------------------
\13\ Actual net trading profits and losses typically include
such things as realized and unrealized gains and losses on portfolio
positions as well as fee income and commissions associated with
trading activities.
---------------------------------------------------------------------------
(2) Once each quarter, the organization must identify the number
of exceptions, that is, the number of business days for which the
magnitude of the actual daily net trading loss, if any, exceeds the
corresponding daily VAR measure.
(3) A bank holding company must use the multiplication factor
indicated in Table 1 of this appendix in determining its capital
charge for market risk under section 3(a)(2)(i)(B) of this appendix
until it obtains the next quarter's backtesting results, unless the
Federal Reserve determines that a different adjustment or other
action is appropriate.
Table 1.--Multiplication Factor Based on Results of Backtesting
------------------------------------------------------------------------
Multiplication
Number of exceptions factor
------------------------------------------------------------------------
4 or fewer.............................................. 3.00
5....................................................... 3.40
6....................................................... 3.50
7....................................................... 3.65
8....................................................... 3.75
9....................................................... 3.85
10 or more.............................................. 4.00
------------------------------------------------------------------------
Section 5. Specific Risk
(a) Specific risk add-on. For purposes of section 3(a)(2)(ii) of
this appendix, a bank holding company's specific risk add-on equals
the standard specific risk capital charge calculated under paragraph
(c) of this s
FR Doc. 96-22546 Risk-Based Capital Standards: Market Risk
ection. If, however, an organization can demonstrate to
the Federal Reserve that its internal model measures the specific
risk of covered debt and/or equity positions and that those measures
are included in the VAR-based capital charge in section 3(a)(2)(i)
of this appendix, then it may reduce or eliminate its specific risk
add-on under this section. The determination as to whether a model
incorporates specific risk must be made separately for covered debt
and equity positions.
(1) If a model includes the specific risk of covered debt
positions but not covered equity positions (or vice versa), then the
organization can reduce its specific risk charge for the included
positions under paragraph (b) of this section. The specific risk
charge for the positions not included equals the standard specific
risk capital charge under paragraph (c) of this section.
(2) If a model addresses the specific risk of both covered debt
and equity positions, then the organization can reduce its specific
risk charge for both covered debt and equity positions under
paragraph (b) of this section. In this case, the comparison
described in paragraph (b) of this section must be based on the
total VAR-based figure for the specific risk of debt and equity
positions, taking account of any correlations that are built into
the model.
(b) VAR-based specific risk capital charge. In all cases where a
bank holding company measures specific risk in its internal model,
the total capital charge for specific risk (i.e., the VAR-based
specific risk capital charge plus the specific risk add-on) must
equal at least 50 percent of the standard specific risk capital
charge (this amount is the minimum specific risk charge).
(1) If the portion of an organization's VAR measure that is
attributable to specific risk (multiplied by the organization's
multiplication factor if required in section 3(a)(2) of this
appendix) is greater than or equal to the minimum specific risk
charge, then the organization has no specific risk add-on and its
capital charge for specific risk is the portion included in the VAR
measure.
(2) If the portion of an organization's VAR measure that is
attributable to specific risk (multiplied by the organization's
multiplication factor if required in section 3(a)(2) of this
appendix) is less than the minimum specific risk charge, then the
organization's specific risk add-on is the difference between the
minimum specific risk charge and the specific risk portion of the
VAR measure (multiplied by the multiplication factor if required in
section 3(a)(2) of this appendix).
(c) Standard specific risk capital charge. The standard specific
risk capital charge equals the sum of the components for covered
debt and equity positions as follows:
(1) Covered debt positions. (i) For purposes of this section 5,
covered debt positions means fixed-rate or floating-rate debt
instruments located in the trading account or instruments located in
the trading account with values that react primarily to changes in
interest rates, including certain non-
[[Page 47375]]
convertible preferred stock, convertible bonds, and instruments
subject to repurchase and lending agreements. Also included are
derivatives (including written and purchased options) for which the
underlying instrument is a covered debt instrument that is subject
to a non-zero specific risk capital charge.
(A) For covered debt positions that are derivatives, an
organization must risk-weight (as described in paragraph (c)(1)(iii)
of this section) the market value of the effective notional amount
of the underlying debt instrument or index portfolio. Swaps must be
included as the notional position in the underlying debt instrument
or index portfolio, with a receiving side treated as a long position
and a paying side treated as a short position; and
(B) For covered debt positions that are options, whether long or
short, an organization must risk-weight (as described in paragraph
(c)(1)(iii) of this section) the market value of the effective
notional amount of the underlying debt instrument or index
multiplied by the option's delta.
(ii) An organization may net long and short covered debt
positions (including derivatives) in identical debt issues or
indices.
(iii) An organization must multiply the absolute value of the
current market value of each net long or short covered debt position
by the appropriate specific risk weighting factor indicated in Table
2 of this appendix. The specific risk capital charge component for
covered debt positions is the sum of the weighted values.
Table 2.--Specific Risk Weighting Factors for Covered Debt Positions
------------------------------------------------------------------------
Weighting
Remaining maturity factor
Category (contractual) (in
percent)
------------------------------------------------------------------------
Government.......................... N/A.................... 0.00
Qualifying.......................... 6 months or less....... 0.25
Over 6 months to 24 1.00
months.
Over 24 months......... 1.60
Other............................... N/A.................... 8.00
------------------------------------------------------------------------
(A) The government category includes all debt instruments of
central governments of OECD-based countries 14 including bonds,
Treasury bills, and other short-term instruments, as well as local
currency instruments of non-OECD central governments to the extent
the organization has liabilities booked in that currency.
---------------------------------------------------------------------------
\14\ Organization for Economic Cooperation and Development
(OECD)-based countries is defined in appendix A of this part.
---------------------------------------------------------------------------
(B) The qualifying category includes debt instruments of U.S.
government-sponsored agencies, general obligation debt instruments
issued by states and other political subdivisions of OECD-based
countries, multilateral development banks, and debt instruments
issued by U.S. depository institutions or OECD banks that do not
qualify as capital of the issuing institution.15 This category
also includes other debt instruments, including corporate debt and
revenue instruments issued by states and other political
subdivisions of OECD countries, that are:
---------------------------------------------------------------------------
\15\ U.S. government-sponsored agencies, multilateral
development banks, and OECD banks are defined in appendix A of this
part.
---------------------------------------------------------------------------
(1) Rated investment-grade by at least two nationally recognized
credit rating services;
(2) Rated investment grade by one nationally recognized credit
rating agency and not rated less than investment grade by any other
credit rating agency; or
(3) Unrated, but deemed to be of comparable investment quality
by the reporting organization and the issuer has instruments listed
on a recognized stock exchange, subject to review by the Federal
Reserve.
(C) The other category includes debt instruments that are not
included in the government or qualifying categories.
(2) Covered equity positions. (i) For purposes of this section
5, covered equity positions means equity instruments located in the
trading account and instruments located in the trading account with
values that react primarily to changes in equity prices, including
voting or non-voting common stock, certain convertible bonds, and
commitments to buy or sell equity instruments. Also included are
derivatives (including written or purchased options) for which the
underlying is a covered equity position.
(A) For covered equity positions that are derivatives, an
organization must risk weight (as described in paragraph (c)(2)(iii)
of this section) the market value of the effective notional amount
of the underlying equity instrument or equity portfolio. Swaps must
be included as the notional position in the underlying equity
instrument or index portfolio, with a receiving side treated as a
long position and a paying side treated as a short position; and
(B) For covered equity positions that are options, whether long
or short, an organization must risk weight (as described in
paragraph (c)(2)(iii) of this section) the market value of the
effective notional amount of the underlying equity instrument or
index multiplied by the option's delta.
(ii) An organization may net long and short covered equity
positions (including derivatives) in identical equity issues or
equity indices in the same market.16
---------------------------------------------------------------------------
\16\ An organization may also net positions in depository
receipts against an opposite position in the underlying equity or
identical equity in different markets, provided that the
organization includes the costs of conversion.
---------------------------------------------------------------------------
(iii)(A) An organization must multiply the absolute value of the
current market value of each net long or short covered equity
position by a risk weighting factor of 8.0 percent, or by 4.0
percent if the equity is held in a portfolio that is both liquid and
well-diversified.17 For covered equity positions that are index
contracts comprising a well-diversified portfolio of equity
instruments, the net long or short position is to be multiplied by a
risk weighting factor of 2.0 percent.
---------------------------------------------------------------------------
\17\ A portfolio is liquid and well-diversified if: (1) it is
characterized by a limited sensitivity to price changes of any
single equity issue or closely related group of equity issues held
in the portfolio; (2) the volatility of the portfolio's value is not
dominated by the volatility of any individual equity issue or by
equity issues from any single industry or economic sector; (3) it
contains a large number of individual equity positions, with no
single position representing a substantial portion of the
portfolio's total market value; and (4) it consists mainly of issues
traded on organized exchanges or in well-established over-the-
counter markets.
---------------------------------------------------------------------------
(B) For covered equity positions from the following futures-
related arbitrage strategies, an organization may apply a 2.0
percent risk weighting factor to one side (long or short) of each
equity position with the opposite side exempt from charge, subject
to review by the Federal Reserve:
(1) Long and short positions in exactly the same index at
different dates or in different market centers; or
(2) Long and short positions in index contracts at the same date
in different but similar indices.
(C) For futures contracts on broadly-based indices that are
matched by offsetting positions in a basket of stocks comprising the
index, an organization may apply a 2.0 percent risk weighting factor
to the futures and stock basket positions (long and short), provided
that such trades are deliberately entered into and separately
controlled, and that the basket of stocks comprises at least 90
percent of the capitalization of the index.
(iv) The specific risk capital charge component for covered
equity positions is the sum of the weighted values.
By order of the Board of Governors of the Federal Reserve
System, August 29, 1996.
William W. Wiles,
Secretary of the Board.
Federal Deposit Insurance Corporation
12 CFR CHAPTER III
For the reasons indicated in the preamble, the FDIC Board of
Directors hereby amends part 325 of chapter III of title 12 of the Code
of Federal Regulations as follows.
PART 325--[AMENDED]
1. The authority citation for part 325 continues to read as
follows:
Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b),
1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n),
1828(o), 1831o, 3907, 3909, 4808; Pub. L. 102-233, 105 Stat. 1761,
1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242, 105 Stat. 2236,
2355, 2386 (12 U.S.C. 1828 note).
2. Appendix A to part 325 is amended in the introductory text, by
adding a new paragraph after the third undesignated paragraph to read
as follows:
Appendix A to Part 325--Statement of Policy on Risk-Based Capital
* * * * *
In addition, when certain banks that engage in trading
activities calculate their risk-based capital ratio under this
appendix A, they must also refer to appendix C of this
[[Page 47376]]
part, which incorporates capital charges for certain market risks
into the risk-based capital ratio. When calculating their risk-based
capital ratio under this appendix A, such banks are required to
refer to appendix C of this part for supplemental rules to determine
qualifying and excess capital, calculate risk-weighted assets,
calculate market risk equivalent assets and add them to risk-
weighted assets, and calculate risk-based capital ratios as adjusted
for market risk.
* * * * *
3. A new appendix C is added to part 325 to read as follows:
Appendix C to Part 325--Risk-Based Capital for State Non-Member
Banks; Market Risk
Section 1. Purpose, Applicability, Scope, and Effective Date
(a) Purpose. The purpose of this appendix is to ensure that
banks with significant exposure to market risk maintain adequate
capital to support that exposure.1 This appendix supplements
and adjusts the risk-based capital ratio calculations under appendix
A of this part with respect to those banks.
---------------------------------------------------------------------------
\1\ This appendix is based on a framework developed jointly by
supervisory authorities from the countries represented on the Basle
Committee on Banking Supervision and endorsed by the Group of Ten
Central Bank Governors. The framework is described in a Basle
Committee paper entitled ``Amendment to the Capital Accord to
Incorporate Market Risk,'' January 1996.
---------------------------------------------------------------------------
(b) Applicability. (1) This appendix applies to any insured
state nonmember bank whose trading activity 2 (on a worldwide
consolidated basis) equals:
---------------------------------------------------------------------------
\2\ Trading activity means the gross sum of trading assets and
liabilities as reported in the bank's most recent quarterly
Consolidated Report of Condition and Income (Call Report).
---------------------------------------------------------------------------
(i) 10 percent or more of total assets; 3 or
---------------------------------------------------------------------------
\3\ Total assets means quarter-end total assets as reported in
the bank's most recent Call Report.
---------------------------------------------------------------------------
(ii) $1 billion or more.
(2) The FDIC may additionally apply this appendix to any insured
state nonmember bank if the FDIC deems it necessary or appropriate
for safe and sound banking practices.
(3) The FDIC may exclude an insured state nonmember bank
otherwise meeting the criteria of paragraph (b)(1) of this section
from coverage under this appendix if it determines the bank meets
such criteria as a consequence of accounting, operational, or
similar considerations, and the FDIC deems it consistent with safe
and sound banking practices.
(c) Scope. The capital requirements of this appendix support
market risk associated with a bank's covered positions.
(d) Effective date. This appendix is effective as of January 1,
1997. Compliance is not mandatory until January 1, 1998. Subject to
supervisory approval, a bank may opt to comply with this appendix as
early as January 1, 1997.4
---------------------------------------------------------------------------
\4\ A bank that voluntarily complies with the final rule prior
to January 1, 1998, must comply with all of its provisions.
---------------------------------------------------------------------------
Section 2. Definitions
For purposes of this appendix, the following definitions apply:
(a) Covered positions means all positions in a bank's trading
account, and all foreign exchange 5 and commodity positions,
whether or not in the trading account.6 Positions include on-
balance-sheet assets and liabilities and off-balance-sheet items.
Securities subject to repurchase and lending agreements are included
as if they are still owned by the lender.
---------------------------------------------------------------------------
\5\ Subject to FDIC review, a bank may exclude structural
positions in foreign currencies from its covered positions.
\6\ The term trading account is defined in the instructions to
the Call Report.
---------------------------------------------------------------------------
(b) Market risk means the risk of loss resulting from movements
in market prices. Market risk consists of general market risk and
specific risk components.
(1) General market risk means changes in the market value of
covered positions resulting from broad market movements, such as
changes in the general level of interest rates, equity prices,
foreign exchange rates, or commodity prices.
(2) Specific risk means changes in the market value of specific
positions due to factors other than broad market movements and
includes such risk as the credit risk of an instrument's issuer.
(c) Tier 1 and Tier 2 capital are defined in appendix A of this
part.
(d) Tier 3 capital is subordinated debt that is unsecured; is
fully paid up; has an original maturity of at least two years; is
not redeemable before maturity without prior approval by the FDIC;
includes a lock-in clause precluding payment of either interest or
principal (even at maturity) if the payment would cause the issuing
bank's risk-based capital ratio to fall or remain below the minimum
required under appendix A of this part; and does not contain and is
not covered by any covenants, terms, or restrictions that are
inconsistent with safe and sound banking practices.
(e) Value-at-risk (VAR) means the estimate of the maximum amount
that the value of covered positions could decline during a fixed
holding period within a stated confidence level, measured in
accordance with section 4 of this appendix.
Section 3. Adjustments to the Risk-Based Capital Ratio
Calculations.
(a) Risk-based capital ratio denominator. A bank subject to this
appendix shall calculate its risk-based capital ratio denominator as
follows:
(1) Adjusted risk-weighted assets. Calculate adjusted risk-
weighted assets, which equals risk-weighted assets (as determined in
accordance with appendix A of this part), excluding the risk-
weighted amounts of all covered positions (except foreign exchange
positions outside the trading account and over-the-counter
derivative positions).7
---------------------------------------------------------------------------
\7\ Foreign exchange positions outside the trading account and
all over-the-counter derivative positions, whether or not in the
trading account, must be included in adjusted risk weighted assets
as determined in appendix A of this part.
---------------------------------------------------------------------------
(2) Measure for market risk. Calculate the measure for market
risk, which equals the sum of the VAR-based capital charge, the
specific risk add-on (if any), and the capital charge for de minimis
exposures (if any).
(i) VAR-based capital charge. The VAR-based capital charge
equals the higher of:
(A) The previous day's VAR measure; or
(B) The average of the daily VAR measures for each of the
preceding 60 business days multiplied by three, except as provided
in section 4(e) of this appendix;
(ii) Specific risk add-on. The specific risk add-on is
calculated in accordance with section 5 of this appendix; and
(iii) Capital charge for de minimis exposure. The capital charge
for de minimis exposure is calculated in accordance with section
4(a) of this appendix.
(3) Market risk equivalent assets. Calculate market risk
equivalent assets by multiplying the measure for market risk (as
calculated in paragraph (a)(2) of this section) by 12.5.
(4) Denominator calculation. Add market risk equivalent assets
(as calculated in paragraph (a)(3) of this section) to adjusted
risk-weighted assets (as calculated in paragraph (a)(1) of this
section). The resulting sum is the bank's risk-based capital ratio
denominator.
(b) Risk-based capital ratio numerator. A bank subject to this
appendix shall calculate its risk-based capital ratio numerator by
allocating capital as follows:
(1) Credit risk allocation. Allocate Tier 1 and Tier 2 capital
equal to 8.0 percent of adjusted risk-weighted assets (as calculated
in paragraph (a)(1) of this section).8
---------------------------------------------------------------------------
\8\ A bank may not allocate Tier 3 capital to support credit
risk (as calculated under appendix A of this part).
---------------------------------------------------------------------------
(2) Market risk allocation. Allocate Tier 1, Tier 2, and Tier 3
capital equal to the measure for market risk as calculated in
paragraph (a)(2) of this section. The sum of Tier 2 and Tier 3
capital allocated for market risk must not exceed 250 percent of
Tier 1 capital allocated for market risk. (This requirement means
that Tier 1 capital allocated in this paragraph (b)(2) must equal at
least 28.6 percent of the measure for market risk.)
(3) Restrictions. (i) The sum of Tier 2 capital (both allocated
and excess) and Tier 3 capital (allocated in paragraph (b)(2) of
this section) may not exceed 100 percent of Tier 1 capital (both
allocated and excess).9
---------------------------------------------------------------------------
\9\ Excess Tier 1 capital means Tier 1 capital that has not been
allocated in paragraphs (b)(1) and (b)(2) of this section. Excess
Tier 2 capital means Tier 2 capital that has not been allocated in
paragraph (b)(1) and (b)(2) of this section, subject to the
restrictions in paragraph (b)(3) of this section.
---------------------------------------------------------------------------
(ii) Term subordinated debt (and intermediate-term preferred
stock and related surplus) included in Tier 2 capital (both
allocated and excess) may not exceed 50 percent of Tier 1 capital
(both allocated and excess).
(4) Numerator calculation. Add Tier 1 capital (both allocated
and excess), Tier 2 capital (both allocated and excess), and Tier 3
capital (allocated under paragraph (b)(2) of this section). The
resulting sum is the bank's risk-based capital ratio numerator.
Section 4. Internal Models
(a) General. For risk-based capital purposes, a bank subject to
this appendix
[[Page 47377]]
must use its internal model to measure its daily VAR, in accordance
with the requirements of this section.10 The FDIC may permit a
bank to use alternative techniques to measure the market risk of de
minimis exposures so long as the techniques adequately measure
associated market risk.
---------------------------------------------------------------------------
\10\ A bank's internal model may use any generally accepted
measurement techniques, such as variance-covariance models,
historical simulations, or Monte Carlo simulations. However, the
level of sophistication and accuracy of a bank's internal model must
be commensurate with the nature and size of its covered positions. A
bank that modifies its existing modeling procedures to comply with
the requirements of this appendix for risk-based capital purposes
should, nonetheless, continue to use the internal model it considers
most appropriate in evaluating risks for other purposes.
---------------------------------------------------------------------------
(b) Qualitative requirements. A bank subject to this appendix
must have a risk management system that meets the following minimum
qualitative requirements:
(1) The bank must have a risk control unit that reports directly
to senior management and is independent from business trading units.
(2) The bank's internal risk measurement model must be
integrated into the daily management process.
(3) The bank's policies and procedures must identify, and the
bank must conduct, appropriate stress tests and backtests.11
The bank's policies and procedures must identify the procedures to
follow in response to the results of such tests.
---------------------------------------------------------------------------
\11\ Stress tests provide information about the impact of
adverse market events on a bank's covered positions. Backtests
provide information about the accuracy of an internal model by
comparing a bank's daily VAR measures to its corresponding daily
trading profits and losses.
---------------------------------------------------------------------------
(4) The bank must conduct independent reviews of its risk
measurement and risk management systems at least annually.
(c) Market risk factors. The bank's internal model must use risk
factors sufficient to measure the market risk inherent in all
covered positions. The risk factors must address interest rate
risk,12 equity price risk, foreign exchange rate risk, and
commodity price risk.
---------------------------------------------------------------------------
\12\ For material exposures in the major currencies and markets,
modeling techniques must capture spread risk and must incorporate
enough segments of the yield curve--at least six--to capture
differences in volatility and less than perfect correlation of rates
along the yield curve.
---------------------------------------------------------------------------
(d) Quantitative requirements. For regulatory capital purposes,
VAR measures must meet the following quantitative requirements:
(1) The VAR measures must be calculated on a daily basis using a
99 percent, one-tailed confidence level with a price shock
equivalent to a ten-business day movement in rates and prices. In
order to calculate VAR measures based on a ten-day price shock, the
bank may either calculate ten-day figures directly or convert VAR
figures based on holding periods other than ten days to the
equivalent of a ten-day holding period (for instance, by multiplying
a one-day VAR measure by the square root of ten).
(2) The VAR measures must be based on an historical observation
period (or effective observation period for a bank using a weighting
scheme or other similar method) of at least one year. The bank must
update data sets at least once every three months or more frequently
as market conditions warrant.
(3) The VAR measures must include the risks arising from the
non-linear price characteristics of options positions and the
sensitivity of the market value of the positions to changes in the
volatility of the underlying rates or prices. A bank with a large or
complex options portfolio must measure the volatility of options
positions by different maturities.
(4) The VAR measures may incorporate empirical correlations
within and across risk categories, provided that the bank's process
for measuring correlations is sound. In the event that the VAR
measures do not incorporate empirical correlations across risk
categories, then the bank must add the separate VAR measures for the
four major risk categories to determine its aggregate VAR measure.
(e) Backtesting. (1) Beginning one year after a bank starts to
comply with this appendix, a bank must conduct backtesting by
comparing each of its most recent 250 business days' actual net
trading profit or loss 13 with the corresponding daily VAR
measures generated for internal risk measurement purposes and
calibrated to a one-day holding period and a 99 percent, one-tailed
confidence level.
---------------------------------------------------------------------------
\13\ Actual net trading profits and losses typically include
such things as realized and unrealized gains and losses on portfolio
positions as well as fee income and commissions associated with
trading activities.
---------------------------------------------------------------------------
(2) Once each quarter, the bank must identify the number of
exceptions, that is, the number of business days for which the
magnitude of the actual daily net trading loss, if any, exceeds the
corresponding daily VAR measure.
(3) A bank must use the multiplication factor indicated in Table
1 of this appendix in determining its capital charge for market risk
under section 3(a)(2)(i)(B) of this appendix until it obtains the
next quarter's backtesting results, unless the FDIC determines that
a different adjustment or other action is appropriate.
Table 1.--Multiplication Factor Based on Results of Backtesting
------------------------------------------------------------------------
Multiplication
Number of exceptions factor
------------------------------------------------------------------------
4 or fewer.............................................. 3.00
5....................................................... 3.40
6....................................................... 3.50
7....................................................... 3.65
8....................................................... 3.75
9....................................................... 3.85
10 or more.............................................. 4.00
------------------------------------------------------------------------
Section 5. Specific Risk
(a) Specific risk add-on. For purposes of section 3(a)(2)(ii) of
this appendix, a bank's specific risk add-on equals the standard
specific risk capital charge calculated under paragraph (c) of this
section. If, however, a bank can demonstrate to the FDIC that its
internal model measures the specific risk of covered debt and/or
equity positions and that those measures are included in the VAR-
based capital charge in section 3(a)(2)(i) of this appendix, then
the bank may reduce or eliminate its specific risk add-on under this
section. The determination as to whether a model incorporates
specific risk must be made separately for covered debt and equity
positions.
(1) If a model includes the specific risk of covered debt
positions but not covered equity positions (or vice versa), then the
bank can reduce its specific risk charge for the included positions
under paragraph (b) of this section. The specific risk charge for
the positions not included equals the standard specific risk capital
charge under paragraph (c) of this section.
(2) If a model addresses the specific risk of both covered debt
and equity positions, then the bank can reduce its specific risk
charge for both covered debt and equity positions under paragraph
(b) of this section. In this case, the comparison described in
paragraph (b) of this section must be based on the total VAR-based
figure for the specific risk of debt and equity positions, taking
into account any correlations that are built into the model.
(b) VAR-based specific risk capital charge. In all cases where a
bank measures specific risk in its internal model, the total capital
charge for specific risk (i.e., the VAR-based specific risk capital
charge plus the specific risk add-on) must equal at least 50 percent
of the standard specific risk capital charge (this amount is the
minimum specific risk charge).
(1) If the portion of a bank's VAR measure that is attributable
to specific risk (multiplied by the bank's multiplication factor if
required in section 3(a)(2) of this appendix) is greater than or
equal to the minimum specific risk charge, then the bank has no
specific risk add-on and its capital charge for specific risk is the
portion included in the VAR measure.
(2) If the portion of a bank's VAR measure that is attributable
to specific risk (multiplied by the bank's multiplication factor if
required in section 3(a)(2) of this appendix) is less than the
minimum specific risk charge, then the bank's specific risk add-on
is the difference between the minimum specific risk charge and the
specific risk portion of the VAR measure (multiplied by the bank's
multiplication factor if required in section 3(a)(2) of this
appendix).
(c) Standard specific risk capital charge. The standard specific
risk capital charge equals the sum of the components for covered
debt and equity positions as follows:
(1) Covered debt positions. (i) For purposes of this section 5,
covered debt positions means fixed-rate or floating-rate debt
instruments located in the trading account and instruments located
in the trading account with values that react primarily to changes
in interest rates, including certain non-convertible preferred
stock, convertible bonds, and instruments subject to repurchase and
lending agreements. Also included are derivatives (including written
and purchased options) for which the underlying instrument is a
covered debt instrument that is subject to a non-zero specific risk
capital charge.
(A) For covered debt positions that are derivatives, a bank must
risk-weight (as
[[Page 47378]]
described in paragraph (c)(1)(iii) of this section) the market value
of the effective notional amount of the underlying debt instrument
or index portfolio. Swaps must be included as the notional position
in the underlying debt instrument or index portfolio, with a
receiving side treated as a long position and a paying side treated
as a short position; and
(B) For covered debt positions that are options, whether long or
short, a bank must risk-weight (as described in paragraph
(c)(1)(iii) of this section) the market value of the effective
notional amount of the underlying debt instrument or index
multiplied by the option's delta.
(ii) A bank may net long and short covered debt positions
(including derivatives) in identical debt issues or indices.
(iii) A bank must multiply the absolute value of the current
market value of each net long or short covered debt position by the
appropriate specific risk weighting factor indicated in Table 2 of
this appendix. The specific risk capital charge component for
covered debt positions is the sum of the weighted values.
Table 2.--Specific Risk Weighting Factors for Covered Debt Positions
------------------------------------------------------------------------
Weighting
Category Remaining maturity factor (in
(contractual) percent)
------------------------------------------------------------------------
Government......................... N/A.................... 0.00
Qualifying......................... 6 months or less....... 0.25
Over 6 months to 24 1.00
months.
Over 24 months......... 1.60
Other.............................. N/A.................... 8.00
------------------------------------------------------------------------
(A) The government category includes all debt instruments of
central governments of OECD-based countries 14 including bonds,
Treasury bills, and other short-term instruments, as well as local
currency instruments of non-OECD central governments to the extent
the bank has liabilities booked in that currency.
---------------------------------------------------------------------------
\14\ Organization for Economic Cooperation and Development
(OECD)-based countries is defined in appendix A of this part.
---------------------------------------------------------------------------
(B) The qualifying category includes debt instruments of U.S.
government-sponsored agencies, general obligation debt instruments
issued by states and other political subdivisions of OECD-based
countries, multilateral development banks, and debt instruments
issued by U.S. depository institutions or OECD-banks that do not
qualify as capital of the issuing institution.15 This category
also includes other debt instruments, including corporate debt and
revenue instruments issued by states and other political
subdivisions of OECD countries, that are:
---------------------------------------------------------------------------
\15\ U.S. government-sponsored agencies, multilateral
development banks, and OECD banks are defined in appendix A of this
part.
---------------------------------------------------------------------------
(1) Rated investment-grade by at least two nationally recognized
credit rating services;
(2) Rated investment-grade by one nationally recognized credit
rating agency and not rated less than investment-grade by any other
credit rating agency; or
(3) Unrated, but deemed to be of comparable investment quality
by the reporting bank and the issuer has instruments listed on a
recognized stock exchange, subject to review by the FDIC.
(C) The other category includes debt instruments that are not
included in the government or qualifying categories.
(2) Covered equity positions. (i) For purposes of this section
5, covered equity positions means equity instruments located in the
trading account and instruments located in the trading account with
values that react primarily to changes in equity prices, including
voting or non-voting common stock, certain convertible bonds, and
commitments to buy or sell equity instruments. Also included are
derivatives (including written and purchased options) for which the
underlying is a covered equity position.
(A) For covered equity positions that are derivatives, a bank
must risk weight (as described in paragraph (c)(2)(iii) of this
section) the market value of the effective notional amount of the
underlying equity instrument or equity portfolio. Swaps must be
included as the notional position in the underlying equity
instrument or index portfolio, with a receiving side treated as a
long position and a paying side treated as a short position; and
(B) For covered equity positions that are options, whether long
or short, a bank must risk weight (as described in paragraph
(c)(2)(iii) of this section) the market value of the effective
notional amount of the underlying equity instrument or index
multiplied by the option's delta.
(ii) A bank may net long and short covered equity positions
(including derivatives) in identical equity issues or equity indices
in the same market.16
---------------------------------------------------------------------------
\16\ A bank may also net positions in depository receipts
against an opposite position in the underlying equity or identical
equity in different markets, provided that the bank includes the
costs of conversion.
---------------------------------------------------------------------------
(iii)(A) A bank must multiply the absolute value of the current
market value of each net long or short covered equity position by a
risk weighting factor of 8.0 percent, or by 4.0 percent if the
equity is held in a portfolio that is both liquid and well-
diversified.17 For covered equity positions that are index
contracts comprising a well-diversified portfolio of equity
instruments, the net long or short position is multiplied by a risk
weighting factor of 2.0 percent.
---------------------------------------------------------------------------
\17\ A portfolio is liquid and well-diversified if: (1) it is
characterized by a limited sensitivity to price changes of any
single equity issue or closely related group of equity issues held
in the portfolio; (2) the volatility of the portfolio's value is not
dominated by the volatility of any individual equity issue or by
equity issues from any single industry or economic sector; (3) it
contains a large number of individual equity positions, with no
single position representing a substantial portion of the
portfolio's total market value; and (4) it consists mainly of issues
traded on organized exchanges or in well-established over-the-
counter markets.
---------------------------------------------------------------------------
(B) For covered equity positions from the following futures-
related arbitrage strategies, a bank may apply a 2.0 percent risk
weighting factor to one side (long or short) of each position with
the opposite side exempt from charge, subject to review by the FDIC:
(1) Long and short positions in exactly the same index at
different dates or in different market centers; or
(2) Long and short positions in index contracts at the same date
in different but similar indices.
(C) For futures contracts on broadly-based indices that are
matched by offsetting positions in a basket of stocks comprising the
index, a bank may apply a 2.0 percent risk weighting factor to the
futures and stock basket positions (long and short), provided that
such trades are deliberately entered into and separately controlled,
and that the basket of stocks comprises at least 90 percent of the
capitalization of the index.
(iv) The specific risk capital charge component for covered
equity positions is the sum of the weighted values.
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.
[FR Doc. 96-22546 Filed 9-5-96; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P
Complete official Federal Register PDF
FR Doc. 96-22372 Revision to NASA FAR Supplement Coverage on Government Property
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47082-47086]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22372]
-----------------------------------------------------------------------
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 1845, 1852 and 1853
Revision to NASA FAR Supplement Coverage on Government Property
AGENCY: Office of Procurement, Contract Management Division, National
Aeronautics and Space Administration (NASA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This is a final rule amending the NASA FAR Supplement to
incorporate changes pertaining to government property reporting by
contractors. The intent of this rule is to improve the completeness,
accuracy and timeliness of the reporting process.
EFFECTIVE DATE: September 6, 1996.
FOR FURTHER INFORMATION CONTACT: Larry G. Pendleton, (202) 358-0487.
SUPPLEMENTARY INFORMATION:
Background
Recent experience at NASA in preparing and auditing annual
financial statements as required by the Chief Financial Officer's (CFO)
Act has led to the need for changes in the contract property reporting
process to improve the completeness, accuracy and timeliness of
information received. NASA does not maintain detailed records of
government property in the possession of contractors. Pursuant to the
Federal Acquisition regulation (FAR) 45.505 the contractor's property
control records constitute the Government's official property records.
All NASA contracts, under which the contractor is accountable for
government property, are required to contain a provision that specifies
the annual submission of a report containing summary financial and
property information on the property in the contractor's custody.
Therefore, when agency requirements for financial/property management
information change, they must be implemented by NASA contractors in
possession of government property. In formulating the rule, NASA
objectives have been to streamline the report to obtain only
information necessary to report on and conduct oversight of contractor
held property, and to generally minimize the impact on reporting
entities.
Summary of Substantive Comments
One comment objected to the inclusion of data on costs for
construction-in-progress and work-in-process on the grounds that such
requirements are inappropriate in a property reporting system, and that
the information is not currently available from contractor property
records. This data is necessary for NASA to comply with Office of
Management and Budget (OMB) guidance on the form and content of federal
agency financial statements, and with the forthcoming accounting
standard on property, plant, and equipment to be issued by the Federal
Accounting Standards Advisory Board (FASAB). NASA Form (NF) 1018 is a
financial report about government property in the possession of
contractors. Therefore, contractors may be required to extract
financial information from other contractor record systems instead of
exclusive reliance on existing property systems for needed information.
The commenter acknowledged that the required information is available
from other contractor records. In addition, contractors are required by
FAR 45.505(b) to provide financial accounts
[[Page 47083]]
in their property control systems for government-owned property in
their possession or control. The order of property classification
accounts on NF 1018 has been changed as suggested by public comment to
group real property accounts together.
Another comment objected to NF 1018 Item 19, Type of Deletion as
requiring major property record system changes in order to furnish this
level of detail. This category is new in name only, currently being
categorized as Disposals on the present form. Detailed lists of
information about these disposals are now required to be maintained by
contractors in the event they are needed by NASA organizations.
Replacing Disposals with Type of Deletion will generate no new
information requirements for contractors, and will make reporting more
complete, accurate, and comparable among contractors by standardizing
the way in which deletion types are provided to the government.
However, as recommended by the commenter, the types of deletions have
been rearranged, two types have been combined, and three have been
deleted since they are part of the plant clearance process.
There was objection in one comment to a proposed requirement that
property shipped to others remain on the shipping contractor's
accountable records until evidence of receipt is obtained from the
consignee. The comment pointed out that receiving contractors do not
normally acknowledge receipt, and that issues of liability, taxable
location, and new suspense systems were raised by the proposed
requirement. While NASA does not agree that all of the issues raised by
the comment are valid, there are acknowledged difficulties in tracking
items assigned to a carrier for shipment. The objective sought by the
proposed arrangement is clear and consistent accountability for
government property at all times. Based upon the concerns expressed in
the comment, the final rule will be changed to provide that property in
transit during the month of September of each year shall be reported by
the shipping contractor, unless confirmation of receipt at destination
has been obtained.
Objection was made in another comment to the revised contract
clause that provides for possible withholding of payment on invoices
when required property reports are not submitted when due. Prompt
receipt of these reports is critical to NASA's ability to prepare
annual financial reports, obtain audit review, and publish them when
due as required by law. Submission of property reports when required is
a contractual obligation resulting from a specific provision in each
affected contract with which contractors have agreed by executing the
contract. However, in response to the concerns expressed in the
comment, the final rule limits possible withholding to a total of
$25,000 or 5 percent of the amount of the contract, whichever is less.
In addition, explanatory language has been added to the prescription
for the clause making clear the importance of timely report submission
and encouraging efforts to obtain reports by the due date rather than
using the withholding authority.
Another comment noted that there is an effort underway to develop a
standard, government-wide property report and recommends that NASA
delay consideration of this rule pending the results of that effort.
Alternatively, the commenter recommends a public hearing to address its
comments. NASA is represented on the interagency group that is
rewriting FAR Part 45, and the subgroup considering a government
standard form. It is not known when these groups will complete their
work and revise the relevant regulations. The revisions contained in
the proposed rule must be made without further delay to allow NASA to
fulfill its financial management obligations. Public comment on the
proposed rule was received from only one organization. Due to this low
level of expressed interest, a public hearing will not be scheduled.
Procedural Requirements
Review Under the Regulatory Flexibility Act
This rule was reviewed under the Regulatory Flexibility Act of
1980. The rule revises the former regulation by simplifying and
reducing reporting requirements, the costs of which are in any case
reimbursed by the Government. NASA certifies that the rule will not
have a significant economic impact on a substantial number of small
entities.
Review Under the Paperwork Reduction Act
Under 5 CFR 1320.5(b)(2)(i), NASA is required to inform potential
persons who are to respond to the collection of information that such
persons are not required to respond to the collection of information
unless it displays a currently valid OMB control number. Under 5 CFR
1320.5(b)(2)(ii)(C), this paragraph meets that display requirement by
providing the following statement: Information collection associated
with this rule has been approved under OMB Control Number(s) 2700-0017
with an expiration date of 12/31/98. This information collection, as
revised, represents a reduction in the estimated paperwork burden to
respondents from the present reporting requirements. The reporting
format has been reduced from 4 pages to 2, and has been streamlined to
facilitate preparation and to clarify reporting requirements.
Completion of the information collection merely requires contractors to
transcribe data from existing contractor records onto the report.
List of Subjects in 48 CFR Parts 1845, 1852 and 1853
Government procurement.
Tom Luedtke,
Deputy Associate Administrator for Procurement.
Accordingly, 48 CFR Parts 1845, 1852, and 1853 are amended as
follows:
1. The authority citation for 48 CFR Parts 1845, 1852, and 1853
continues to read as follows:
Authority: 42 U.S.C. 2473(c)(1).
PART 1845--GOVERNMENT PROPERTY
2. Section 1845.102-70(a)(3) is revised to read as follows:
1845.102-70 Procedures.
(a) * * *
(3) Requirement that additional facilities that the offeror
requests to be provided by the Government be described and identified
by classification such as ``Land'', ``Buildings'', and ``Equipment''
(see subpart 1845.71); and
* * * * *
1845.106-70 [Amended]
3. In section 1845.106-70, paragraph (d) is revised to read as
follows, paragraph (i) is removed and paragraphs (j) and (k) are
redesignated as paragraphs (i) and (j):
1845.106-70 NASA contract clauses and solicitation provision.
* * * * *
(d)(1) The contracting officer shall insert the clause at 1852.245-
73, Financial Reporting of NASA Property in the Custody of Contractors,
in all cost reimbursement contracts. It shall be included in all other
types of contracts when it is known at the time of award that property
will be provided to the contractor or that the contractor will acquire
property, title to which will vest in the Government prior to delivery
of the contract products. Where all
[[Page 47084]]
property to be provided is subject to the clause at 1852.245-71,
Installation-Provided Government Property (see paragraph (b) of this
section), the clause at 1852.245-73 is not required. Where the clause
is not included in contracts at the time of award, if Government
property is subsequently provided to a contractor, or the contractor is
authorized to acquire property to which the Government takes title, the
clause shall be included in the contract at that time.
(2) Paragraph (c) of the clause at 1852.245-73 permits the
contracting officer to withhold payments, up to a specified dollar
limit, in the event a contractor fails to submit the annual NF 1018 by
the due date. This provision reflects the importance to NASA of
receiving this financial data on time. Upon receipt, the information is
entered into the NASA accounting system and is used in the preparation
of agency annual financial statements. Therefore, timely receipt of
contractor held property financial data is essential to the process. A
concerted effort should be made to obtain NF 1018 reports by the due
date before resorting to the payment withholding alternative.
* * * * *
1845.301 [Amended]
4. In section 1845.301, the definition heading ``Space property''
is revised to read ``Agency-peculiar property''.
1845.407 [Amended]
5. In section 1845.407, the section heading ``Non-Government use of
plant equipment'' is revised to read ``Non-Government use of
equipment''.
6. In the introductory text to section 1845.407, the phrase ``plant
equipment'' is revised to read ``equipment''.
7. In paragraphs (a) (1) and (b) to section 1845.407, the phrase
``plant equipment'' is revised to read ``equipment''.
1845.501 [Amended]
8. In section 1845.501, in the definition of ``Space property'',
the heading ``Space property'' is revised to read ``Agency-peculiar
property'', the phrase ``property peculiar to NASA'' is revised to read
``property unique to NASA'', and the last sentence is removed.
9. In section 1845.501, in the definition ``Centrally reportable
equipment (CRE)'', the phrase ``space property'' is revised to read
``agency-peculiar property''
1845.502-1 [Amended]
10. In section 1845.502-1, the title of the NASA Form 1018 ``Report
of Government-Owned/Contractor-Held Property'' is revised to read
``NASA Property in the Custody of Contractors''.
1845.502-71 [Amended]
11. In paragraph (e) to section 1845.502-71, the heading ``Space
Property'' is revised to read ``Agency-peculiar property''.
12. Section 1845.505-14 is revised to read as follows:
1845.505-14 Reports of Government property.
When required by the contract, the contractor shall submit a report
of NASA Property in the Custody of Contractors, NASA Form 1018, in
accordance with the instructions on the form, in subpart 1845.71, and
the contract clause at 1852.245-73. Contractor property control systems
shall distinguish between Government furnished and contractor acquired
property classification shown in FAR 45.505-14(a) (1) through (5).
1845.7101 [Amended]
13. In 1845.7101 the last sentence is removed and the following
three sentences are added to read as follows:
* * * This report provides information for NASA financial
statements and property management; accuracy and timeliness of the
report are, therefore, very important. Contractors shall retain
documents which support the data reported on NF 1018 in accordance with
FAR subpart 4.7, Contractor Records Retention. Classifications of
property, related costs to be reported, and reporting requirements are
set forth in this subpart.
14. Sections 1845.7101-1, 1845.7101-2, 1845.7101-3, 1845.7101-4 and
1845.7101-5 are revised to read as follows:
1845.7101-1 Property classification.
(a) Contractors shall report costs in the classifications required
on NF 1018, as described in this section. For Land, Buildings, Other
Structures and Facilities, and Leasehold Improvements, contractors
shall report the amount for all items with a unit cost of $5,000 or
more and useful life of 2 years or more. For Plant Equipment, Special
Tooling, Special Test Equipment and Agency-Peculiar Property,
Contractors shall separately report--
(1) The amount for all items with a unit cost of $5,000 or more and
a useful life of 2 years or more, and
(2) All times under $5,000, regardless of useful life.
(b) Contractors shall report the amount for all Materials,
regardless of unit cost.
(c) Land. Includes costs of land, improvements to land, and
associated costs incidental to acquiring and preparing land for use,
for example; appraisal fees, clearing costs, drainage, grading,
landscaping, plats and surveys, removal and relocation of the property
of others as part of a land purchase, removal or destruction of
structures or facilities purchased but not used, and legal expenses.
(d) Buildings. Includes costs of buildings, improvements to
buildings, and fixed equipment required for the operation of a building
which is permanently attached to and a part of the building and cannot
be removed without cutting into the walls, ceilings, or floors.
Examples of fixed equipment required for the functioning of a building
include plumbing, heating and lighting equipment, elevators, central
air conditioning systems, and built-in safes and vaults.
(e) Other structures and facilities. Includes costs of acquisitions
and improvements of structures and facilities other than buildings; for
example, airfield pavements, harbor and port facilities, power
production facilities and distribution systems, reclamation and
irrigation facilities, flood control and navigation aids, utility
systems (heating, sewage, water and electrical) when they serve several
buildings or structures, communication systems, traffic aids, roads and
bridges, railroads, monuments and memorials, and nonstructural
improvements, such as sidewalks, parking areas, and fences.
(f) Leasehold improvements. Includes costs of improvements to
leased buildings, structures, and facilities, as well as easements and
right-of-way, where NASA is the lessee or the cost is charged to a NASA
contract.
(g) Equipment. Includes costs of commercially available personal
property for use in manufacturing supplies, performing services, or any
general or administrative purpose; for example, machine tools,
furniture, vehicles, computers, accessory or auxiliary items, and test
equipment.
(h) Construction in progress. Includes costs for work in process
for the construction of Buildings, Other Structures and Facilities, and
Leasehold Improvements to which NASA has title.
(i) Special tooling. Includes costs of equipment and manufacturing
aids (and components and replacements of these items) that are of such
a specialized nature that, without substantial modification or
alteration, their use is limited to the development or production of
particular supplies or parts, or to the performance of particular
services. Examples include jigs, dies,
[[Page 47085]]
fixtures, molds, patterns, taps and gauges.
(j) Special test equipment. Includes costs of equipment used to
accomplish special purpose testing in performing a contract, and items
or assemblies of equipment.
(k) Material. Includes costs of NASA owned property held in
inventory that may become a part of an end item or be expended in
performing a contract. Examples include raw and processed material,
parts, assemblies, small tools and supplies. Does not include material
that is part of work in process.
(l) Agency-peculiar property. Includes actual or estimated costs of
completed items, systems and subsystems, spare parts and components
unique to NASA aeronautical and space programs. Examples include
aircraft, engines, satellites, instruments, rockets, prototypes and
mock-ups. The amount of property, title to which vests in the
Government as a result of progress payments to fixed price
subcontractors, shall be included to reflect the pro rata cost of
undelivered agency-peculiar property.
(m) Contract work-in-process. Includes the costs of all work-in-
process and excludes the costs of completed items reported in other
categories.
1845.7101-2 Transfers of property.
The procedures in this section apply to all types of transfers.
Only Government installations may furnish Government property to a
contractor. Therefore, procurement, property, and financial
organizations at NASA Centers must effect all transfers of
accountability, although physical shipment and receipt of property may
be made directly by contractors. Such transfers include shipments
between contractors of the same installation, contractors of different
installations, a contractor of one installation to another
installation, an installation to a contractor of another installation,
and a contractor to another Government agency or its contractor. So
that NASA may properly control and account for transfers, they shall be
adequately documented. The procedures described in this section shall
be followed in all cases, to provide an administrative and audit trail,
even if property is physically shipped directly from one contractor to
another. Property shipped between September 1 and September 30,
inclusively, shall be reported by the shipping contractor, regardless
of the method of shipment, unless written evidence of receipt at
destination has been received. Property provided under fixed price
repair contracts remains accountable to the cognizant NASA Center and
is not reportable on NF 1018; property provided for repair under a
cost-reimbursement contract, however, is accountable to the contractor
and reportable on NF 1018.
(a) Approval and notification. The contractor must obtain the
approval of the contracting officer or designee for transfers of
property before shipment. Each shipping document must contain contract
numbers, shipping references, property classifications in which the
items are recorded, unit prices, and any other appropriate identifying
or descriptive data. Unit prices shall be obtained from records
maintained pursuant to FAR part 45 and part 1845 of this chapter.
Shipping contractors shall furnish a copy of the shipping document to
the cognizant property administrator. Shipping and receiving
contractors shall promptly notify the financial management office of
the NASA Center responsible for their respective contracts when
accountability for Government property is transferred to, or received
from, other contracts, contractors, NASA Centers or Government
agencies. Copies of shipping or receiving documents will suffice as
notification in most instances.
(b) Reclassification. If property is transferred to another
contract or contractor, the receiving contractor shall record the
property in the same property classification and amount appearing on
the shipping document. For example, when a contractor receives an item
from another contractor that is identified on the shipping document as
equipment, but that the recipient intends to incorporate into special
test equipment, the recipient shall first record the item in the
equipment account and subsequently reclassify it as special test
equipment. Reclassification of equipment, special tooling, special test
equipment, or agency-peculiar property requires prior approval of the
contracting officer or a designee.
(c) Incomplete documentation. If contractors receive transfer
documents having insufficient detail to properly record the transfer
(e.g., omission of property classification, unit prices, etc.) they
shall request the omitted data directly from the shipping contractor or
through the property administrator as provided in FAR 45.505-2.
1845.7101-3 Computing costs of fabricated special tooling, special
test equipment, agency-peculiar property and contract work in process.
(a) Costs shall be computed in accordance with accepted accounting
principles, be reasonably accurate, and be the product of any one or a
combination of, the following:
(1) Abstracts of cost data from contractor property or financial
records.
(2) Computations based on engineering and financial data.
(3) Estimates based on NASA Form 533 reports.
(4) Formula procedures (e.g., using a 50 percent factor for work in
process items, on the basis of updated Standard Form 1411 estimates or
the contractor's approved estimating and pricing system).
(5) Other approved methods.
(b) Contractors shall report costs using records that are part of
the prescribed property or financial control system as provided in this
section. Fabrication costs shall be based on approved systems or
procedures and shall include all direct and indirect costs of
fabricating Government property.
(c) The contractor shall redetermine the costs of items returned
for modification or rehabilitation.
(d) The computation of work in process shall include the costs of
associated systems, subsystems, and spare parts and components
furnished or acquired and charged to work in process pending
incorporation into a finished item. These types of items make up what
is sometimes called production inventory and include programmed extra
units to cover replacement during the fabrication process (production
spares). Also included are deliverable items on which the contractor or
a subcontractor has begun work, and materials that have been issued
from inventory.
1845.7101-4 Type of deletion.
Contractors shall report the types of deletions from contract
property records as described in this section.
(a) Adjusted. Changes in the deletion amounts, if any, that result
from mathematical errors in the previous report.
(b) Lost, damaged or destroyed. Deletion amounts as a result of
relief from responsibility under FAR 45.503 granted during the
reporting period.
(c) Transferred in place. Deletion amounts that result from a
transfer of property to a follow-on contract with the same contractor.
(d) Transferred to center accountability. Deletion amounts that
result from transfer of accountability to the NASA Center responsible
for the contract, whether or not the items are physically moved.
(e) Transferred to another NASA Center. Deletion amounts caused by
transfer of accountability to NASA Center other than the one
responsible for the contract, whether or not the items are physically
moved.
[[Page 47086]]
(f) Transferred to another Government agency. Deletion amounts that
result from transfer of property to another Government agency.
(g) Purchased at cost/returned for credit. Deletion amounts due to
contractor purchase or retention of contractor acquired property as
provided in FAR 45.605-1; or to contractor returns to suppliers under
FAR 45.605-2.
(h) Disposal through plant clearance process. Deletions other than
transfers; i.e., donations to eligible recipients, sold at less than
cost, or abandoned/directed destruction.
1845.7101-5 Contractor's privileged financial and business
information.
If a transfer of property between contractors will involve
disclosing costs of a proprietary nature, the contractor shall furnish
unit prices only on those copies of the shipping documents that are
sent to the shipping and receiving NASA installations. Transfer of the
property to the receiving contractor shall be on a no-cost basis.
1845.7101-6 [Redesignated]
1845.7101-7, 1845.7101-8, 1845.7101-9 [Removed]
15.-16. Sections 1845.7101-7, 1845.7101-8, and 1845.7101-9 are
removed.
1845.7101-10 [Redesignated]
PART 1852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
17.-18. Section 1852.245-73 is revised to read as follows:
1852.245-73 Financial reporting of NASA property in the custody of
contractors.
As prescribed in 1845.106-70(d), insert the following clause:
Financial Reporting of NASA Property in the Custody of Contractors
Sept. 1996
(a) The Contractor shall submit annually a NASA Form (NF) 1018,
NASA Property in the Custody of Contractors, in accordance with
1845.505-14, the instructions on the form, and subpart 1845.71.
Subcontractor use of NF 1018 is not required by this clause;
however, the contractor shall include data on property in the
possession of subcontractors in the annual NF 1018.
(b) If administration of this contract has been delegated to the
Department of Defense, the original of NASA Form 1018 shall be
submitted to the NASA installation Financial Management Officer and
three copies shall be sent concurrently through the DOD Property
Administrator to the NASA office identified below. If the contract
is administered to NASA, the original of NF 1018 shall be submitted
to the installation Financial Management Officer, and three copies
shall be sent concurrently to the following NASA office:
(Insert the address and office code of the organization within the
cognizant NASA installation.)
(c) The annual reporting period shall be from October 1 of each
year through September 30 of the following year. The report shall be
submitted in time to be received by October 31. The information
contained in these reports is entered into the NASA accounting
system to reflect current asset values for agency financial
statement purposes. Therefore, it is essential that required reports
be received no later than October 31. The Contracting Officer may,
in the Government's interest, withhold payment until a reserve not
exceeding $25,000 or 5 percent of the amount of the contract,
whichever is less, has been set aside, if the Contractor fails to
submit annual NF 1018 reports when due. Such reserve shall be
withheld until the Contracting Officer has determined that the
required reports have been received by the Government. The
withholding of any amount or the subsequent payment thereof shall
not be construed as a waiver of any Government right.
(d) A final report is required within 30 days after disposition
of all property subject to reporting when the contract performance
period is complete.
(End of clause)
1852.245-78 [Removed]
19. Section 1852.245-78 is removed.
PART 1853--FORMS
20. Section 1853.245(a) is revised to read as follows:
1853.245 Property (NASA Form 1018, Department of Defense Form 1342,
and Department of Defense Form 1419).
(a) NASA Form 1018, NASA Property in the Custody of Contractors.
NASA Form 1018, prescribed at 1845.505-14, shall be used by contractors
for reporting Government-owned property.
* * * * *
[FR Doc. 96-22372 Filed 9-5-96; 8:45 am]
BILLING CODE 7510-01-M
Complete official Federal Register PDF
FR Doc. 96-22234 Rewrite of the NASA FAR Supplement (NFS)
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47068-47082]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22234]
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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 1807, 1808, 1809, 1810, 1811, 1812, 1814, 1828, 1835,
1842, 1852, 1871
Rewrite of the NASA FAR Supplement (NFS)
AGENCY: Office of Procurement, National Aeronautics and Space
Administration (NASA).
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: Parts 1807 through 1814 (except 1813), and clauses affected by
these parts, are revised in their entirety. Part 1810 is removed in its
entirety; a new Part 1811 is added; and Parts 1828, 1835, 1842, and
1871 are revised as a result of the rewritten parts. The numbering of
NFS sections has been changed to indicate the exact section of the FAR
being implemented or supplemented.
EFFECTIVE DATE: September 6, 1996.
FOR FURTHER INFORMATION CONTACT:
Mr. Thomas O'Toole, (202) 358-0478; Mr. Bruce King, (202) 358-0461.
SUPPLEMENTARY INFORMATION:
Background
The National Performance Review urged agencies to streamline and
clarify their regulations. The NFS rewrite initiative was established
to pursue these goals by conducting a section by section review of the
NFS to verify its accuracy, relevancy, and validity.
Impact
NASA certifies that this regulation will not have a significant
economic impact on a substantial number of small entities under the
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). This rule does not
impose any reporting or record keeping requirements subject to the
Paperwork Reduction Act.
List of Subjects in 48 CFR Parts 1807, 1808, 1809, 1810, 1811, 1812,
1814, 1828, 1835, 1842, 1852, and 1871
Government procurement.
Tom Luedtke,
Deputy Associate Administrator for Procurement.
Accordingly, 48 CFR Parts 1807, 1808, 1809, 1810, 1811, 1812, 1814,
1828, 1835, 1842, 1852, and 1871 are amended as follows:
2. Part 1807 is revised to read as follows:
PART 1807--ACQUISITION PLANNING
Subpart 1807.1--Acquisition Plans
Sec.
1807.103 Agency-head responsibilities.
1807.105 Contents of written acquisition plans.
1807.170 Acquisition Strategy Meeting (ASM)
Subpart 1807.2--Planning for the Purchase of Supplies in Economic
Quantities
1807.204 Responsibilities of contracting officers.
Subpart 1807.3--Contractor Versus Government Performance
1807.307 Appeals.
Subpart 1807.5--Inherently Governmental Functions
1807.503 Policy.
Subpart 1807.70--Reserved
Subpart 1807.71--Master Buy Plan
1807.7100 General.
1807.7101 Applicability.
1807.7102 Submission, selection, and notification procedures.
1807.7102-1 Submission of Master Buy Plan.
1807.7102-2 Submission of amendments to the Master Buy Plan.
1807.7102-3 Selection and notification procedures.
1807.7103 Format of Master Buy Plan.
Subpart 1807.72--Acquisition Forecasting
1807.7200 Scope of subpart.
1807.7201 Definitions.
1807.7202 Policy.
1807.7203 Responsibilities.
1807.7204 Forecast data.
1807.7205 Public availability.
Authority: 42 U.S.C. 2473(c)(1)
PART 1807--ACQUISITION PLANNING
Subpart 1807.1--Acquisition Plans
1807.103 Agency-head responsibilities.
(NASA supplements paragraphs (d) and (e))
(d)(i) Except as provided in paragraph (d)(iii) of this section,
acquisition plans shall be prepared according to the following:
(A) For acquisitions requiring Headquarters approval, by an
Acquisition Strategy Meeting (ASM) (see 1807.170);
(B) For acquisitions not requiring Headquarters approval and
expected to exceed $5 million, by installation-approved ASMs or written
acquisition plans; and,
(C) For acquisitions not expected to exceed $5 million, in
accordance with installation procedures.
(ii) The estimated dollar amounts shall include all options and
later phases of the same program or project.
(iii) Acquisition plans are not required for the following
acquisitions:
(A) Architect-engineering services;
(B) Broad agency announcements (see 1835.016) or unsolicited
proposals;
(C) Basic research from nonprofit organizations;
(D) Utility services available from only one source;
(E) From or through other Government agencies;
(F) Industrial facilities required in support of related contracts;
or
(G) MidRange procedure awards (see part 1871). However, acquisition
plans are required for commercial item acquisitions that exceed the
MidRange dollar thresholds for noncommercial items.
[[Page 47069]]
(iv) Acquisition plans shall be approved before soliciting
proposals.
(v) Approval of an acquisition plan does not constitute approval of
any special conditions, or special clauses that may be required unless
the plan so specifies, and the individual having approval authority is
a signatory of the plan. All required deviations shall be approved
through the procedures described in FAR 1.4 and 1801.4.
(vi) A single acquisition plan may be used for all phases of a
phased acquisition provided the plan fully addresses each phase, and no
significant changes occur after plan approval to invalidate the
description of the phases. If such significant changes do occur, the
plan shall be amended and approved at the same level as the original
plan.
(e) Acquisition plans should be prepared on a program or system
basis when practical. In such cases, the plan should fully address all
component acquisitions of the program or system.
1807.105 Contents of written acquisition plans.
(NASA supplements paragraphs (a) and (b))
Acquisition plans shall address each applicable topic listed in FAR
7.105, as supplemented by this section. Plans shall be structured by
subject heading using each italicized topic heading in the same
sequence as presented in the FAR. Subheadings should be used when
appropriate (e.g., the separate items under contracting considerations
at 7.105(b)(4)). Topics not applicable to a given acquisition (e.g.,
design-to-cost and should-cost are not compatible with service
acquisitions), should be marked N/A.
(a)(1) Describe in nontechnical terms the supplies or services to
be acquired. Include quantities.
(3) Identify the estimated cost and describe the estimating
methodology.
(5) Specify the delivery or performance period requirements
separately by the basic contract, each option, and the total.
(8) Streamlining applies to all NASA acquisitions. Describe all
planned streamlining procedures.
(b)(3) Address how cost realism will be evaluated.
(4)(A) If an incentive contract is planned, describe the planned
incentive(s) and the anticipated effects.
(B) Describe subcontracting issues, including all applicable
subcontracting goals. (See FAR part 19 and part 1819).
(5)(A) Identify the estimated cost separately by the basic
contract, each option and total amount.
(B) Identify the funding by fiscal year and unique project number
(UPN).
(C) Discuss planned approaches to eliminate funding shortfalls (vs.
the estimated cost).
(6) Identify the type of work statement/specification planned.
Specifically address the applicability of performance-based requirement
descriptions and the availability of commercial sources for the
supplies/services.
(10) Address contract management issues, including planned
delegations of administrative functions.
(19) If the period between release of solicitation to contract
award is more than 120 calendar days (180 days for formal SEB
competitions), explain why that goal cannot be met.
1807.170 Acquisition Strategy Meeting (ASM).
(a) The ASM is an acquisition plan conducted through a meeting
attended by all interested NASA offices. At the meeting, the
acquisition plan topics and structure specified in 1807.105 are
presented in briefing format, and formal written minutes prepared to
summarize the decision, actions, and conclusions of the ASM members.
The approved minutes, along with the briefing charts, shall be included
in the contract file to document completion of the acquisition plan
required by 1807.103.
(b) The ASM is not a requirements definition meeting. It is a
meeting to seek approval for the proposed acquisition approach for
requirements that were previously defined and agreed to by the
cognizant offices.
(c) Headquarters ASMs will be chaired by the Associate
Administrator for Procurement or designee. The Headquarters Office of
Procurement (Code HS) will prepare the minutes of Headquarters ASMs and
distribute them to all attendees for review prior to approval by the
ASM chairperson.
(d) For field installation ASMs, the minutes shall be approved in
accordance with installation procedures.
Subpart 1807.2--Planning for the Purchase of Supplies in Economic
Quantities
1807.204 Responsibilities of contracting officers.
(NASA supplements paragraph (a))
(a) The contracting officer shall transmit in writing to the
cognizant inventory management/requirements office either the actual
offeror responses or a summary of their salient points. The transmittal
should be made within five working days after the closing date for
receipt of offers; however, if a response indicates the potential for a
significant savings, it should be transmitted immediately.
Subpart 1807.3--Contractor Versus Government Performance
1807.307 Appeals.
(NASA supplements paragraph (a))
(a) Installations shall establish appeals procedures in accordance
with NMI 7410.3, Delegation of Authority for Acquisition of Commercial
Activities for NASA's Use.
Subpart 1807.5--Inherently Governmental Functions
1807.503 Policy.
(NASA supplements paragraph (e))
(e) The field installation requirements office shall provide the
contracting officer the written determination that none of the
statement of work tasks are inherently governmental. Disagreements
regarding the determination shall be resolved in accordance with
installation procedures.
Subpart 1807.70--[Reserved]
Subpart 1807.71--Master Buy Plan
1807.7100 General.
The Master Buy Plan provides information on planned acquisitions to
enable management to focus its attention on a representative selection
of high-dollar-value and otherwise sensitive acquisitions.
1807.7101 Applicability.
(a) The Master Buy Plan applies to each negotiated acquisition,
including supplemental agreements, where the dollar value, including
the aggregate amount of options, follow-on acquisitions, or later
phases of multi-phase acquisitions, is expected to equal or exceed
$50,000,000.
(b) For initial annual Master Buy Plan submission only, each
installation shall submit its three largest acquisitions regardless of
dollar value and all acquisitions over $50,000,000.
(c) The procedure also applies to:
(1) Any supplemental agreement that contains either new work, a
debit change order, or a credit change order (or any combination/
consolidation thereof), if the absolute value of the actions equals or
exceeds $50,000,000 (e.g., the absolute value of a supplemental
agreement adding $30,000,000 of new work and deleting $30,000,000 of
work is $60,000,000, and is therefore subject to the Master Buy Plan).
(2) Any supplement agreement that contains one or more elements
(new work and/or individual change orders)
[[Page 47070]]
of a sensitive nature that, in the judgment of the installation or
Headquarters, warrants Headquarters consideration under the Master Buy
Plan, even though the value does not equal or exceed $50,000,000.
(d) The Master Buy Plan does not apply to incremental funding
actions or termination settlement agreements.
1807.7102 Submission, selection, and notification procedures.
1807.7102-1 Submission of Master Buy Plan.
(a) Prior to July 15th of every year, each installation shall
submit to the Headquarters Office of Procurement (Code HS) a Master Buy
Plan (electronically or original and eight copies) for the next fiscal
year, listing every known acquisition that
(1) Meets the criteria in 1807.7101,
(2) Is expected to be initiated in that fiscal year, and
(3) Has not been included in a previous Master Buy Plan or
amendment to a Master Buy Plan.
(b) The fiscal year Master Buy Plan shall list all uncompleted
acquisitions selected for Headquarters review and approval from prior
Master Buy Plans and amendments to Master Buy Plans. These acquisitions
should be listed by the appropriate fiscal year Master Buy Plan and
individual item numbers, and should indicate the current status of the
individual acquisition documents previously selected for Headquarters
review and approval.
(c) Plans shall be prepared in accordance with 1807.7103 and shall
identify the individual acquisition documents involved for every
acquisition listed. Acquisition documents that may require Headquarters
approval will be held in abeyance until receipt of the notification
required by 1807.7102-3. This is not to preclude the planning for or
initiation of such documents up to that point where Headquarters
approval may be required.
1807.7102-2 Submission of amendments to the Master Buy Plan.
(a) Acquisitions identified by installations after submission of
their Master Buy Plan and meeting the criteria in 1807.7102-1(a) shall
be submitted to Headquarters in accordance with 1807.7103 and
identified as an amendment to the fiscal year Master Buy Plan
submission.
(b) Master Buy Plan submissions should not be accomplished after
the fact. Amendments shall be submitted sufficiently in advance of
contract award date to allow Headquarters to select those acquisition
documents that will be subject to Headquarters review and approval
without creating an unacceptable delay in contract placement.
(c) When timely submittal is not possible, the installation shall
provide with the amendment a narrative explaining the circumstances
leading to the late submittal. A Master Buy Plan submission for a
contract change order expected to meet the criteria in 1807.7101 shall
be submitted to Headquarters immediately upon issuance of the change
order.
1807.7102-3 Selection and notification procedures.
(a) The Headquarters Office of Procurement (Code HS) shall select
acquisition documents from the Master Buy Plan and amendments to Master
Buy Plans to receive Headquarters review and approval and shall
designate source selection officials.
(b) When, subsequent to document selection or delegation, an
acquisition is changed (for example, increase or decrease in dollar
amount, change in requirement), canceled, superseded, deferred, or
becomes no longer subject to the Master Buy Plan procedures in
accordance with the criteria in 1807.7101, the installation shall
immediately notify Code HS, giving the reasons. Code HS shall notify
the installation's procurement office in writing of any further action
that may be required.
(c) Acquisition documents not selected for Headquarters review will
be subject to after-the-fact reviews by Headquarters during normal
procurement management surveys or other special reviews. Acquisition
delegations may subsequently be rescinded if a Headquarters review is
deemed appropriate.
1807.7103 Format of Master Buy Plan.
In accordance with the requirements of 1807.7102-1 and 1807.7102-2,
Master Buy Plans and amendments to Master Buy Plans shall be prepared
in accordance with the format illustrated in Table 1807-1.
Subpart 1807.72--Acquisition Forecasting
1807.7200 Scope of subpart.
This subpart prescribes the acquisition forecasting procedure
required to comply with the Business Opportunity Development Reform Act
of 1988.
1807.7201 Definitions.
Class of contracts means a grouping of acquisitions, either by
dollar value or by the nature of supplies and services to be acquired.
Contract opportunity means planned new contract awards exceeding
$25,000.
1807.7202 Policy.
As required by statute, it is NASA policy to
(a) Prepare an annual forecast and semiannual update of expected
contract opportunities or classes of contract opportunities for each
fiscal year;
(b) Include in the forecast contract opportunities that small
business concerns, including those owned and controlled by socially and
economically disadvantaged individuals, may be capable of performing;
and
(c) Make available such forecasts to the public.
1807.7203 Responsibilities.
(a) NASA procurement officers shall furnish the Headquarters Office
of Procurement (Code HS) with the data required in 1807.7204 on
September 1 for the annual forecast and March 15 for the semiannual
update.
(b) Code HS will prepare and distribute the consolidated annual
forecast and the semiannual update.
1807.7204 Forecast data.
(a) The annual forecast shall contain--
(1) Summary historical data (based on information provided by the
Headquarters Office of Procurement (Codes HC and HS)) on the class of
contract opportunities below the simplified acquisition threshold;
(2) Identification of all known contract opportunities in excess of
the simplified acquisition threshold. Each such action should be
identified as one of the three broad categories of acqusition--Research
and Development, Services, or Supplies and Equipment and shall include
the following information:
(i) A brief description not to exceed ten typed lines;
(ii) Approximate dollar value within the following dollar ranges:
$100,000 to $1,000,000; $1,000,000 to $5,000,000; and over $5,000,000;
(iii) Anticipated time (by fiscal year quarter) for the issuance of
the solicitation;
(iv) Identification if it is reserved for performance by small
business concerns including those owned and controlled by socially and
economically disadvantaged individuals;
(v) Identification as competitive or noncompetitive; and
(vi) Identification and telephone number of a center point of
contact.
(b) The semiannual report shall be an update of the data provided
by the annual forecast. This update should
[[Page 47071]]
provide information on new requirements not previously reported and on
changes in data related to actions previously identified.
1807.7205 Public availability.
(a) The annual forecast and semiannual update are available via the
NASA Acquisition Internet Service (NAIS) (http://
procurement.nasa.gov.).
(b) The forecasts may also be obtained from the Headquarters Office
of Procurement (Code HS) and the Office of Small and Disadvantaged
Business Utilization (Code K).
BILLING CODE 7510-01-M
[[Page 47072]]
TABLE 1807-1
[GRAPHIC] [TIFF OMITTED] TR06SE96.000
BILLING CODE 7510-01-M
[[Page 47073]]
3. Part 1808 is revised to read as follows:
PART 1808--REQUIRED SOURCES OF SUPPLIES AND SERVICES
Sec.
1808.002 Use of other Government supply sources.
1808.002-70 Acquisition of radioisotopes.
1808.002-71 Acquisition of liquid hydrogen.
1808.002-72 Acquisition of propellants.
1808.002-75 Acquisition of mercury.
Subpart 1808.1--Excess Personal Property
1808.103 Information on available excess personal property.
Subpart 1808.4--Federal Supply Schedules
1808.404 Using schedules.
1808.404-3 Requests for waivers.
Subpart 1808.6--Acquisition From Federal Prison Industries, Inc.
1808.605 Clearances.
Subpart 1808.7--Acquisition From Nonprofit Agencies Employing People
Who Are Blind or Severely Disabled
1808.705 Procedures.
1808.705-1 General.
Subpart 1808.8--Acquisition of Printing and Related Supplies
1808.802 Policy.
1808.870 Contract clause.
Subpart 1808.11--Leasing of Motor Vehicles
1808.1100 Scope of subpart.
Authority: 42 U.S.C. 2473(c)(1)
PART 1808--REQUIRED SOURCES OF SUPPLIES AND SERVICES
1808.002 Use of other Government supply sources.
1808.002-70 Acquisition of radioisotopes.
(a) DOE Form 5400.3, U.S. Department of Energy Isotope Order Blank,
and NRC Form 313, U.S. Nuclear Regulatory Commission Application for
Material License, shall be used to acquire radioisotopes, as stated on
the back of DOE Form 5400.3. No other type of order blank, purchase
order, or contract may be used in lieu of these forms.
(b) NRC Form 313 shall be filed with the Chief, Radioisotopes
Licensing Branch, Division of Fuel Cycle and Material Safety, United
States Nuclear Regulatory Commission, Washington, DC 20555. If the
application meets all regulatory requirements and applicable standards,
the Radioisotopes Licensing Branch, Nuclear Regulatory Commission, will
issue a license to the applicant. After receipt of the license, a
completed DOE Form 5400.3 (in duplicate, if the contracting office
wants an accepted copy of the form back from the supplier), the
license, and a Government bill of lading shall be sent to the
appropriate DOE laboratory. If a bill of lading is not furnished,
shipment shall be made collect on a commercial bill of lading, to be
converted at destination.
(c) NRC Form 313 and DOE Form 5400.3 shall be requisitioned
directly from United States Nuclear Regulatory Commission, Attn:
Radioisotopes Licensing Branch, Division of Fuel Cycle and Material
Safety, Washington, DC 20555.
1808.002-71 Acquisition of liquid hydrogen.
Rquests for liquid hydrogen shall be submitted to the John F.
Kennedy Space Center, National Aeronautics and Space Administration,
Kennedy Space Center, FL 32899, Attn: Director of Logistics Operations.
1808.002-72 Acqusition of propellants.
(a) General. NASA (and its contractors when authorized in
accordance with 1851.1) may acquire the items listed in paragraph (j)
of this section (except for liquid hydrogen; see 1808.002-71) on a
reimbursable basis from the San Antonio Air Logistics Center (SA-ALC),
Kelly Air Force Base, Texas, under the Air Force Missile Procurement
Fund (MPF). The Air Force MPF shall be used as a supply source for
propellants whenever there are economic or other advantages to the
Government. Field installations and offices obtaining supplies from the
MPF shall comply with the reporting requirements of paragraph (f) of
this section.
(b) Requests for acquisition. To obtain the materials listed in
paragraph (j) of this section from the Air Force MPF, NASA contracting
offices will execute a NASA-Defense Purchase Request (NASA Form 523)
(see 1853.303-523) and forward it to Headquarters, SA-ALC, Kelly Air
Force Base, TX 78241, Attention: SFS. The following additional
information should be provided on the form:
(1) Contract number (when material is required for use by a NASA
contractor).
(2) Delivery address.
(3) Mode of transportation (rail, trailer, barge, etc.). When the
procurement request covers requirements for materials not previously
forecasted or covers significant changes to previously reported
requirements, SA-ALC should be notified immediately of such
requirements.
(c) Delivery requests.
(1) A delivery request is a call on the Air Force, made against a
NASA-Defense Purchase Request (NASA Form 523), specifying the time and
place of delivery. On the basis of the estimated requirements, the Air
Force will notify NASA field installations and contractors of the name
and address of the Air Force office or producing contractor's plant to
which requests for delivery of materials shall be made. Delivery
requests may be placed by any means of communication that time
justifies; however, all verbal requests for delivery must be confirmed
in writing within 24 hours. The delivery request, whether oral or
written, must cite the NASA-Defense Purchase Request number under which
the material is being ordered and contain the following information:
(i) Nomenclature and National Stock Number.
(ii) Quantity.
(iii) Program, project, and task.
(iv) Contract number (when material is required for use by a NASA
contractor).
(v) Delivery address.
(vi) Dates of delivery.
(vii) Mode of transportation.
(viii) Location of weighting stations and scales (if weighing of
the products before delivery is required).
(2) Each delivery request shall be numbered as follows to simplify
identification and control: the last two digits of the calendar year; a
dash; and a consecutive number beginning with 1 to run through the year
(e.g., 89-5, for the fifth request made in 1989). Changes to a request
are identified by adding an alphabetical designator beginning with (A)
to the number.
(d) Receiving procedures.
(1) Receiving documents. Receipt of materials shall be evidenced on
the receiving document received with the shipment by the signature of
an individual authorized by NASA to receive materials from the Air
Force. Every effort should be made to ensure that the NASA-Defense
Purchase Request number is recorded on the receiving document before
signing.
(2) Weighing facilities. Local weighing facilities (NASA-owned,
contractor-owned, commercial, or State-operated) may be used to
determine quantities of product received. If a discrepancy exists
between the quantities shown on receiving documents and the quantities
actually received--
(i) A certified weighing ticket evidencing actual weight at
destination shall be obtained; and
(ii) A copy of the receiving document (AF Form 857 or DD Form 250)
and the original weighting ticket shall be forwarded to Headquarters,
SA-ALC, Kelly Air Force Base, TX 78241, Attention: ACFOM, identifying
the discrepancy.
[[Page 47074]]
(3) Distribution of receipts. Copies of all receiving documents
except the AF Form 857 shall be transmitted to the Headquarters, SA-
ALC, Kelly Air Force Base, TX 78241, Attention: SACAOM. Receiving
documents may be accumulated and submitted on the 10th, 20th, and last
day of each month.
(e) Billing. The costs of materials obtained through the MPF are
reimbursable. After delivery, a Standard Form 1080 (Voucher for
Transfers Between Appropriations and/or Funds (Disbursement)),
supported by documentary evidence of delivery, will be submitted by
Headquarters, SA-ALC to the NASA installation designated in the NASA
Form 523.
(f) Reporting requirements.
(1) Field installations shall submit periodic estimates of
requirements for materials listed in paragraph (j) of this section for
all programs under their cognizance, including in-house contractor
requirements. Reports shall be submitted in duplicate on AF Form 858,
Forecast of Propellant Requirements.
(2) The reports shall be forwarded no later than June 1 and
December 1 to reach Headquarters, SA-ALC, Kelly AFB, TX 78241, Attn:
SFS. Supplemental reports advising of additions to or significant
changes in previous reports may be submitted at any time. The reports,
covering all materials listed in paragraph (j) of this section, due in
June and December, shall begin with requirements as of the following
July 1 and January 1, respectively, and shall cover a 3-year period.
Requirements shall be shown by month for the first 6 months, and by
quarters for the remaining 2\1/2\-year period.
(3) Estimated requirements and other pertinent data required from
contractors shall be obtained on Air Force Form 858.
(g) Report content. Reports shall be made using a separate report
form for each material and shall provide, for each item of material,
the--
(1) Contract number;
(2) Program and/or project;
(3) Specific task within the project;
(4) End use when not associated with the named program or project;
(5) Contractor's name;
(6) Specific location of use (shipping destination); and
(7) Planned source of supply.
(h) Basis for developing materials requirements. In computing
requirements, consideration shall be given to such elements as lead
time, waste factors, transfer, and storage losses so that phased
requirements reflect the total gross quantities required to be
delivered to the use or storage site. Since the requirements estimates
are being used by other Government agencies acting as supply sources to
contract for materials, estimates must be as accurate as possible.
(i) NASA coordination. The Kennedy Space Center shall coordinate
the review of all data and establish NASA policy and procedures. The
data shall be used as the basis for NASA requirements reports to
various Government agencies for planning and supply support.
(j) Table of reportable materials.
Ammonia, Technical (Anhydrous) (Low Oil Content) 99.97 percent purity,
Spec 0-A-445
Argon Gas, 6000 PSI, AFPID 6830-5
Propellant, Ammonia, Liquid, Anhydrous 99.5 percent purity, Spec MIL-P-
27406
Propellant, Chlorine Trifluoride, Spec MIL-P-81399
Propellant, Deuterium, Gaseous, AFPID 9135-20
Propellant, Fluorine, Gaseous, Spec MIL-P-27405
Propellant, Fluorine, Liquid, Spec MIL-P-27405
Helium, Technical Grade A, Spec BB-H-1168
Propellant, Isopropyl Alcohol, AFPID 9135-18
Propellant, Hydrazine, Standard Grade, Spec MIL-P-26536
Propellant, Hydrazine, Monopropellant Grade, Spec MIL-P-26536
Propellant, Hydrazine/Unsymmetrical Dimethylhydrazine, Spec MIL-P-27402
Propellant, Hydrogen, Gaseous, Type I, Spec MIL-P-27201
Propellant, Hydrogen, Liquid, Type II, Spec MIL-P-27201
Propellant, Hydrogen Peroxide, Spec MIL-P-16005
Propellant, Hydrogen Peroxide, Electrolytic Process, Spec MIL-P-16005
Propellant, Jet Fuel, Grade RJ-1, Spec MIL-F-25558
Propellant, JPX, 50% UDMH-50% JP-4, Spec MIL-P-26694
Propellant, JPX, 17% UDMH-83% JP-4, Spec MIL-P-26694
Propellant, Kerosene, Grade RP-1, Spec MIL-P-25576
Propellant, Monomethyl Hydrazine, Spec MIL-P-27404
Propellant, Neon, Liquid, AFPID 9135-16
Propellant, Nitric Acid, Type IIIB, Spec MIL-P-7254
Propellant, Nitric Acid, Type III LS, Spec MIL-P-7254
Propellant, Nitric Acid, Type IV (High Density Acid), Spec MIL-P-7254
Propellant, Nitrogen Tetroxide (NTO) (MON-1) (MON-3), Spec MIL-P-26539
Propellant, Nitrogen Tetroxide (NTO), MIL-P-26539
Propellant, Nitrogen Tetroxide (MON-1), Spec MIL-P-26539
Propellant, Nitrogen Tetroxide (MON-3), Spec MIL-P-26539
Propellant, Oxygen, Grade B, Spec MIL-P-25508
Propellant, Oxygen, Grade A, Spec MIL-P-25508
Propellant, Oxygen, Grade F, Spec MIL-P-25508
Propellant Pressurizing Agent, Helium, Spec MIL-P-27407, 99.995 pct min
assay
Propellant Pressurizing Agent, Nitrogen, Type II, Liquid Grade C, Spec
MIL-P-27401
Propellant Pressurizing Agent, Nitrogen, Type I, Gaseous Grade A, Spec
MIL-P-27401
Propellant Pressurizing Agent, Nitrogen, Type I, Grade B, Spec MIL-P-
27401
Propellant Pressurizing Agent, Nitrogen, Type II, Grade A, Spec MIL-P-
27401
Propellant Pressurizing Agent, Nitrogen, Type II, Grade B, Spec MIL-P-
27401
Propellant, Unsymmetrical Dimethyl-hydrazine, Spec MIL-P-25604
Propellant, Nitrogen Trifluoride Spec MIL-P-87896
Propellant, Pressurizing Agent, Argon, Liquid, AFPID 9135-19
1808.002-75 Acquisition of mercury.
(a) Requests for mercury by NASA installations for their use or for
use by their cost-reimbursement type contractors shall be made to the
Mercury Contract Specialist, Directorate of Stockpile Contracts, DLA,
Defense National Stockpile Center, 8725 John J. Kingman Rd., #3339, Ft.
Belvoir, VA 22060-6223. DLA will furnish the current fair market value
to NASA. The unit of issue is a 76-pound flask.
(b) Requests for clearance to purchase quantities of 76 pounds or
more from sources other than DLA shall be submitted to the office in
paragraph (a) of this section and must be accompanied by a statement of
reasons why the available excess mercury is unsuitable for use by the
requesting field installation.
Subpart 1808.1--Excess Personal Property
1808.103 Information on available excess personal property.
In addition to the sources identified in FAR 8.103, information on
availability of NASA excess property is maintained by the Installation
Property Disposal Officer and the NASA
[[Page 47075]]
Equipment Management System (NEMS) Coordinator.
Subpart 1808.4--Federal Supply Schedules
1808.404 Using schedules.
1808.404-3 Requests for waivers.
(NASA supplements paragraphs (a) and (b)).
(a) The head of the NASA office initiating the procurement request
or a designated representative shall furnish the NASA contracting
office a signed statement identifying the supplies or services to be
purchased and explaining why similar items listed in the applicable
schedule will not meet the requirement.
(b) If a waiver is not granted, the case shall be referred to the
Associate Administrator for Procurement (Code HS) for a final decision
as to whether the non-schedule item will be purchased. The Associate
Administrator for Procurement shall promptly notify the Commissioner,
Federal Supply Service, GSA, and the contracting office of the
decision.
Subpart 1808.6--Acquisition From Federal Prison Industries, Inc.
1808.605 Clearances.
(NASA supplements paragraphs (a) and (c)).
(a) NASA purchase orders or contracts written pursuant to a general
or blanket clearance need not be supported by a copy of the clearance,
but the clearance number must be cited on the purchase order or
contract as well as on the initial voucher. A copy of the clearance
certificate must be attached to the initial voucher.
(c) When disputes occur, the contracting officer shall refer the
matter to the Associate Administrator for Procurement (Code HS) for
review and any further action. Such referrals shall include a complete
statement of the attempts made to resolve the matter.
Subpart 1808.7--Acquisition From Nonprofit Agencies Employing
People Who are Blind or Severely Disabled
1808.705 Procedures.
1808.705-1 General.
The Federal Standard Requisitioning and Issue Procedure (Federal
Property Management Regulation, Subpart 101-26.2) shall be used to
obtain nonprofit agency-produced supplies from GSA supply distribution
facilities.
Subpart 1808.8--Acquisition of Printing and Related Supplies
1808.802 Policy.
(NASA supplements (paragraph (b)).
(b) (i) The Headquarters Information Resources Management Division
(Code JT) is the NASA central printing authority.
(ii) Requests for approval to contract for printing supplies or
services shall be addressed to Code JT. Approval to contract for such
supplies or services is restricted to those requirements meeting the
following conditions:
(A) An individual order is under $1,000;
(B) The order is not of a continuing or repetitive nature; and,
(C) The Public Printer certifies it cannot be provided more
economically through the GPO.
1808.870 Contract clause.
The contracting officer shall insert the clause at 1852.208-81,
Restrictions on Printing and Duplicating, in solicitations and
contracts where there is a requirement for any printing, and/or any
duplicating/copying in excess of that described in paragraph (c) of the
clause.
Subpart 1808.11--Leasing of Motor Vehicles
1808.1100 Scope of subpart.
NASA procedures for leasing motor vehicles from GSA or commercial
sources are contained in NMI 6000.5, Transportation Management.
4. Part 1809 is revised to read as follows:
PART 1809--CONTRACTOR QUALIFICATIONS
Subpart 1809.1--Responsible Prospective Contractors
Sec.
1809.104-4 Subcontract responsibility.
1809.106 Preaward surveys.
1809.106-1 Conditions for preaward surveys.
1809.106-2 Requests for preaward surveys.
1809.106-3 Interagency preaward surveys.
1809.106-70 Preaward surveys performed by NASA installations.
Subpart 1809.2--Qualifications Requirements
1809.200 Scope of subpart.
1809.202 Policy.
1809.203 QPL's, QML's, and QBL's.
1809.203-70 General.
1809.203-71 Waiver of qualification requirements.
1809.206 Acquisitions subject to qualification requirements.
1809.206-1 General.
1809.206-70 Small businesses.
1809.206-71 Contract clause.
Subpart 1809.4--Debarment, Suspension, and Ineligibility
1809.403 Definitions.
1809.404 List of Parties Excluded from Federal Procurement and
Nonprocurement programs.
1809.405 Effect of listing.
1809.405-1 Continuation of current contracts.
1809.405-2 Restrictions on subcontracting.
1809.406 Debarment.
1809.406-3 Procedures.
1809.407 Suspension.
1809.407-3 Procedures.
1809.408 Certification regarding debarment, suspension, proposed
debarment, and other responsibility matters.
1809.470 Reporting of suspected evasive actions and causes for
debarment or suspension.
1809.470-1 Situations requiring reports.
1809.470-2 Contents of reports.
1809.470-3 Addresses and copies of reports.
Subpart 1809.5--Organizational and Consultant Conflicts of Interest
1809.500 Scope of subpart.
1809.503 Waiver.
1809.506 Procedures.
1809.507 Solicitation provisions and contract clause.
1809.507-2 Contract clause.
Subpart 1809.6--Contractor Team Arrangements
1809.670 Contract clause.
Authority: 42 U.S.C. 2473(c)(1)
PART 1809--CONTRACTOR QUALIFICATIONS
Subpart 1809.1--Responsible Prospective Contractors
1809.104-4 Subcontractor responsibility.
Generally, the Canadian Commercial Corporation's (CCC) proposal of
a firm as its subcontractor is sufficient basis for an affirmative
determination of responsibility. However, when the CCC determination of
responsibility is not consistent with other information available to
the contracting office, the contracting officer shall request from the
CCC and any other sources whatever information is necessary to make the
responsibility determination.
Upon request, CCC shall be furnished the rationale for any
subsequent determination of nonresponsibility.
1809.106 Preaward surveys.
1809.106-1 Conditions for preaward surveys.
(NASA supplements paragraph (a)).
(a) (i) Preaward surveys are used only to assist the contracting
officer to make determinations of responsibility under FAR 9.104. They
are not to be used to obtain information useful to proposal evaluation
that does not directly relate
[[Page 47076]]
to the responsibility determination. Accordingly, preaward surveys
shall not be used except in rare circumstances when determination of
responsibility cannot be made without the specific information that can
be provided only in a preaward survey report and only after all other
means of obtaining the required information have been explored.
(ii) Surveys shall not be performed for companies of any size
performing study or research contracts.
(iii) The procurement officer shall approve all preaward survey
requests.
1809.106-2 Requests for preaward surveys.
(NASA supplements paragraph (a)).
(a) The ``Walsh-Healey Public Contracts Act'' block of Section I is
for information purposes only. If information is needed for a
determination on the offeror's eligibility under the Walsh-Healey Act,
it must be specifically requested in block 20.H. of Section III.
1809.106-3 Interagency preaward surveys.
(NASA supplements paragraph (a)).
(a) If the survey will be performed for NASA by a DOD agency, the
SF 1403 request is to be sent to the appropriate office shown in the
DOD Directory of Contract Administration Services Components, DLAH
4105.4, Attn: Preaward Survey Monitor. DOD normally allows seven
working days in which to conduct a full survey and submit the report to
the requesting agency.
1809.106-70 Preaward surveys performed by NASA installations.
In discussions with representatives of the company being surveyed,
NASA preaward survey team members shall not refer to or comment on the
possibility of award to the prospective contractor. This does not
preclude discussion with a prospective contractor of questionable areas
that require clarification. Information obtained during the survey will
be treated in strict confidence and divulged only to those Government
representatives having a need to know.
Subpart 1809.2--Qualifications Requirements
1809.200 Scope of subpart.
This subpart prescribes policies and procedures to be followed in
the use of qualified products lists for acquisition of parts as
authorized by NMI 5320.5, Basic Policy for NASA Space Flight Program
Electrical, Electronic, and Electromechanical (EEE) Parts.
1809.202 Policy.
(NASA supplements paragraphs (a) and (e)).
(a) Authority regarding agency head actions under FAR 9.202(a) is
delegated to the cognizant technical activity, with approval by the
installation's competition advocate.
(e) The approval authority of FAR 9.202(e) is delegated to the
installation's competition advocate. Requests shall be prepared by the
cognizant requirements office and submitted via the procurement
officer.
1809.203 QPL's, QML's and QBL's.
1809.203-70 General.
(NASA supplements paragraph (a)).
(a) The Deputy Associate Administrator for the Office of Safety and
Mission Assurance (Code Q), is responsible for justifying, determining,
and approving NASA's need for inclusion and continued use of
qualification requirements in specifications under the NASA EEE Parts
and Advanced Interconnect Program.
1809.203-71 Waiver of qualification requirements.
When acquiring a product under a specification that includes
qualification requirements either for the end item or for components of
the end item, the NASA installation conducting the acquisition can
waive the qualification requirements. Directing a waiver of the end
item qualification requirement constitutes adequate authorization for
waiver of product qualification requirements. When a waiver has been
granted, the solicitation shall specifically indicate that the
qualification requirement is inapplicable. Such information shall also
be included in any synopsis of the acquisition (see FAR subpart 5.2).
1809.206 Acquisitions subject to qualification requirements.
1809.206-1 General.
(NASA supplements paragraph (b) and (c)).
(b)(i) The authority to determine that an emergency exists is
delegated to the installation's competition advocate. Requests for
determination shall be prepared by the cognizant requirements office
and submitted through the procurement officer.
(ii) Requests not to enforce a qualification requirement in a
nonemergency situation shall be prepared by the cognizant requirements
office and approved by the Headquarters Office of Safety and Mission
Assurance (Code Q).
(c) If an offeror seeks to demonstrate its capability, both the
product and the producer must meet the established standards.
1809.206-70 Small businesses.
If a small business otherwise eligible for award has been placed in
a special status on a Qualified Products List (Mil-Bul-103) or the
Qualified Manufacturers List (QML-38510) established as a part of the
NASA Microelectronics Reliability Program and the contracting officer
determines that the small business does not appear to have the capacity
to perform, the certificate of competency procedures in FAR subpart
19.6 are applicable.
1809.206-71 Contract clause.
When qualified products (end items or components of end items) are
being procured, the contracting officer shall insert the clause at
1852.209-70, Product Removal from Qualified Products List, in the
solicitation and in the resulting contract.
Subpart 1809.4--Debarment, Suspension, and Ineligibility
1809.403 Definitions.
For purposes of FAR subpart 9.4 and this subpart, the Associate
Administrator for Procurement is the ``debarring official,'' the
``suspending official,'' and the agency head's ``designee.''
1809.404 List of parties excluded from federal procurement and
nonprocurement programs.
(NASA supplements paragraphs (c) and (d)).
(c) The Office of Procurement (Code HS) is responsible for taking
the actions listed in FAR 9.404(c).
(d)(1) Installation procurement offices shall notify Code HS of how
many copies of the List they want and provide a single mailing address
at the installation. Code HS will place the order for the copies which
will be mailed directly to the installation. Electronic access is also
available as described in the List.
1809.405 Effect of listing
If it is believed that a new contract or subcontract must be
awarded to a firm on the List of Parties Excluded from Federal
Procurement and Nonprocurement Programs, the procurement officer shall
prepare a request for a determination with all necessary supporting
information and forward it to the Associate Administrator for
Procurement (Code HS) for approval.
[[Page 47077]]
1809.405-1 Continuation of current contracts. (NASA supplements
paragraph (c)).
(c) Approval of contract renewals or extensions shall be requested
in accordance with 1809.405.
1809.405-2 Restrictions on subcontracting. NASA supplements paragraph
(a)).
(a) Approval of consent to subcontract shall be requested in
accordance with 1809.405.
1809.406 Debarment.
1809.406-3 Procedures.
(NASA supplements paragraph (a)).
(a) The report required by FAR 9.406-3(a) shall be prepared in
accordance with 1809.470.
1809.407 Suspension.
1809.407-3 Procedures.
(NASA supplements paragraph (a)).
(a) Reports shall be prepared in accordance with 1809.470.
1809.408 Certification regarding debarment, suspension, proposed
debarment, and other responsibility matters.
(NASA supplements paragraph (a)).
(a)(2) (A) If the offeror indicates that it has been indicted,
charged, convicted, or had a civil judgment rendered against it, the
contracting officer shall immediately notify the Associate
Administrator for Procurement (Code HS), providing details as known,
and shall await a response before awarding the contract.
(B) If the offeror discloses information that indicates a need for
a debarment or suspension determination, the contracting officer shall
report the facts to the Associate Administrator for Procurement (Code
HS) in accordance with 1809.470.
1809.470 Reporting of suspected evasive actions and causes for
debarment or suspension.
1809.470-1 Situations requiring reports.
A report incorporating the information required by 1809.470-2 of
this subpart shall be forwarded by the procurement officer to the
Associate Administrator for Procurement (Code HS) when a contractor:
(a) Has committed, or is suspected of having committed, any of the
acts described in FAR 9.406-2 and 9.407-2; or
(b) Is suspected of attempting to evade the prohibitions of a
debarment or suspension imposed under the FAR by changes of address,
multiple addresses, formation of new companies, or other devices.
1809.470-2 Contents of reports.
Each report shall be coordinated with local counsel and shall
include substantially the following information, if available:
(a) Name and address of the contractor.
(b) Names of the principal officers, partners, owners, or managers.
(c) All known affiliates, subsidiaries, or parent firms, and the
nature of the affiliation.
(d) A description of the contract or contracts concerned, including
the contract number and office identifying numbers or symbols, the
amount of each contract, the amounts paid the contractor and still due,
and the percentage of work completed and to be completed.
(e) The status of vouchers.
(f) Whether the contract has been assigned pursuant to the
Assignment of Claims Act, and, if so, the name and address of the
assignee and a copy of the assignment.
(g) Whether any other contracts are outstanding with the contractor
or any affiliates, and, if so, their amount, whether they are assigned
pursuant to the Assignment of Claims Act, and the amounts paid or due
on them.
(h) A complete summary of all pertinent evidence. If a request for
debarment or suspension is based on an indictment or a conviction,
provide the evidence upon which the indictment or conviction is based.
(i) An estimate of any damages, sustained by the Government as a
result of the contractor's action, including an explanation of the
method used in making the estimate.
(j) Recommendation as to
(1) Whether the contractor should be suspended or debarred,
(2) Whether any limitations should be applied to such action,
(3) Whether current contracts should be terminated, and
(4) The period of any debarment.
(k) As an enclosure, a copy of the contract(s) or pertinent
excerpts, appropriate exhibits, testimony or statements of witnesses,
copies of assignments, and other relevant documentation.
1809.470-3 Addresses and copies of reports.
Reports, including enclosures, shall be submitted to the Office of
Procurement (Code HS), with an additional copy to the Headquarters
Office of General Counsel (Code G).
Subpart 1809.5--Organizational and Consultant Conflicts of Interest
1809.500 Scope of subpart.
The Associate Administrator for Procurement has authorized the
procurement officer to take those actions reserved in FAR subpart 9.5
for the head of the contracting activity. However, see 1809.503
regarding waivers.
1809.503 Waiver.
The Administrator has designated the Associate Administrator for
Procurement as the approval authority for waivers under FAR 9.503. The
procurement officer shall forward requests for waivers under FAR 9.503
to the Associate Administrator for Procurement (Code HS) for action.
1809.506 Procedures.
(NASA supplements paragraph (b)).
(b) The approving official is the procurement officer when the
installation has source selection authority and the Associate
Administrator for Procurement (Code HS) when NASA Headquarters has that
authority.
1809.507 Solicitation provisions and contract clause.
1809.507-2 Contract clause.
The contracting officer may insert a clause substantially the same
as the clause at 1852.209-71, Limitation of Future Contracting, in
solicitations and contracts.
Subpart 1809.6--Contractor Team Arrangements
1809.670 Contract clause.
The contracting officer shall insert the clause at 1852.209-72,
Composition of the Contractor, in all construction invitations for bids
and resulting contracts. The clause may be used in other solicitations
and contracts to clarify a contractor team arrangement where the prime
contractor consists of more than one legal entity, such as a joint
venture.
PART 1810--SPECIFICATIONS, STANDARDS, AND OTHER PURCHASE
DESCRIPTIONS
PART 1810--[REMOVED]
(5) Under the authority of 10 U.S.C. chapter 137, Part 1810 is
removed.
(6) Part 1811 is added to read as follows:
[[Page 47078]]
PART 1811--DESCRIBING AGENCY NEEDS
Sec.
1811.002 Policy.
Subpart 1811.1--Selecting and Developing Requirements Documents
1811.104 Items peculiar to one manufacturer.
1811.104-70 Brand name or equal purchase descriptions.
1811.104-71 NASA solicitation provision.
Subpart 1811.4--Delivery or Performance Schedules
1811.403 Supplies or services.
1811.404 Contract clauses.
Subpart 1811.5--Liquidated Damages
1811.502 Policy.
Subpart 1811.6 Priorities and Allocations
1811.602 General.
1811.603 Procedures.
Authority: 42 U.S.C. 2473(c)(1)
PART 1811--DESCRIBING AGENCY NEEDS
1811.002 Policy.
(NASA supplements paragraph (b))
(b) Implementation of the Metric Conversion Act of 1975, as
amended, shall be in accordance with NPD 8010.2B, Use of the Metric
System of Measurements in NASA Programs.
Subpart 1811.1--Selecting and Developing Requirements Documents
1811.104 Items peculiar to one manufacturer.
1811.104-70 Brand name or equal purchase descriptions.
(a) Use of brand-name purchase descriptions is the least preferred
method for describing Agency requirements. Purchase descriptions
containing references to one or more brand-name products, or components
of a product, followed by ``or equal'' may be used only in accordance
with this part 1811.
(b) The term ``or equal'' should not be added if it is determined
under FAR 11.104 that only a particular product meets the essential
requirements of the Government.
(c) To the extent feasible, all acceptable brand-name products
should be referenced. If ``brand-name-or-equal'' is used, offerors must
be given the opportunity to offer products other than those referenced
by brand-name if those products will meet the needs of the Government
in essentially the same manner.
(d) ``Brand-name-or-equal'' purchase descriptions should set forth
the salient physical, functional, or other characteristics essential to
the needs of the Government. Purchase descriptions should include the
following items and any other information necessary to describe the
item:
(1) Complete common generic identification of the item.
(2) Model, make, or catalog number for each brand name product, and
identity of the commercial catalog in which it appears.
(3) Name of manufacturer, producer, or distributor of each brand
name product referenced (and address if company is not well known).
(e) When it is needed to describe the item required, a commercial
catalog description, or pertinent extracts, may be used if the
description is identified in the solicitation as being that of the
manufacturer, producer, or distributor. The contracting officer shall
ensure that a copy of any catalog referenced (except parts catalogs) is
available on request for review by offerors at the contracting office.
(f) Offerors offering brand-name products shall not be required to
furnish samples; however, solicitations may require the submission of
samples from offerors proposing ``or equal'' products.
(g) Proposals offering products differing from brand-name products
referenced in a ``brand-name-or-equal'' purchase description shall be
considered for award if the contracting officer determines that the
offered products meet the salient characteristics required by the
solicitation. Offers shall not be rejected because of minor differences
in design, construction, or features that do not affect the suitability
of the products for their intended use.
(h) Except as provided in paragraph (i)(1) of this section, when a
``brand-name-or-equal'' purchase description is included in a
solicitation, the following shall be inserted after each item so
described in the solicitation for completion by the offeror:
Offering:
Manufacturer's Name----------------------------------------------------
Brand------------------------------------------------------------------
No.--------------------------------------------------------------------
(i) If the contracting officer determines that the provision at
1852.211-70 should apply only to certain components, the requirements
of paragraph (h) of this section shall apply to them, and a statement
substantially as follows shall be included:
The provision entitled Brand Name or Equal applies to the
following components:
(List the components to which the provision applies.)
(j) Award documents for brand-name-or-equal acquisitions shall
identify the specific products or components the contractor is to
furnish. This identification shall include any brand name and make or
model number, descriptive material, and any modifications of brand name
products specified in the solicitation.
1811.104-71 NASA solicitation provision.
When a ``brand-name-or-equal'' purchase description is used, the
contracting officer shall insert in the solicitation the provision at
1852.211-70, Brand Name or Equal.
Subpart 1811.4--Delivery or Performance Schedules
1811.403 Supplies or services.
(NASA supplements paragraph (a))
(a)(3) Contract delivery or performance schedules shall not be
expressed in terms of a notice of award. A notice of award as a
specific document, separate from the award document itself, is not a
contractual document and shall not be used as a reference point for
contract performance. See 1814.408 for additional information on
notices of award.
1811.404 Contract clauses.
(NASA supplements paragraph (a))
(a)(2) FAR 52.211-8, Time of Delivery, Alternates II and III, shall
not be used in NASA contracts.
(3) FAR 52.211-9, Desired and Required Time of Delivery, Alternates
II and III, shall not be used in NASA contracts.
Subpart 1811.5--Liquidated Damages
1811.502 Policy.
(NASA supplements paragraph (d))
(d) The procurement officer shall forward recommendations
concerning remission of liquidated damages to the Headquarters Office
of Procurement (Code HS).
Subpart 1811.6--Priorities and Allocations
1811.602 General.
(NASA supplements paragraph (c))
(c) The Department of Defense is the ``Delegate Agency'' for NASA.
The Headquarters Office of Procurement (Code HS) shall coordinate with
DOD, as necessary, to ensure that any DOD requirements are met.
1811.603 Procedures.
(NASA supplements paragraphs (e) and (g))
(e)(i) The use of priority ratings on NASA contracts and purchase
orders is mandatory except as noted in paragraph (e)(ii) of this
section. Priority ratings are
[[Page 47079]]
assigned on individual contracts and purchase orders by the contracting
officer.
(ii) Priority ratings will not be issued for the following:
(A) Items ordered or requisitioned from the GSA Federal Supply
Service.
(B) Items for plant improvement, expansion, or construction, unless
they will be physically incorporated into a construction project
covered by a rated order, or unless NASA has obtained specific priority
rating authority.
(C) Production or construction equipment or items to be used for
the manufacture of production equipment, unless NASA has obtained
specific priority rating authority.
(D) Items falling under the jurisdiction of agencies other than
NASA's Delegate Agency. These are: petroleum, gas, solid fuel, electric
power, and all other forms of energy; food; civil transportation and
the movement of persons and property by all modes; minerals; water;
housing facilities; health facilities; radio-isotopes, stable isotopes,
source material and special nuclear material produced in Government-
owned plants or facilities operated by or for the Department of Energy;
communication services; copper raw materials; crushed stone; gravel;
sand; scrap; slag; central steam heat; and waste paper.
(iii) All other NASA orders shall be assigned a DO rating, unless
NASA has obtained a DX rating from the Delegate Agency.
(iv) The program identification numbers (DPAS, 15 CFR part 700, SCH
L.) to be used by NASA are as follows:
A1 Aircraft
A2 Missiles
A3 Ships
A5 Weapons
A6 Ammunition
A7 Electronic and Communications Equipment
B1 Military Building Supplies
B8 Production Equipment (for Contractor's Account)
B9 Production Equipment (Government-Owned)
C2 Construction
C3 Maintenance, Repair, and Operating Supplies for Facilities
C9 Miscellaneous/Other
(g) Installation requests for assistance shall be directed to the
Headquarters Office of Procurement (Code HS).
7. Part 1812 is revised to read as follows:
PART 1812--ACQUISITION OF COMMERCIAL ITEMS
Subpart 1812.1--Acquisition of Commercial Items--General
Sec.
1812.102 Applicability.
Subpart 1812.3--Solicitation Provisions and Contract Clauses for the
Acquisition of Commercial Items
1812.301 Solicitation provisions and contract clauses for the
acquisition of commercial items.
1812.302 Tailoring of provisions and clauses for the acquisition of
commercial items.
Subpart 1812.4--Unique Requirements Regarding Terms and Conditions for
Commerical Items
1812.404 Warranties.
Authority: 42 U.S.C. 2473(c)(1).
PART 1812--ACQUISITION OF COMMERCIAL ITEMS
Subpart 1812.1--Acquisition of Commercial Items--General
1812.102 Applicability.
(NASA supplements paragraph (c))
(c) For the acquisition of commercial items of any value, the
MidRange procedures described in part 1871 may be used to the extent
they are consistent and compliant with FAR part 12 and part 1812.
Unless specifically stated, in any conflict between these parts the
descending order of precedence is FAR part 12, part 1812, and part
1871.
Subpart 1812.3--Solicitation Provisions and Contract Clauses for
the Acquisition of Commercial Items
1812.301 Solicitation provisions and contract clauses for the
acquisition of commercial items.
(NASA supplements paragraph (f))
(f)(i) The following clauses may be used in acquisitions of
commercial items:
(A) 1852.214-71, Grouping for Aggregate Award.
(B) 1852.214-72, Full Quantities.
(C) 1852.215-84, Ombudsman.
(D) 1852.219-75, Small Business and Small Disadvantaged Business
Subcontracting Reporting.
(E) 1852.219-76, NASA Small Disadvantaged Business Goal.
(F) 1852.228-72, Cross-Waiver of Liability for Space Shuttle
Services.
(G) 1852.228-76, Cross-Waiver of Liability for Space Station
Activities.
(H) 1852.228-78, Cross-Waiver of Liability for NASA Expendable
Launch Vehicles.
(I) 1852.232-70, NASA Progress Payment Rates.
(ii) No other provisions and clauses prescribed in the NFS or
center documents shall be used in acquisitions of commercial items,
except as permitted by FAR 12.302.
1812.302 Tailoring of provisions and clauses for the acquisition of
commercial items.
(NASA supplements paragraph (c))
(c) The Associate Administrator for Procurement (Code HS) is the
approval authority for waivers. Requests shall be prepared and
submitted in accordance with 1801.471.
Subpart 1812.4--Unique Requirements Regarding Terms and Conditions
for Commercial Items
1812.404 Warranties.
(b) In acquisitions under the Simplified Acquisition Threshold
specified in FAR part 13, no express warranty should be required other
than the offeror's commercial warranty.
8. Part 1814 is revised to read as follows:
PART 1814--SEALED BIDDING
Subpart 1814.2--Solicitation of Bids
Sec.
1814.201-- Preparation of invitations for bids.
1814.201-5-- Part IV--Representations and instructions.
1814.201-6-- Solicitation provisions.
1814.201-670-- NASA solicitation provisions.
Subpart 1814.3--Submission of Bids
1814.302-- Bid submission
Subpart 1814.4--Opening of Bids and Award of Contract
1814.404-- Rejection of bids.
1814.404-1 Cancellation of invitations after opening.
1814.407-- Mistakes in bids.
1814.407-3-- Other mistakes disclosed before award.
1814.407-4-- Mistakes after award.
1814.408-- Award.
1814.408-1-- General.
Authority: 42 U.S.C. 2473(c)(1)
PART 1814--SEALED BIDDING
Subpart 1814.2--Solicitation of Bids
1814.201 Preparation of invitations for bids.
1814.201-5 Part IV--Representations and instructions.
(NASA supplements paragraph (c)).
(c) Section M, Evaluation factors for award.
(i) The contracting officer shall state if award is to be made in
the aggregate (all-or-non basis) or by specified groups of items.
[[Page 47080]]
(ii) if bidders are required to have special technical
qualifications because of the complexity of the equipment being
purchased or for some other reason, the contracting officer shall state
those qualifications.
1814.201-6 Solicitation provisions.
1814.201-670 NASA solicitation provisions.
(a) The contracting officer shall insert the provision at 1852.214-
70, Caution to Offerors Furnishing Descriptive Literature, in
invitations for bids. See FAR 52.214-21, Descriptive Literature.
(b) The contracting officer shall insert the provision at 1852.214-
71, Grouping for Aggregate Award, in invitations for bids, except for
construction, when it is in the Government's best interest not to make
award for less than specified quantities solicited for certain items or
groupings of certain items. Insert the item numbers and/or descriptions
applicable for the particular procurement.
(c) The contracting officer shall insert the provision at 1852.214-
72, Full Quantities, in invitations for bids, except for construction,
when it is in the Government's best interest not to make award for less
than the full quantities solicited.
(d) If a pre-bid conference is planned, the contracting officer
shall insert the provision at 1852.215-77, Preproposal/Pre-bid
Conference. See 1815.407-70(d).
Subpart 1814.3--Submission of Bids
1814.302 Bid submission.
(NASA supplements paragraph (b))
(b) NASA contracting officers shall not consider telegraphic bids
communicated by the telephone.
Subpart 1814.4--Opening of Bids and Award of Contract
1814.404 Rejection of bids.
1814.404-1 Cancellation of invitations after opening.
(NASA supplements paragraphs (c) and (e)).
(c) The authority to make the determination at FAR 14.404-1(c) is
delegated to the contracting officer, except as provided in paragraph
(e)(1) of this subsection.
(e)(1) A determination that includes an authorization to complete
the acquisition through negotiation shall be made by the procurement
officer, in consultation with the chief counsel.
1814.407 Mistakes in bids.
1814.407-3 Other mistakes disclosed before award.
(NASA supplements paragraph (e))
(e) Procurement officers are authorized to make the determinations
under 14.407-3 (a), (b), (c) and (d).
1814.407-4 Mistakes after award.
(NASA supplements paragraph (d))
(d) Determinations shall be made by the procurement officer.
1814.408 Award.
1814.408-1 General.
(1) A notice of award as a specific document is used when the
contracting officer needs to inform a responsible bidder that its offer
was determined to be the most advantageous to the Government
(considering only price and price-related factors) and that the formal
award will be made upon satisfaction of specified pre-performance
conditions.
(2) The notice of award is not a contractual instrument. It does
not authorize the successful bidder to perform and, in itself, does not
obligate the Government to award a contractual document. Its limited
purpose is to provide: evidence of the Government's selection of the
successful bidder; instruction to that bidder to satisfy specified pre-
performance conditions; and a statement that the Government intends to
award the contract to the successful bidder upon satisfaction of these
conditions if a contract is awarded as a result of the invitation for
bids.
(3) Use of a notice of award is optional. The contracting officer
may issue the award document itself without first issuing a notice of
award. However, there are instances when a notice of award should be
considered, for example, in construction contracts where performance or
payment bonds are required. In such cases, the most cost effective
technique is to require only the successful bidder to provide the
necessary bonds. The notice of award advises the successful bidder to
provide the bonds, and it also serves as formal evidence from the
Government of the impending award if such evidence is required to
secure the bonds.
(4) The notice of award shall not be issued unless bids have been
evaluated and a selection made, and a definitive contract document is
ready for execution upon satisfaction of the conditions specified in
the notice. Upon satisfaction of these conditions, the approved and
executed contract instrument shall be provided to the successful
bidder.
(5) Since the notice of award is not a contractual document
authorizing performance, the period of performance of the resultant
contract shall not be based on the date of issuance or receipt of the
notice of award. The period of performance specified in the contract
shall be based on some other reference point, such as the date the
contract is provided to the successful bidder, a mutually agreeable
effective date of a later authorization to proceed date.
(6) The notice of award can be issued by any formal written means
such as a letter, telegram or electronic means. The notice should be
substantially the same as the following format.
Format
Subject: Notice of Award--Invitation for Bids (IFB) (a). This
notice is to advise you that your bid (b) in response to the subject
IFB has been determined to be the most advantageous to the
Government (considering only price and price-related factors). It is
the Government's intention to award you a contract in the amount of
(c) for this effort pending satisfaction of the following pre-
performance conditions: (d)
Evidence (e) of satisfaction of these conditions must be
provided to the contracting officer by (f). In the event these
conditions are not satisfied by this date, the Government reserves
the right to award the contract to the bidder who submitted the next
most advantageous bid.
Please note that this notice of award is not a contractual
document. It does not obligate the Government to award you, or any
other bidder, a contract relative to the subject IFB, and it does
not authorize you to proceed with contract performance or incur
costs pursuant to such performance. Any costs incurred for contract
performance prior to your receipt of a fully executed contract
document are at your own risk and are not recoverable under any
Government contract should the Government fail, for whatever reason,
to award you a contract in response to the subject IFB.
If a contract is awarded after evidence of satisfaction of the
pre-performance conditions listed above is provided to the
contracting officer by the specified due date, the date of
commencement of work will be provided with the formal award. This
date will be based on (g).
Notes.--The contracting officer shall insert, where shown, the
following information:
(a) Identification of the IFB by number and title.
(b) Identification of the contractor's bid.
(c) The award price.
(d) The preperformance conditions (e.g., any required payment
and performance bonds).
(e) The evidence required to satisfy the pre-performance
conditions (e.g., the actual payment and performance bonds).
(f) The date by which the evidence must be provided to the
contracting officer.
(g) Identification of the date for commencement of performance.
The period of performance of the contract shall not be based on the
date of issuance or receipt of the notice of award. It shall be
based on the date the contract is provided to the successful bidder,
a mutually agreeable effective date, or a later authorization to
proceed date.
[[Page 47081]]
PART 1828--BONDS AND INSURANCE
1828.202 [Added]
9. Section 1828.202 is revised to read as follows:
1828.202 Acceptability of corporate sureties.
(NASA supplements paragraph (a)).
(a) Contracting officers may obtain access to the Department of
Treasury Circular 570 through the Circular 570 Bulletin Board,
telephone (202) 874-7214. Use the following communications software
specifications:
Baud rate..........................................................2400
Parity.............................................................None
No. of Data Bits......................................................8
No. of Stop Bits......................................................1
Duplex.............................................................Full
PART 1835--RESEARCH AND DEVELOPMENT CONTRACTING
1835.004 [Added]
10. Section 1835.004 is added to read as follows:
1835.004 Publicizing requirements and expanding research and
development sources.
(NASA supplements paragraph (a))
(a) In R&D acquisitions over $100,000, when only three or fewer
sources are known, the contracting officer shall have the requirements
office query the Defense Technical Information Center (DTIC) IR&D
Database to identify additional sources conducting IR&D in the area of
the acquisition, in addition to using other market survey techniques.
If needed, specific information on access to and use of the DTIC IR&D
Database by a particular NASA installation may be obtained from that
installation's designated IR&D focal point.
PART 1842--CONTRACT ADMINISTRATION
Subpart 1842.13--[Added]
11. Subpart 1842.13 is added to read as follows:
1842.13--Suspension of work, stop-work orders, and Government delay of
work
1842.1305 Contract clauses.
(NASA supplements paragraph (b))
(b) FAR 52.242-15, Stop-Work Order, shall not be used in
solicitations or contracts for research performed by educational or
other nonprofit institutions.
PART 1852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES.
1852.207-70 [Removed]
12.-13. Section 1852.207-70 is removed.
1852.210-70 [Redesignated]
1852.210-71, 1852.210-72, 1852.210-75 [Removed]
14.-15. Sections 1852.210-40, 1852.210-71, 1852.210-72 and
1852.210-75 are removed.
1852.211-70, 1852.211-72, 1852.211-74 [Added]
16. Sections 1852.211-70, 1852.211-72 and 1852.211-74 are added to
read as follows:
1852.211-70 Brand name or equal.
As prescribed in 1811.104-71, insert the following provision:
Brand Name or Equal
(DECEMBER 1988)
(a) As used in this provision, ``brand name'' means
identification of products by make and model. The term ``bid'' means
``offer'' if this is a negotiated acquisition.
(b) If items called for by this solicitation are identified in
the Schedule by a ``brand name or equal'' description, that
identification is intended to be descriptive, not restrictive, and
is to indicate the quality and characteristics of products that will
be satisfactory. Bids offering ``equal'' products, including
products of the brand name manufacturer other than the one described
by model designation, will be considered for award if the products
are clearly identified in the bids and are determined by the
Government to meet fully the salient characteristics requirements
referenced in the solicitation.
(c) Unless the offeror clearly indicates in the bid that it is
offering an ``equal'' product, the bid shall be considered as
offering a brand-name product referenced in the solicitation.
(d) (1) If the offeror proposes to furnish an ``equal'' product,
the brand name, if any, of the product to be furnished shall be
inserted in the space provided in the solicitation, or that product
shall be otherwise clearly identified in the bid. The evaluation of
bids and the determination as to equality of the product offered
shall be the responsibility of the Government and will be based on
information furnished by the offeror or identified in its bid, as
well as on other information reasonably available to the contracting
activity.
(2) CAUTION TO OFFERORS: The contracting office is not
responsible for locating or securing any information not identified
in the bid and reasonably available to the contracting office.
Accordingly, to ensure that sufficient information is available, the
offeror must furnish as a part of its bid all descriptive material
(such as cuts, illustrations, drawings, or other information)
necessary for the contracting office to (i) determine whether the
product offered meets the salient characteristics requirements of
the solicitation and (ii) establish exactly what the offeror
proposes to furnish and what the Government would be binding itself
to purchase by making an award. The information furnished may
include specific references to information previously furnished or
to information otherwise available to the contracting office.
(3) If the offeror proposes to modify a product so as to make it
conform to the requirements of the solicitation, it shall (i)
include in the bid a clear description of the proposed modifications
and (ii) clearly mark any descriptive material to show them.
(4) If this is a sealed bid acquisition, modifications proposed
after bid opening to make a product conform to a brand name product
referenced in the solicitation will not be considered.
(End of provision)
1852.211-72 Period of Performance.
As prescribed in 1811.403(a)(3), insert the following clause:
Period of Performance
(DECEMBER 1988)
The period of performance of this contract shall be [Insert
period of performance dates].
(End of clause)
1852.211-74 Notice of Delay.
As prescribed at 1811.404-70(a), insert the following clause:
Notice of Delay
(DECEMBER 1988)
If, because of technical difficulties, the Contractor becomes
unable to complete the contract work at the time specified,
notwithstanding the exercise of good faith and diligent efforts in
performing the work called for under this contract, the Contractor
shall give the Contracting Officer written notice of the anticipated
delay and the reasons for it. The notice and reasons shall be
delivered promptly after the condition creating the anticipated
delay becomes known to the Contractor but in no event less than 45
days before the completion date specified in this contract, unless
otherwise permitted by the Contracting Officer. When notice is
given, the Contracting Officer may extend the time specified in the
Schedule for such period as is deemed advisable.
(End of clause)
1852.212-70 [Redesignated]
1852.212-72, 1852.212-73 [Removed]
17.-18. Sections 1852.212-72 and 1852.212-73 are removed.
1852.212-74 [Redesignated]
1852.214-70, 1852-214-71, 1852.214-72 [Amended]
19.-20. Sections 1852.214-70, 1852.214-71, and 1852-214.72 are
revised to read as follows:
[[Page 47082]]
1852.214-70 Caution to Offerors Furnishing Descriptive Literature.
As prescribed in 1814.201-670(a), insert the following provision:
Caution to Offerors Furnishing
Descriptive Literature
(DECEMBER 1988)
Bidders are cautioned against furnishing as a part of their bids
descriptive literature that includes language reserving to the
bidder the right to deviate from the requirements of the invitation
for bids. Statements that ``Data are subject to change without
notice,'' ``Prices subject to change without notice,'' or words
having a similar effect are examples of such reservation. The
Government will reject as nonresponsive any bid that incorporates
literature containing such language or any bid that must be
evaluated by using literature containing such language. Bidders
should clearly label any submissions of descriptive literature not
intended to form a part of a bid as such in order to preclude any
need for the Government to interpret the bidder's intent in
submitting descriptive literature. [See FAR 14.202-5.]
(End of provision)
1852.214-71 Grouping for Aggregate Award.
As prescribed in 1814.201-670(c), insert the following provision:
Grouping for Aggregate Award
(MARCH 1989)
(a) The Government will evaluate offers and make award on a
basis of the aggregate offers for items
Insert the item numbers and/or descriptions].
The Government will not consider an offer for quantities less
than those specified for these items.
(b) If this is an invitation for bids, the Government will
reject as nonresponsive a bid that is not made on the total
quantities for all of the items specified in paragraph (a) of this
section.
(End of provision)
1852.214-72 Full Quantities.
As prescribed in 1814.201-670(b), insert the following provision:
FULL QUANTITIES
(DECEMBER 1988)
The Government will not consider an offer for quantities of
items less than those specified. If this is an invitation for bids,
the Government will reject as nonresponsive a bid that is not made
on full quantities.
(End of provision)
PART 1871--MIDRANGE PROCUREMENT PROCEDURES
1871.103 [Amended]
21. Paragraph (b) to section 1871.103 is revised to read as
follows:
1871.103 Applicability.
(a) * * *
(b) This part applies to all contract actions the aggregate amount
of which is greater than the simplified acquisition threshold (SAT)
(FAR part 13) and not more than $1,000,000 in basic value and for
commercial items regardless of dollar value to the extent consistent
and compliant with FAR part 12 and part 1812 (see 1812.102(c)). For
service contracts, up to four annual options of not more than
$1,000,000 each are permitted where the option requirements are
substantially the same as the basic requirement. For R&D contracts,
options are permitted not to exceed $1,000,000 in total value (basic
contract plus options). For supply contracts, four options of not more
than $1,000,000 each are permitted when not more than $1,000,000 in
funding is to be required in any fiscal year. The total amount of the
basic award plus options may not exceed $5,000,000 in either the case
of supplies or services except as provided in paragraph (c) of this
section. For commercial item contracts, options are permitted
regardless of dollar value.
* * * * *
1871.401-6 [Amended]
22. In section 1871.401-6, paragraph (a)(2) is revised to read as
follows:
1871.206-1 Commercial Items.
(a) Policy.
(1) * * *
(2) MidRange Procedures may be used for commercial item
procurements to the extent consistent and compliant with FAR part 12
and part 1812 (see 1812.102(c)).
* * * * *
[FR Doc. 96-22234 Filed 9-5-96; 8:45 a.m]
BILLING CODE 7510-01-M
Complete official Federal Register PDF
FR Doc. 96-22045 Implementation of the Local Competition Provisions of the Telecommunications Act of 1996
[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47284-47355]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22045]
[[Page 47283]]
_______________________________________________________________________
Part III
Federal Communications Commission
_______________________________________________________________________
47 CFR Parts 51 and 52
Telecommunications Act of 1996: Implementation of Local Competition
Provisions; Final Rule
Federal Register / Vol. 61, No. 174 / Friday, September 6, 1996 /
Rules and Regulations
[[Page 47284]]
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 51 and 52
[CC Docket No. 96-98, 95-185, 92-237, FCC 96-333]
Implementation of the Local Competition Provisions of the
Telecommunications Act of 1996
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In enacting the Telecommunications Act of 1996 (1996 Act)
Congress sought to establish a pro-competitive, deregulatory national
policy framework for the telecommunications industry. In adding a new
Section 251 to the Communications Act of 1934, Congress set forth a
blueprint for ending monopolies in local telecommunications markets. In
this Second Report and Order the Commission adopts rules implementing
certain provisions of Section 251. Specifically, this order adopts
rules requiring local exchange carriers to provide dialing parity and
nondiscriminatory access to their competitors; and requiring incumbent
local exchange carriers to give public notice of certain network
changes. In addition, this order adopts rules regarding number
administration and addresses various petitions concerning numbering
issues. These actions will serve to implement the statute, eliminate
operational barriers to competition, and provide for effective use of
numbering resources.
EFFECTIVE DATE: October 7, 1996, except that the collection of
information subject to approval by the Office of Management and Budget
(OMB) that are contained in sections 51.211(c), 51.213, 51.217,
51.305(g), 51.307(e), 51.325, 51.327, 51.329, 51.331, 51.333, 51.335
and 52.19(b) which are effective November 15, 1996.
FOR FURTHER INFORMATION CONTACT: For information concerning Dialing
Parity, Nondiscriminatory Access and Network Information Disclosure,
contact Lisa Boehley, (202) 418-2320, Network Services Division, Common
Carrier Bureau. For information concerning Numbering Administration
contact Marian Gordon, (202) 418-2320, Network Services Division,
Common Carrier Bureau.
SUPPLEMENTARY INFORMATION: This Second Report and Order contains new or
modified information collections subject to the Paperwork Reduction Act
of 1995 (PRA). It has been submitted to the Office of Management and
Budget (OMB) for review under the PRA. OMB, the general public, and
other federal agencies are invited to comment on the proposed or
modified information collections contained in this proceeding. This is
a synopsis of the Commission's Second Report and Order and Memorandum
Opinion and Order, (FCC 96-333) adopted on August 8, 1996 and released
on August 8, 1996. The full text of this Order is available for
inspection and copying during normal business hours in the FCC
Reference Center (Room 239), 1919 M Street, N.W., Washington, D.C. The
complete text also may be purchased from the Commission's copy
contractor, International Transcription Service, Inc., (202) 857-3800,
2100 M Street N.W., Suite 140, Washington, D.C. 20037.
PAPERWORK REDUCTION ACT: This Second Report and Order contains either a
new or modified information collection. The Commission, as part of its
continuing effort to reduce paperwork burdens, invites the general
public and the Office of Management and Budget (OMB) to comment on the
information collections contained in this order, as required by the
Paperwork Reduction Act of 1995, Public Law No. 104-13. OMB
notification of action is due September 6, 1996. Comments should
address: (a) whether the new or modified collection of information is
necessary for the proper performance of the functions of the
Commission, including whether the information shall have practical
utility; (b) the accuracy of the Commission's burden estimates; (c)
ways to enhance the quality, utility, and clarity of the information
collected; and (d) ways to minimize the burden of the collection of
information on the respondents including the use of automated
collection techniques or other forms of information technology.
OMB Approval Number: None.
Title: Implementation of the Local Competition Provisions of the
Telecommunications Act of 1996--Second Report and Order and Memorandum
Opinion and Order, CC Dockets No. 96-98 and 95-185.
Form No.: N/A.
Type of Review: New Collections.
Respondents: Business or other for-profit, including small
businesses, and state and local governments.
----------------------------------------------------------------------------------------------------------------
No. of Est. time per Total annual
Section/title respondents response burden
----------------------------------------------------------------------------------------------------------------
Dialing parity implementation plans............................. 1,350 100 135,000
Justification for noncompliance................................. 20 9 180
Sharing of directory listings................................... 500 36 18,000
Provision of technical information.............................. 500 24 12,000
Public notice of network changes................................ 500 72 36,000
Burden of proof................................................. 75 8 600
Submission of area code relief plans............................ 30 40 1,200
----------------------------------------------------------------------------------------------------------------
Total Annual Burden: 202,980.
Estimated Costs Per Respondent: $0.
Needs and Uses: The new or modified information collections in this
Second Report and Order will be used to ensure that affected
telecommunications carriers fulfill their obligations under the
Communications Act, as amended.
Synopsis of Second Report and Order
Adopted: August 8, 1996.
Released: August 8, 1996.
Table of Contents
Section Paragraph
I. Introduction and Overview............................... 1
A. Actions to Implement Section 251(b)(3)................ 4
1. Dialing Parity...................................... 4
2. Nondiscriminatory Access............................ 12
B. Actions to Implement Section 251(c)(5)................ 16
C. Actions Taken to Implement Section 251(e)............. 18
II. Dialing Parity Requirements............................ 22
A. In General............................................ 22
1. The Need for Minimum Nationwide Dialing Parity
Standards............................................. 23
a. Background and Comments........................... 23
[[Page 47285]]
b. Discussion........................................ 25
2. Scope of the Dialing Parity Requirements............ 26
a. Background........................................ 26
b. Comments.......................................... 27
c. Discussion........................................ 29
B. Implementation of the Toll Dialing Parity Requirements 31
1. Presubscription Method of Achieving Toll Dialing
Parity................................................ 31
a. Background........................................ 31
b. Comments.......................................... 33
c. Discussion........................................ 34
2. Categories of Domestic, Long Distance Traffic
Subject to Presubscription............................ 35
a. Background........................................ 35
b. Comments.......................................... 36
c. Discussion........................................ 37
3. Separate Presubscription for International Calls.... 43
a. Background and Comments........................... 43
b. Discussion........................................ 45
4. Full 2-PIC Presubscription Method................... 46
a. Background........................................ 46
b. Comments.......................................... 48
c. Discussion........................................ 49
5. Deployment of Presub-scription Software in Each End
Office................................................ 51
a. Background........................................ 51
b. Comments.......................................... 52
c. Discussion........................................ 54
C. Implementation Schedule for Toll Dialing Parity....... 55
1. Background and Comments............................. 55
2. Discussion.......................................... 59
D. Implementation of the Local Dialing Parity
Requirements............................................ 64
1. In General.......................................... 64
a. Background........................................ 64
b. Comments.......................................... 65
c. Discussion........................................ 67
2. Local Dialing Parity Methodologies.................. 69
a. Background and Comments........................... 69
b. Discussion........................................ 71
3. Non-Uniform Local Calling Areas..................... 72
a. Background........................................ 72
b. Comments.......................................... 73
c. Discussion........................................ 75
E. Consumer Notification and Carrier Selection Procedures 76
a. Background........................................ 76
b. Comments.......................................... 77
c. Discussion........................................ 80
F. Cost Recovery......................................... 82
a. Background........................................ 82
b. Comments.......................................... 83
c. Discussion........................................ 92
G. Unreasonable Dialing Delays........................... 96
III. Nondiscriminatory Access Provisions................... 97
A. Definition of the Term ``Nondiscriminatory Access''... 97
1. Background.......................................... 97
2. Comments............................................ 98
3. Discussion.......................................... 101
B. Nondiscriminatory Access to Telephone Numbers......... 106
1. Definition.......................................... 106
2. Commission Action to Enforce Access to Telephone
Numbers............................................... 107
C. Nondiscriminatory Access to Operator Services......... 108
1. Definition of ``Operator Services''................. 108
a. Background and Comments........................... 108
b. Discussion........................................ 110
2. Definition of ``Nondiscriminatory Access to Operator
Services''............................................ 112
a. Background........................................ 112
b. Comments.......................................... 113
c. Discussion........................................ 114
3. Commission Action to Ensure Nondiscriminatory Access
to Operator Services.................................. 119
a. Background and Comments........................... 119
b. Discussion........................................ 121
4. ``Branding'' Requirements for Operator Services..... 123
a. Background........................................ 123
b. Comments.......................................... 126
c. Discussion........................................ 128
D. Nondiscriminatory Access to Directory Assistance and
Directory Listings...................................... 130
1. Definition of ``Nondiscriminatory Access to
Directory Assistance and Directory Listings''......... 130
a. Background........................................ 130
b. Comments.......................................... 131
c. Discussion........................................ 133
2. Commission Action to Implement Nondiscriminatory
Access to Directory Assistance and Directory Listings. 138
a. Background and Comments........................... 138
b. Discussion........................................ 141
3. Branding of Directory Assistance.................... 146
a. Background and Comments........................... 146
b. Discussion........................................ 148
4. Alternative Dialing Arrangements for Directory
Assistance............................................ 149
a. Background and Comments........................... 149
b. Discussion........................................ 151
E. Unreasonable Dialing Delay............................ 152
1. Definition and Appropriate Measurement Methods...... 152
a. Background and Comments........................... 152
b. Discussion........................................ 156
2. Specific Technical Standard for Dialing Delay....... 163
a. Background and Comments........................... 163
b. Discussion........................................ 164
IV. Network Disclosure..................................... 165
A. Scope of Public Notice................................ 166
1. Definition of ``Information Necessary for
Transmission and Routing''............................ 166
a. Background and Comments........................... 166
b. Discussion........................................ 171
2. Definition of ``Services''.......................... 175
a. Background and Comments........................... 175
b. Discussion........................................ 176
3. Definition of ``Interoperability''.................. 177
a. Background and Comments........................... 177
b. Discussion........................................ 178
4. Changes that Trigger the Public Notice Requirement.. 179
a. Background and Comments........................... 179
b. Discussion........................................ 182
5. Types of Information to be Disclosed................ 183
a. Background........................................ 183
b. Comments.......................................... 184
c. Discussion........................................ 188
B. How Public Notice Should be Provided.................. 192
1. Dissemination of Public Notice Through Industry Fora
and Publications...................................... 192
a. Background........................................ 192
b. Comments.......................................... 193
c. Discussion........................................ 198
2. When Should Public Notice of Changes Be Provided?... 203
a. Background........................................ 203
b. Comments.......................................... 206
c. Discussion........................................ 214
C. Relationship with other Public Notice Requirements and
Practices............................................... 237
1. Relationship of Sections 273(c)(1) and 273(c)(4)
with Section 251(c)(5)................................ 237
a. Background........................................ 237
b. Comments.......................................... 238
c. Discussion........................................ 240
[[Page 47286]]
2. Relationship of Sections 251(a) and 251(c)(5) with
Section 256........................................... 241
a. Background........................................ 241
b. Comments.......................................... 242
c. Discussion........................................ 244
D. Enforcement and Safeguards............................ 245
1. Enforcement Mechanisms.............................. 245
a. Background and Comments........................... 245
b. Discussion........................................ 247
2. Protection of Proprietary Information, Network and
National Security..................................... 249
a. Background and Comments........................... 249
b. Discussion........................................ 254
V. Numbering Administration................................ 261
A. Designation of an Impartial Number Administrator...... 262
1. Background.......................................... 262
2. Comments............................................ 263
3. Discussion.......................................... 264
B. Delegation of Numbering Administration Functions...... 267
1. Delegation of Matters Related to Implementation of
New Area Codes........................................ 268
a. Background........................................ 268
b. Comments.......................................... 269
c. Discussion........................................ 271
2. Area Code Implementation Guidelines................. 273
a. Background........................................ 273
b. Comments.......................................... 275
c. Discussion........................................ 281
3. Texas Public Utility Commission's Area Code Relief
Order for Dallas and Houston.......................... 294
a. Background........................................ 294
b. Petition and Comments............................. 295
c. Discussion........................................ 304
4. Delegation of Additional Numbering Administration
Functions............................................. 309
a. Background........................................ 309
b. Comments.......................................... 311
c. Discussion........................................ 315
5. Delegation of Existing Numbering Administration
Functions Prior to Transfer........................... 323
a. Background........................................ 323
b. Comments.......................................... 324
c. Discussion........................................ 328
C. Cost Recovery for Numbering Administration............ 336
1. Background.......................................... 336
2. Comments............................................ 337
3. Discussion.......................................... 342
D. Section 271 Competitive Checklist Requirement that the
BOCs Provide Non-Discriminatory Access to Numbers for
Entry into In-region InterLATA Services................. 344
1. Background and Comments............................. 344
2. Discussion.......................................... 345
VI. Final Regulatory Flexibility Analysis.................. 346
A. Need for and Purpose of this Action................... 347
B. Summary of Issues Raised by the Public Comments in
Response to the Initial Regulatory Flexibility Analysis. 349
C. Description and Estimate of the Small Entities Subject
to the Rules............................................ 361
D. Summary of Projected Reporting, Recordkeeping and
Other Compliance Requirements........................... 378
E. Report to Congress.................................... 398
VII. Ordering Clauses...................................... 399
I. Introduction and Overview
1. In February, 1996, Congress passed and the President signed into
law, the Telecommunications Act of 1996 (1996 Act).1 The 1996 Act
erects a ``procompetitive, de-regulatory national framework designed to
accelerate rapid private sector deployment of advanced
telecommunications and information technologies and services to all
Americans by opening all telecommunications markets to competition.''
2 Section 101 of the 1996 Act adds new section 251 to the
Communications Act of 1934. Congress intended that the provisions of
this new section would help competition grow in the market for exchange
and exchange access and related telecommunications services. It
directed the Commission to adopt rules that would implement the
requirements of this section no later than August 8, 1996.3 We
note, however, that, under section 251(f), certain rural or small local
exchange carriers (LECs) are exempt or may seek relief from the rules
we adopt herein.4
---------------------------------------------------------------------------
\1\ Telecommunications Act of 1996, Public Law No. 104-104, 110
Stat. 56 (1996) (1996 Act), to be codified at 47 U.S.C. 151 et. seq.
\2\ S. Conf. Rep. No. 104-230, 104th Cong., 2d Sess. 1 (1996).
\3\ 47 U.S.C. 251(d)(1).
\4\ 47 U.S.C. 251(f) (1) and (f)(2). We note that the term
``United States'' means ``the several States and Territories, the
District of Columbia, and the possessions of the United States, but
does not include the Canal Zone.'' 47 U.S.C. 153(50).
---------------------------------------------------------------------------
2. We began this rulemaking proceeding on April 19, 1996.5 The
First Report and Order, which addressed issues that were raised in this
docket, decided that the Commission should establish national rules
implementing section 251.6 The First Report and Order interprets
and implements, inter alia, sections 251 (a), (b)(1), (b)(4), (b)(5),
(c)(1), (c)(2), (c)(3), (c)(4), and (c)(6). That order promulgates
rules to open the local exchange and exchange access markets to
competition by eliminating legal and technical barriers to such
competition. This Second Report and Order and Memorandum Opinion and
Order (Order) promulgates rules to implement the parts of section 251
that relate to the elimination of certain operational barriers to
competition. Specifically, this Order addresses local exchange
carriers' obligations to provide their competitors with dialing parity
and nondiscriminatory access to certain services and functionalities;
7 incumbent local exchange carriers' duty to make network
information disclosures; 8 and numbering administration.9 In
this Order we also deny the Petition for Expedited Declaratory Ruling
on the area code relief plan for Dallas and Houston that the Texas
Public Utility Commission (Texas Commission) filed with this Commission
on May 9, 1996.10 We also address petitions for clarification or
reconsideration in the Ameritech and NANP proceedings.11
---------------------------------------------------------------------------
\5\ Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996, CC Docket No. 96-98, Notice of
Proposed Rulemaking, FCC 96-182 (released April 19, 1996) (NPRM) 61
FR 18311 (April 25, 1996).
\6\ Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996, CC Docket No. 96-98, Interconnection
between Local Exchange Carriers and Commercial Mobile Radio Service
Providers, CC Docket No. 95-185, First Report and Order, FCC 96-235
(released August 8, 1996) (hereinafter First Report and Order) at
section II.
\7\ 47 U.S.C. 251(b)(3).
\8\ 47 U.S.C. 251(c)(5).
\9\ 47 U.S.C. 251(e)(1).
\10\ In the Matter of Area Code Relief Plan for Dallas and
Houston, Ordered by the Public Utility Commission of Texas, Petition
for Expedited Declaratory Ruling filed May 9, 1996.
\11\ See In the Matter of Proposed 708 Relief Plan and 630
Numbering Plan Area Code by Ameritech--Illinois, IAD File No. 94-
102, Declaratory Ruling and Order, 10 FCC Rcd 4596 (1995) (Ameritech
Order) 60 FR 19255 (April 17, 1995) and Administration of the North
American Numbering Plan, CC Docket No. 92-237, Report and Order, 11
FCC Rcd 2588, 2591 (1995) (NANP Order) 60 FR 38737 (July 28, 1995).
---------------------------------------------------------------------------
3. Dialing parity, nondiscriminatory access, network disclosure,
and numbering administration issues are critical issues for the
development of local competition. As stated in the First Report and
Order, incumbent local exchange carriers have little incentive to
[[Page 47287]]
provide access to potential competitors to their networks. In other
words, potential competitors in the local and long distance markets
face numerous operational barriers to entry notwithstanding their legal
right to enter such markets. The dialing parity, nondiscriminatory
access, and network disclosure requirements should remove those
barriers to entry. The rules we adopt herein will benefit consumers by
making some of the strongest aspects of local exchange carrier
incumbency--the local dialing, telephone numbers, operator services,
directory assistance, and directory listing--available to all
competitors on an equal basis.
A. Actions To Implement Section 251(b)(3)
1. Dialing Parity
4. Section 251(b)(3) of the 1996 Act directs each local exchange
carrier (LEC) 12 to provide dialing parity to competing providers
of telephone exchange and telephone toll service.13 This
requirement means that customers of these competitors should not have
to dial extra digits to have their calls routed over that LEC's
network. To implement this statutory requirement, we adopt broad
guidelines and minimum federal standards that build upon the
experiences and accomplishments of state commissions. Although the 1996
Act requires a LEC to provide dialing parity only to providers of
telephone exchange and toll services, section 251(b)(3) does not limit
the type of traffic or service for which dialing parity must be
afforded to those providers. We conclude, therefore, that section
251(b)(3) requires LECs to provide dialing parity to providers of
telephone exchange or toll service with respect to all
telecommunications services that require dialing to route a call and
encompasses international, interstate, intrastate, local and toll
services.
---------------------------------------------------------------------------
\12\ The 1996 Act defines the term ``local exchange carrier'' as
``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 commercial
mobile service under section 332(c), except to the extent that the
Commission finds that such provider should be included in the
definition of such term.'' 47 U.S.C. 153(26). For purposes of the
dialing parity and nondiscriminatory access obligations that we
impose pursuant to section 251(b)(3), we find that commercial mobile
radio service (CMRS) providers are not LECs. See infra para. 29.
\13\ According to the 1996 Act, the term ``dialing parity''
means ``that a person that is not an affiliate of a local exchange
carrier is able to provide telecommunications services in such a
manner that customers have the ability to route automatically,
without the use of any access code, their telecommunications to the
telecommunications services provider of the customer's designation
from among 2 or more telecommunications services providers
(including such local exchange carrier).'' 47 U.S.C. 153(15).
---------------------------------------------------------------------------
(5) With respect to toll service, we further find that section
251(b)(3) requires, at a minimum, that customers be entitled to choose
different presubscribed, or preselected, carriers for both their
intraLATA and interLATA toll calls. In states, like Alaska and Hawaii,
that have no LATAs,14 customers must be able to choose different
presubscribed carriers for both their intrastate and interstate toll
calls. Based on this finding, we adopt a rule requiring all LECs to
implement intraLATA and interLATA toll dialing parity, using the ``full
2-PIC'' presubscription method.15 The toll dialing parity
requirement we adopt is defined by LATA boundaries given that the Bell
Operating Companies' (BOCs') operations are likely to be shaped by LATA
boundary restrictions for a period of unforeseeable duration. Given
that implementation of the 1996 Act over time may diminish the
significance of LATA boundaries, however, we permit states to redefine
the toll dialing parity requirement based on state, rather than LATA,
boundaries where a state deems such a requirement to be pro-competitive
and otherwise in the public interest.16
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\14\ 47 U.S.C. 153(25). According to the 1996 Act, a LATA is a
``local access and transport area.'' It is a ``contiguous geographic
area--
(A) established before the date of enactment of the
Telecommunications Act of 1996 by a Bell operating company such that
no exchange area includes points within more than 1 metropolitan
statistical area, consolidated metropolitan statistical area, or
State, except as expressly permitted under the AT&T Consent Decree;
or
(B) established or modified by a Bell operating company after
such date of enactment and approved by the Commission.''
\15\ We note that the abbreviation ``PIC'' in the past has
stood for the term ``primary,'' or ``preferred, interexchange
carrier.'' While we retain the acronym ``PIC,'' we define the term
to include any toll carrier for purposes of the presubscription
rules that we adopt in this Order. For a discussion of the full 2-
PIC presubscription methodology, see infra section II.B(4).
\16\ To illustrate, if the presubscription requirement were
based on LATA boundaries, a customer would be entitled to choose a
primary carrier for all intraLATA toll calls and a separate, or the
same, primary carrier for all interLATA toll calls. If the
presubscription requirement were based on state boundaries, a
customer would be entitled to choose a primary carrier for all
intrastate toll calls and a separate, or the same, primary carrier
for all interstate toll calls.
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6. In order to facilitate the orderly implementation of toll
dialing parity, we require each LEC, including a BOC, to submit a plan
to the state regulatory commission for each state in which it provides
telephone exchange service setting forth the LEC's plan for
implementing toll dialing parity, including the methods it proposes to
enable customers to select alternative providers. In the event that a
state elects not to evaluate such a plan sufficiently in advance of the
date on which a LEC is required to implement toll dialing parity, we
require the LEC to file its plan with the Commission. The Commission
will act upon such a plan within 90 days of the date on which it is
filed with the Commission.
7. Under the toll dialing parity implementation schedule we adopt,
we require each LEC, including a BOC, to implement toll dialing parity
no later than February 8, 1999. In addition, we require a LEC,
including a BOC, to provide toll dialing parity throughout a state
coincident with its provision of in-region, interLATA or in-region,
interstate toll services in that state. LECs, other than BOCs, that are
either already offering or plan to begin to provide in-region,
interLATA or in-region, interstate toll services before August 8, 1997,
must implement toll dialing parity by August 8, 1997. We note that
smaller LECs, for which this implementation schedule may be unduly
burdensome, may petition their state commission for a suspension or
modification of the application of this requirement.17
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\17\ 47 U.S.C. 251(f)(2).
---------------------------------------------------------------------------
8. Those states desiring to impose more stringent presubscription
methodologies, e.g., multi-PIC or smart-PIC,18 will retain the
flexibility to impose such additional requirements. We also announce
our intention to issue a Further Notice of Proposed Rulemaking
addressing the technical feasibility and nationwide availability of a
separate presubscription choice for international calling based on the
use of multi-PIC or smart-PIC technologies.
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\18\ The multi-PIC or smart-PIC presubscription method would
enable subscribers to select multiple carriers for various
categories of toll traffic. For a discussion of multi-PIC and smart-
PIC presubscription methodologies, see infra section II.B(4).
---------------------------------------------------------------------------
9. Pursuant to the local dialing parity requirements of section
251(b)(3), we require a LEC to permit telephone exchange service
customers, within a defined local calling area, to dial the same number
of digits to make a local telephone call, notwithstanding the identity
of the customer's or the called party's local telephone service
provider. We decline at this time to prescribe additional guidelines to
address the methods that LECs may use to accomplish local dialing
parity given our finding that local dialing parity will be achieved
upon implementation of the number portability and interconnection
requirements of section 251, as well as
[[Page 47288]]
the provisions requiring nondiscriminatory access to telephone numbers
found in section 251(b)(3).
10. We also decline to adopt federal consumer education programs or
procedures that would inform consumers of the existence of competitive
telecommunications providers. Instead, we leave decisions regarding
consumer education and carrier selection procedures to the states. We
conclude that, in order to ensure that dialing parity is implemented in
a pro-competitive manner, national rules are needed for the recovery of
dialing parity implementation costs.
11. Section 271 of the 1996 Act requires BOCs to provide intraLATA
toll dialing parity throughout a state coincident with the exercise of
their authority to offer interLATA services originating within the
state.19 BOC entry into the interLATA market is conditioned upon
their offering ``nondiscriminatory access to such services or
information as are necessary to allow the requesting carrier to
implement local dialing parity in accordance with the requirements of
Section 251(b)(3).'' 20
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\19\ 47 U.S.C. 271(e)(2)(A).
\20\ 47 U.S.C. 271(c)(2)(B)(xii). We decline to address section
271(c)(2)(B) issues in this Order. We will consider each BOC's
application to enter in-region, interLATA services pursuant to
section 271(c)(2)(B) on a case-by-case basis to determine whether
the BOC has complied with section 271(c)(2)(B)(xii).
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2. Nondiscriminatory Access
12. Section 251(b)(3) also requires all LECs to permit competing
providers of telephone exchange service and toll service
``nondiscriminatory access to telephone numbers, operator services,
directory assistance and directory listings.'' 21 We conclude that
``Nondiscriminatory access,'' as used in section 251(b)(3), encompasses
both: (1) Nondiscrimination between and among carriers in rates, terms
and conditions of access; and (2) the ability of competing providers to
obtain access that is at least equal in quality to that of the
providing LEC. This definition of ``nondiscriminatory access'' in
section 251(b)(3) recognizes the more general application of that
section to all LECs, whereas section 251(c) places more specific duties
upon incumbent LECs in terms of nondiscriminatory access. We conclude
that the term ``nondiscriminatory access to telephone numbers''
requires all LECs to permit competing providers access to telephone
numbers that is identical to the access the LEC provides to itself.
---------------------------------------------------------------------------
\21\ 47 U.S.C. 251(b)(3).
---------------------------------------------------------------------------
13. We conclude that the term ``operator services,'' for purposes
of section 251(b)(3), means any automatic or live assistance to a
consumer to arrange for billing or completion, or both, of a telephone
call. Such a definition includes busy line verification, emergency
assistance, operator-assisted directory assistance, and any other such
services used to arrange for the billing and/or completion of telephone
calls. We further conclude that any customer of a telephone service
provider that provides operator services should be able to obtain these
services by dialing ``0'' or ``0-plus the desired telephone number.''
If a dispute arises regarding a competitor's access to operator
services, the burden will be upon the providing LEC to demonstrate,
with specificity, that it has permitted nondiscriminatory access and
that any disparity is not caused by network elements within its
control. To the extent that operator services use any information
services and adjuncts that are not ``telecommunications services,'' of
which resale is required under 251(b)(1), LECs are required to make
available such services to competing providers in their entirety as a
requirement of nondiscriminatory access under 251(b)(3).22
Finally, we find that the refusal of a LEC providing nondiscriminatory
access to comply with reasonable requests of competing providers to
``brand'' resold operator services as those of the reseller, or to
remove its brand, creates a presumption that the LEC is unlawfully
restricting access to operator services.
---------------------------------------------------------------------------
\22\ Id.
---------------------------------------------------------------------------
14. We conclude that the requirement in section 251(b)(3) of
nondiscriminatory access to directory assistance means that LECs that
provide directory assistance must permit access to this service to
competing providers that is at least equal in quality to the access
that the LEC provides to itself. We impose obligations upon all LECs to
satisfy the requirement of nondiscriminatory access to directory
listings. If a LEC provides directory assistance, that LEC must permit
competing providers to have access to its directory assistance, so that
any customer of a competing provider can access any listed number on a
nondiscriminatory basis, notwithstanding the identity of the customer's
local service provider. Further, we require LECs to share directory
listings with competing service providers, in ``readily accessible''
tape or electronic formats, upon request, and in a timely manner. To
the extent that all or part of directory assistance services are not
``telecommunications services,'' of which resale is required under
251(b)(1), LECs must make available such services in their entirety as
part of their obligation to permit nondiscriminatory access to
competing providers.23 This requirement thus extends to any
information services and adjuncts used to provide directory assistance.
Finally, as with the branding of resold operator services, we find that
the refusal of a LEC providing nondiscriminatory access to directory
assistance to ``brand'' resold directory assistance services as those
of the reseller, or to remove its brand, creates a presumption that the
LEC is unlawfully restricting access to directory assistance.
---------------------------------------------------------------------------
\23\ Id.
---------------------------------------------------------------------------
15. We also conclude that section 251(b)(3)'s requirement of
nondiscriminatory access and its prohibition of unreasonable dialing
delays applies to both the provision of local and toll dialing parity.
We conclude that the dialing delay experienced by customers of a
competing provider should not be greater than that experienced by
customers of a LEC providing dialing parity or nondiscriminatory
access, for identical calls or call types. Finally, we conclude that
the statutory obligation to avoid unreasonable dialing delays places a
duty on LECs that provide dialing parity, or nondiscriminatory access
to operator services or directory assistance, to process all calls from
competing providers on the same terms as calls from its own customers.
B. Actions To Implement Section 251(c)(5)
16. In addition to the duties imposed by section 251(b)(3) on all
LECs, new section 251(c)(5) imposes upon incumbent LECs the duty to
``provide reasonable public notice of changes in the information
necessary for the transmission and routing of services using that local
exchange carrier's facilities or networks, as well as of any other
changes that would affect the interoperability of those facilities or
networks.'' 24 We adopt broad guidelines
[[Page 47289]]
to implement section 251(c)(5). We also specify how public notice must
be made whenever an upcoming change may affect the way in which a
competing service provider transmits, routes, or otherwise provides its
services.
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\24\ An incumbent LEC, with respect to an area, is defined under
the 1996 Act as ``the local exchange carrier that: (A) on the date
of enactment of the Telecommunications Act of 1996, provided
telephone exchange service in such area; and (B)(i) on such date of
enactment, was deemed to be a member of the exchange carrier
association pursuant to section 69.601(b) of the Commission's
regulations (47 CFR 69.601(b)); or (ii) is a person or entity that,
on or after such date of enactment, became a successor or assign of
a member described in clause (i).'' 47 U.S.C. 251(h)(1).
---------------------------------------------------------------------------
17. We conclude that ``information necessary for transmission and
routing'' in section 251(c)(5) means any information in the incumbent
LEC's possession that affects a competing service provider's
performance or ability to provide either information or
telecommunications services. We define ``interoperability'' as the
ability of two or more facilities, or networks, to be connected, to
exchange information, and to use the information that has been
exchanged.
C. Actions Taken To Implement Section 251(e)
18. New section 251(e)(1) restates the Commission's authority over
matters relating to the administration of numbering resources by giving
the Commission ``exclusive jurisdiction over those portions of the
North American Numbering Plan that pertain to the United States.''
25 This section also requires the Commission to ``create or
designate one or more impartial entities to administer
telecommunications numbering and to make such numbers available on an
equitable basis.'' 26 Finally, section 251(e)(2) provides that the
cost of establishing telecommunications numbering administration
arrangements ``shall be borne by all telecommunications carriers on a
competitively neutral basis as determined by the Commission.'' 27
In this Order, we address whether further action is required to create
or designate an impartial entity to administer telecommunications
numbering. We clarify the states' role in number administration, and
provide direction to states wishing to use area code overlay plans. We
also clarify how cost recovery for numbering administration will occur.
We deny the petition for expedited declaratory ruling filed by the
Texas Commission based on our finding that the Texas Commission's
wireless-only area code overlay plan violates the guidelines set forth
in our Ameritech Order. We authorize Bellcore and the incumbent LECs to
perform number administration functions as they did prior to the
enactment of the 1996 Act until such functions are transferred to the
new North American Numbering Plan Administrator.
---------------------------------------------------------------------------
\25\ 47 U.S.C. 251(e)(1).
\26\ Id.
\27\ 47 U.S.C. 251(e)(2).
---------------------------------------------------------------------------
19. We conclude that we have taken appropriate action to designate
an impartial number administrator pursuant to section 251(e)(1). We
further conclude that the Commission should retain its authority to set
policy with respect to all facets of numbering administration to ensure
the creation of a nationwide, uniform system of numbering that is
essential to the efficient delivery of interstate and international
telecommunications services and to the development of a competitive
telecommunications services market. While we retain this policy-making
authority, we authorize the states to resolve matters involving
implementation of new area codes subject to the guidelines set forth in
this Order.
20. In this Order, we also prohibit the use of service-specific or
technology-specific area code overlay plans. States may employ all-
services overlays only if they also mandate 10-digit dialing for all
local calls within the area affected by the area code change and ensure
the availability of at least one central office code in the existing
area code to every entity authorized to provide local exchange service
in that area, including CMRS providers.
21. To fulfill the mandate of section 251(e)(2), we require that
(1) only ``telecommunications carriers,'' as defined in section 3(44)
of the 1996 Act, shall contribute to the costs of numbering
administration; 28 and (2) that such contributions shall be based
on each contributor's gross revenues from its provision of
telecommunications services reduced by all payments for
telecommunications services and facilities that have been paid to other
telecommunications carriers.
---------------------------------------------------------------------------
\28\ 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).
---------------------------------------------------------------------------
II. Dialing Parity Requirements
A. In General
22. With dialing parity a telephone customer can preselect any
provider of telephone exchange service or telephone toll service
without having to dial extra digits to route a call to that carrier's
network. Until now, in most states, telephone customers wishing to have
their intraLATA toll calls carried by a carrier other than their
current provider of telephone exchange service had to dial a five- or
seven-digit prefix or access code before dialing the called party's
telephone number.29 Presubscription to a carrier other than a
customer's telephone exchange service provider has not been an option
for interstate, intraLATA toll calls or in most states for intrastate,
intraLATA toll calls.30 In states where intrastate, intraLATA toll
dialing parity is available, a customer may presubscribe to a carrier
other than his or her provider of telephone exchange service and have
all of that customer's intrastate, intraLATA toll calls carried by that
selected carrier simply by dialing ``1'' plus the area code and
telephone number of the called party.31 The section 251(b)(3)
dialing parity obligation will foster vigorous local exchange and long
distance competition by ensuring that each customer has the freedom and
flexibility to choose among different carriers for different services
without the burden of dialing access codes.
---------------------------------------------------------------------------
\29\ Sometimes referred to as ``10XXX'' or ``101XXXX'' dialing,
callers may reach a long distance carrier in states where such
dialing arrangements are authorized by dialing a five-digit carrier
access code (``10XXX,'' with ``XXX'' representing a three-digit
carrier identification code) or a seven digit carrier access code
(``101XXXX,'' with ``XXXX'' representing a carrier identification
code).
\30\ An ``interstate, intraLATA toll call'' is a call that: (1)
Crosses a state boundary but does not cross a LATA boundary; and (2)
is subject to a charge. A call from Philadelphia, Pennsylvania to
Cherry Hill, New Jersey (currently handled by Bell Atlantic) is an
example of such a call.
\31\ It is our understanding that some form of intraLATA toll
dialing parity is available or has been ordered in Alaska, Arizona,
Connecticut, Florida, Georgia, Illinois, Kentucky, Michigan,
Minnesota, New Jersey, New York, Ohio, Pennsylvania, West Virginia,
Wisconsin and Wyoming. See Ex parte letter from Charles D. Cosson,
USTA, to William F. Caton, Acting Secretary, Federal Communications
Commission, filed in CC Docket No. 96-98, July 10, 1996, at 2.
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The Need for Minimum Nationwide Dialing Parity Standards
a. Background and Comments
23. Section 251(b)(3) imposes on all LECs the ``duty to provide
dialing parity to competing providers of telephone exchange service and
telephone toll service.'' 32 In the NPRM, we sought comment on
whether the Commission should adopt nationwide dialing parity standards
and, if so, what those standards should be.33
---------------------------------------------------------------------------
\32\ 47 U.S.C. 251(b)(3).
\33\ NPRM at paras. 206, 207, 209-213, 218, 219.
---------------------------------------------------------------------------
24. A majority of commenters urge the Commission to adopt uniform
nationwide dialing parity guidelines,
[[Page 47290]]
but commenters differ on how detailed such federal rules should be. For
example, the Telecommunications Resellers Association maintains that
specific national standards are needed to ensure that competing
providers are able to utilize common network designs in multiple
markets and to prevent incumbent LECs from ``gaming'' or ``manipulating
the processes'' of the states.34 Ameritech urges the Commission to
adopt ``broad rules that afford sufficient flexibility to accommodate
local conditions.'' 35 Other commenters, such as Bell Atlantic,
opposing the adoption of federal dialing parity standards, assert that
the proponents of such standards have failed to demonstrate how they or
consumers have been harmed by ``locally tailored implementation'' of
dialing parity in the intraLATA toll markets.36 Without such a
demonstration, argues Bell Atlantic, the Commission should not
interfere with states' activities.37 Cincinnati Bell Telephone
Company (CBT) likewise opposes federal standards, maintaining that so
long as a state regulatory commission adopts a toll dialing parity
arrangement that ``offers consumers a choice from at least two
carriers, one of which is the local exchange carrier, the requirements
of the 1996 Act have been met.'' 38
---------------------------------------------------------------------------
\34\ Telecommunications Resellers Association reply at 8-9.
\35\ Ameritech reply at i.
\36\ Bell Atlantic reply at 2.
\37\ Id.
\38\ CBT comments at 5.
---------------------------------------------------------------------------
b. Discussion
25. We conclude that the purpose of the statutory dialing parity
requirements--to facilitate the introduction of competition in the
local and toll markets--is best served by the adoption of broad
guidelines and minimum federal standards that build upon the states'
experiences. We conclude that such minimum nationwide standards will
facilitate competition to the extent that new entrants seeking to offer
regional or national services will not be subjected to an array of
differing state standards and timetables.39 We note that our
conclusion to adopt nationwide dialing parity standards is consistent
with our conclusion in the First Report and Order that nationwide
standards to implement other section 251 provisions are necessary to
facilitate competition by serving as a backdrop against which
interconnection negotiations and arbitration can occur.40 We are
persuaded that, contrary to the views of Bell Atlantic, the failure to
adopt minimum federal standards would harm both new entrants and
consumers by delaying the introduction of competition and imposing
additional costs on competitors, including small entities, particularly
when different network configurations are required in each market. We
conclude that uniform standards--in some cases minimum, uniform
standards--will speed competitive entry by more promptly opening the
local and toll markets to competition.
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\39\ We note that section 271(e)(2)(B) precludes most states
from requiring a BOC to implement intraLATA toll dialing parity in a
state before the BOC has received authority to provide in-region,
interLATA services in such state or before three years after
enactment of the 1996 Act, whichever is earlier. 47 U.S.C.
271(e)(2)(B).
\40\ See First Report and Order at section II.
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2. Scope of the Dialing Parity Requirements
a. Background
26. Under section 251(b)(3) a LEC must provide dialing parity only
to competing providers of telephone exchange service and telephone toll
service.41 The scope of the obligation to provide dialing parity,
however, is not limited to a particular type of traffic or service.
Section 251(b)(3) makes no distinction among international, interstate
and intrastate traffic for purposes of the dialing parity
provisions.42 The statutory definition of ``dialing parity'' also
contains no such distinctions and, instead, speaks generally in terms
of the provision of ``telecommunications services'' by ``a person that
is not an affiliate of a local exchange carrier.'' 43 Based on the
absence of any such distinctions in defining the scope of the dialing
parity requirements, the NPRM tentatively concluded that section
251(b)(3) creates a duty to provide dialing parity to competing
providers of telephone exchange service and telephone toll service with
respect to all telecommunications services that require dialing to
route a call, and encompasses international as well as interstate and
intrastate, local and toll services.44
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\41\ 47 U.S.C. 251(b)(3).
\42\ Id.
\43\ 47 U.S.C. 153(15).
\44\ NPRM at para. 206.
---------------------------------------------------------------------------
b. Comments
27. Numerous parties express support for the Commission's tentative
conclusion.45 Several parties qualify their support for this
conclusion, however, by asserting that the duty to provide dialing
parity to competing providers of telephone toll service applies to
international calls only to the extent that it entitles a customer to
route automatically, without the use of an access code, all of the
customer's international calls to his or her presubscribed interLATA
long distance carrier.46 These parties maintain that section
251(b)(3) does not require LECs to provide customers a separate
presubscription choice for international calling.47
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\45\ See, e.g., MFS comments at 2; California Commission
comments at 3.
\46\ See, e.g., Sprint comments at 4-5; SBC comments at 5.
\47\ Id.
---------------------------------------------------------------------------
28. A broad range of parties also support the tentative conclusion
that section 251(b)(3) imposes a duty on the LEC to provide both local
and toll dialing parity.48 Two parties reject this tentative
conclusion, arguing that the dialing parity requirements apply only to
local calling and do not extend to toll services.49 Specifically,
Lincoln Telephone and the Pennsylvania Commission contend that Congress
addressed toll dialing parity only in section 271(e)(2) of the 1996 Act
as it relates to the conditions under which a BOC may enter the in-
region, interLATA toll business and question the Commission's authority
to implement toll dialing parity requirements.50 U S WEST
similarly argues that section 251(b)(3) imposes only a duty to provide
local dialing parity and suggests that the only affirmative obligation
to provide toll dialing parity is contained in the equal access
provisions of section 251(g) of the 1996 Act, which, U S WEST states,
applies only to the BOCs and GTE.51 Lincoln Telephone makes the
additional argument that competitive providers wishing to enter the
intraLATA toll market should be required to ``share responsibility for
serving the entire LATA, rather than simply selecting the lowest cost
customers from the most profitable exchanges without regard to that
practice's effect on other customers.'' 52 The imposition of such
a requirement, according to Lincoln Telephone, would ``reflect a
commitment to affordable universal service.'' 53
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\48\ See, e.g., Excel comments at 6; MCI comments at 2;
BellSouth comments at 9.
\49\ Lincoln Telephone comments at 2-3; Pennsylvania Commission
comments at 1-2.
\50\ Id.
\51\ U S WEST comments at 4-5.
\52\ Lincoln Telephone comments at 5.
\53\ Id. at 6.
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c. Discussion
29. We adopt our tentative conclusion that section 251(b)(3)
creates a duty to provide dialing parity to competing
[[Page 47291]]
providers of telephone exchange service and telephone toll service with
respect to all telecommunications services that require dialing to
route a call, and encompasses international as well as interstate and
intrastate, local and toll services.54 We note that section
251(b)(3) does not limit the types of traffic or services for which
dialing parity must be provided to competing providers of telephone
exchange and telephone toll service. The reference to these types of
providers clearly shows that dialing parity must be provided for
exchange service and toll service. Nothing in the statutory language
limits the scope of the dialing parity obligation to exchange and toll
services or distinguishes among the various types of telecommunications
services in imposing the dialing parity obligations. This conclusion is
further supported by the statutory definition of dialing parity insofar
as it refers to the provision of ``telecommunications services''
generally without distinction among various types of telecommunications
services.55 In addition, we are not persuaded that section 251(g)
relieves certain LECs of the duty to provide toll dialing parity. That
section contains no reference or cross reference to dialing parity or
to section 251(b)(3). Section 251(g) preserves the equal access
obligations already imposed on the BOCs and GTE, but does not exempt
them or other LECs from the toll dialing parity requirements. Finally,
we note that CMRS providers are not required to provide dialing parity
or nondiscriminatory access under section 251(b)(3) because the
Commission has not determined that CMRS providers are LECs and section
332(c) of the Communications Act of 1934 provides that a ``person
engaged in the provision of commercial mobile services * * * shall not
be required to provide equal access to common carriers for the
provision of toll services.'' 56
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\54\ NPRM at para. 206.
\55\ The issue of whether a separate presubscription choice is
required for international, interstate, and intrastate toll calls is
discussed more fully in section II.B(2) infra.
\56\ 47 U.S.C. 332(c)(8).
---------------------------------------------------------------------------
30. Finally, concerning Lincoln Telephone's proposal to require
competitive providers of intraLATA toll service to serve an entire
LATA, rather than merely certain low cost customers within a LATA, we
note that Lincoln Telephone, in essence, is asking us to condition a
carrier's receipt of dialing parity upon that carrier's assuming the
obligation of an ``eligible'' telecommunications carrier.57 We
find neither the language of section 251(b)(3) nor its legislative
history supports the conclusion that Congress intended to condition a
carrier's right to receive the benefits of dialing parity upon its
assuming the obligations of an eligible telecommunications carrier. The
issue of encouraging carriers to provide universal service throughout a
service territory is beyond the scope of this proceeding.58 Also,
for the Commission to make LATA-wide or state-wide service a
precondition of entry into that LATA or state would be to erect a major
legal barrier to entry, particularly for smaller telecommunications
services providers, that is contrary to the basic thrust of the 1996
Act.
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\57\ An eligible telecommunications carrier is a common carrier
that offers all services that are supported by federal universal
service support mechanisms under section 254(c) and that uses
``media of general distribution'' to advertise the availability of
those services and its charges for them. 47 U.S.C. 214(e)(1). The
issue of which services should receive support from universal
service support mechanisms is being addressed by the Commission and
the Federal-State Joint Board on universal service, as required by
new section 254 of the Communications Act, as amended by the 1996
Act. See Federal-State Joint Board on Universal Service, CC Docket
No. 96-45, Notice of Proposed Rulemaking and Order Establishing
Joint Board, FCC 96-93, (released March 8, 1996) (Universal Service
NPRM) (proposing rules to implement section 254 of the 1996 Act) 61
FR 10499 (March 14, 1996).
\58\ See Universal Service NPRM.
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B. Implementation of the Toll Dialing Parity Requirements
1. Presubscription Method of Achieving Toll Dialing Parity
a. Background
31. The statutory definition of dialing parity provides that the
customer must have the ability to choose ``from among 2 or more
telecommunications services providers (including such local exchange
carrier).'' 59 The definition also provides that customers must be
able to exercise this choice by being able ``to route automatically
without the use of access codes, their telecommunications to the
telecommunications services provider of the customer's designation.''
60 Thus, LECs are precluded from relying on access codes as a
means of providing dialing parity to competitive service
providers.61 The 1996 Act, however, does not specify what methods
should be used to implement dialing parity. The NPRM tentatively
concluded that presubscription represents the most feasible method of
achieving dialing parity in long distance markets consistent with the
statutory definition of dialing parity and sought comment as to this
tentative conclusion.62 In this context, the NPRM defined
``presubscription'' as the process by which a customer preselects a
carrier to which all of a particular category or categories of calls on
the customer's line will be routed automatically.63
---------------------------------------------------------------------------
\59\ 47 U.S.C. 153(15).
\60\ Id.
\61\ Id.
\62\ NPRM at para. 207.
\63\ Id.
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32. As stated in the NPRM, presubscription to a carrier other than
the customer's local exchange carrier has not been available for
interstate, intraLATA toll calls nor has it been available in most
states for intrastate, intraLATA toll calls.64 Instead, LECs
automatically carry these calls rather than routing them to a
presubscribed carrier of the customer's choice. If the state from which
the customer is calling has authorized competition, but has not ordered
presubscription in the intraLATA toll market, a customer wishing to
route an intraLATA toll call to an alternative carrier typically must
dial the carrier access code of the alternative carrier.
---------------------------------------------------------------------------
\64\ Id. at para. 208.
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b. Comments
33. Nearly all parties concur in the Commission's tentative
conclusion that presubscription represents the most feasible method of
achieving toll dialing parity consistent with the statutory definition
of dialing parity.65 PacTel and Lincoln Telephone suggest that
presubscription is not required to achieve toll dialing parity so long
as customers can reach competing toll carriers through the use of
carrier access codes.66 Finally, BellSouth argues that the toll
dialing parity requirement is satisfied by ``removing the intraLATA
default to the incumbent LEC, thus assuring that no additional digits
need to be dialed in order to reach carriers competing with the
incumbent LEC for intraLATA toll service.'' 67 BellSouth further
argues that the Commission should confirm that such arrangements are
consistent with the statutory dialing parity requirements.68
---------------------------------------------------------------------------
\65\ See, e.g., Ohio Commission comments at 6; NEXTLINK comments
at 9.
\66\ See, e.g., PacTel reply at 10 (``Toll dialing parity, on
the other hand, should mean that customers can reach competing toll
carriers on the same dialing basis, including through the use of
carrier access codes, with an equal number of digits.''); Lincoln
Telephone comments at 2-3.
\67\ BellSouth comments at 11 n.23.
\68\ Id.
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c. Discussion
34. We adopt our tentative conclusion that the dialing parity
requirement for toll calling can best be achieved through
presubscription because that method would enable customers to route a
[[Page 47292]]
particular category of traffic to a preselected carrier without having
to dial access codes. We note that the use of access codes to route
calls among competing providers of telephone toll service is precluded
under the statutory definition of dialing parity.69 Accordingly,
we disagree with those parties who contend that toll dialing parity can
be achieved through the use of access codes in a manner that is
consistent with the statutory definition of dialing parity.70 We
also cannot conclude that the toll dialing parity requirement is
satisfied by removing the intraLATA default, as BellSouth
maintains.71 Removing the intraLATA default would not satisfy the
toll dialing parity requirement unless the LEC also uses the full 2-PIC
presubscription methodology discussed below.72
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\69\ See 47 U.S.C. 153(15).
\70\ Although the use of access codes to access competing
providers of telephone toll service does not constitute dialing
parity as defined in 47 U.S.C. 153(15), we do not intend to preclude
their use where a customer wishes to route a call to a carrier other
than his or her presubscribed intraLATA toll carrier.
\71\ We understand BellSouth's reference to ``removing the
intraLATA default'' to mean that BellSouth would modify its switches
so they no longer automatically route all intraLATA toll calls to
BellSouth and thus, would permit customers to choose an alternative
intraLATA toll carrier.
\72\ For a discussion of the full 2-PIC methodology, see section
II.B(4) infra.
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2. Categories of Domestic, Long Distance Traffic Subject to
Presubscription
a. Background
35. In the NPRM, the Commission sought comment as to the categories
of long distance traffic (e.g., intrastate, interstate, and
international traffic) for which a customer should be entitled to
choose presubscribed carriers.73 The NPRM also sought comment on
specific alternative methods for implementing local and toll dialing
parity, including various forms of presubscription, in the interstate
and intrastate long distance and international markets, that are
consistent with the statutory requirements set forth in the 1996
Act.74
---------------------------------------------------------------------------
\73\ NPRM at para. 210.
\74\ Id. at para. 209.
---------------------------------------------------------------------------
b. Comments
36. Most parties appear to agree that customers should be entitled
to presubscribe to two separate carriers for their toll calling.75
There is a lack of consensus in the record, however, regarding how the
Commission should define the presubscription requirement. USTA, for
example, argues that ``[a]ll telecommunications carriers, including
LECs, should be permitted to define the scope of local service and toll
service in response to market forces.'' 76 USTA further argues
that the ``relevant distinction, for the long term, will be between
intrastate and interstate toll traffic.'' 77 Sprint, on the other
hand, argues in favor of maintaining a presubscription requirement
based on LATA boundaries and recommends that customers continue to be
allowed to choose separate intraLATA and interLATA toll
carriers.78 Sprint urges us to maintain the LATA distinction,
asserting that ``competition over the past 12 years has developed
around the LATA concept, and presubscription has for the most part
already occurred along these lines.'' 79
---------------------------------------------------------------------------
\75\ See, e.g., Ohio Consumers' Counsel comments at 2; see also
MCI comments at 3 (recommending that call types subject to
presubscription should include: 1-plus/0-plus interexchange, 7-digit
interexchange and 1+555-1212 calls); cf. GTE comments at 9
(maintaining that decisions regarding appropriate presubscription
categories should be left to state regulatory agencies on theory
that states are best positioned to balance value of additional
carrier choices against higher administrative and network design
costs associated with increased number of presubscription choices).
\76\ Ex parte letter from Charles D. Cosson, USTA, to William F.
Caton, Acting Secretary, Federal Communications Commission, filed in
CC Docket No. 96-98, June 17, 1996, at 2.
\77\ USTA comments at 3 n.2; see also MFS reply at 12-13 (``The
Commission should recognize that rules for intraLATA presubscription
are transitory. At some point, wh
FR Doc. 96-22045 Implementation of the Local Competition Provisions of the Telecommunications Act of 1996
en the BOCs and GTE are authorized
to provide both interLATA and intraLATA service, the distinctions
between interLATA and intraLATA calls will no longer be meaningful,
and the Commission should be prepared to revisit and eliminate these
distinctions.'').
\78\ Sprint comments at 4.
\79\ Id. At the same time, Sprint asks that we eliminate the
intrastate intraLATA/interstate intraLATA distinction and make all
intraLATA toll calls (both interstate and intrastate) subject to a
single presubscription.
---------------------------------------------------------------------------
c. Discussion
37. With respect to toll service, we conclude that section
251(b)(3) requires, at a minimum, that customers be entitled to choose
presubscribed carriers for their intraLATA and interLATA toll calls.
Because of the variations that exist among LATA boundaries and toll
traffic within, and among, the various states, we have also concluded
that each state should have the opportunity to determine whether
customers should be able to presubscribe to carriers for intrastate
toll service and for interstate toll service in lieu of the intraLATA
and interLATA toll presubscription dichotomy that we have established
as a minimum nationwide standard at this time. Although toll dialing
parity typically has been based on LATA boundaries in multi-LATA states
where it has been implemented, we do not impose a requirement that toll
dialing parity be based only on LATA boundaries given our expectation
that implementation of the 1996 Act eventually will diminish the
significance of LATA boundaries.80 We are aware that BOCs remain
subject to certain LATA boundary restrictions for at least the near-
term and that some BOCs may find it technically infeasible, or
otherwise undesirable, to implement toll dialing parity based on state
boundaries.81 We thus conclude that states should be able to take
the relevance of those factors into account, where applicable, and have
the flexibility to require that toll dialing parity implementation be
based on state boundaries where they determine that implementing toll
dialing parity on the basis of state boundaries would be pro-
competitive and otherwise in the public interest. In Alaska and Hawaii,
states with no LATAs, toll dialing parity will continue to be based on
state boundaries.
---------------------------------------------------------------------------
\80\ USTA correctly notes that independent exchange carriers
have not been subject to the interLATA line of business restrictions
that were imposed on the BOCs pursuant to the AT&T Consent Decree.
See United States v. American Telephone and Telegraph Co., 552 F.
Supp. 226 (D.D.C. 1982). See USTA comments at 3 n.2.
\81\ For example, where BOCs receive authority to provide in-
region, interLATA services, they are required to provide such
services through a separate affiliate for at least three years
pursuant to section 272 of the 1996 Act. See 47 U.S.C. Secs. 272
(a)(2), (f)(1). Accordingly, it appears that the LATA distinction
will remain relevant insofar as it will continue to define the
geographic areas in which a BOC must provide toll services through
an affiliate and those in which it may provide toll services
directly.
---------------------------------------------------------------------------
38. We also direct each LEC to submit to the state regulatory
commission for each state in which it provides telephone exchange
service the LEC's plan for implementing toll dialing parity. That plan
must contain detailed implementation information, including the
proposed date for dialing parity implementation for that exchange that
the LEC operates in each state, and the method it proposes for enabling
customers to select alternative providers of telephone toll service.
For a LEC, other than a BOC, the plan also must identify the LATA with
which the LEC proposes to associate.82
---------------------------------------------------------------------------
\82\ States may require a LEC to provide other categories of
information in its plan in addition to the information categories
stated here.
---------------------------------------------------------------------------
39. We find that the states are best able to evaluate
implementation plans in a way that will avoid service disruptions for
subscribers and promote competition in the intrastate toll market. A
LEC must first obtain state approval of its implementation plan before
it implements toll dialing parity. If the LEC determines that a state
commission elects not to evaluate the LEC's toll dialing parity
implementation plan for
[[Page 47293]]
that state sufficiently in advance of the date on which a LEC is
required to implement toll dialing parity pursuant to the Commission's
rules, we direct the LEC to file its plan with the Commission.83
The Commission will release a public notice of any such LEC filings, in
order to give interested parties an opportunity to comment. The LEC's
plan will be deemed approved on the fifteenth day following release of
the Commission's public notice unless, no later than the fourteenth day
following the release of the Commission's public notice, either: (1)
The Common Carrier Bureau notifies the LEC that its plan will not be
deemed approved on the fifteenth day; or (2) an opposition to the plan
is filed with the Commission and served on the LEC that filed the plan.
The opposition must state specific reasons why the plan does not serve
the public interest.
---------------------------------------------------------------------------
\83\ See infra para. 62 , which sets forth the dates by which a
dialing parity implementation plan must be filed with the Commission
in the event that a state will not be evaluating the plan.
---------------------------------------------------------------------------
40. If one or more oppositions are filed, the LEC that filed the
plan will have seven additional days (i.e., until no later than the
twenty-first day following the release of the Commission's public
notice) within which to file a reply to the opposition(s) and serve it
on all parties that filed oppositions. The response shall: (a) Include
information responsive to the allegations and concerns identified by
the opposing party; and (b) identify possible revisions to the plan
that will address the opposing party's concerns. In the case of such
contested toll dialing parity plans, the Common Carrier Bureau will act
on the plan within ninety days of the date on which the Commission
released its public notice.84 In the event the Bureau fails to act
within 90 days, the plan will not go into effect pending Bureau action.
If the plan is not contested but did not go into effect on the
fifteenth day after the Commission released its public notice, and the
Common Carrier Bureau fails to act on the plan within ninety days of
the date on which the Commission released its public notice, the plan
will be deemed approved without further Commission action on the
ninety-first day after the date on which the Commission released its
public notice of the plan's filing.
---------------------------------------------------------------------------
\84\ We delegate to the Chief, Common Carrier Bureau, the
authority to approve, modify, or require the refiling of each plan
that is filed with the Commission pursuant to this requirement.
---------------------------------------------------------------------------
41. A LEC's plan may not accomplish toll dialing parity by
automatically assigning toll customers to itself, to a customer's
currently presubscribed interLATA or interstate toll carrier, or to any
other carrier except when, in a state that already has implemented
intrastate, intraLATA toll dialing parity, the subscriber has selected
the same intraLATA and interLATA presubscribed carrier. Finally, when
LATA boundaries encompass parts of two adjacent states, we permit the
LEC to implement in each state the procedures that that state approved
for implementing toll dialing parity within its borders. If a state
commission elects not to evaluate the LEC's intrastate toll dialing
parity plan, we direct the LEC to file both its intrastate toll dialing
plan and its interstate toll dialing plan with the Commission. The
plans will be acted on in accordance with the procedures outlined
above.
42. We note that the minimum intraLATA/interLATA toll
presubscription requirement that we adopt in this Order is necessarily
an interim measure. Specifically, we expect that the development of the
``multi-PIC'' or ``smart-PIC'' presubscription methodology will enable
customers to presubscribe to multiple carriers for various categories
of long-distance calling.85 Thus, in time, we anticipate that
service markets, and the presubscription requirement in particular,
will be defined by technological, economic and marketing considerations
and that LATA or state boundary distinctions will diminish for purposes
of the toll dialing parity requirements. As the record before us
provides an inadequate basis for adopting more specific requirements
now, we intend to monitor developments in this area and issue a Further
Notice of Proposed Rulemaking to address these long range
considerations so that end users will be able to preselect alternative
providers for operator services, directory assistance, international
and other services.
---------------------------------------------------------------------------
\85\ The terms ``smart-PIC'' and ``multi-PIC'' have been defined
differently in various contexts. For example, GVNW states that the
multi-PIC presubscription method would permit customers to choose up
to three different toll carriers, which, GVNW suggests, might
include an intraLATA toll, interLATA toll and an international
service provider. See GVNW comments at 6. GVNW states that the
smart-PIC presubscription method would allow customers more than
three carrier choices, ``as when a fourth PIC for interstate,
intraLATA is needed.'' Id. In a recent state commission decision,
the terms ``multi-PIC'' and ``smart-PIC,'' deemed to be synonymous,
were defined as the ability to ``select multiple carriers for
various subdivisions of their interLATA and intraLATA toll calls.''
Local Exchange Competition and Other Competitive Issues, Case No.
95-845-TP-COL, 164 P.U.R.4th 214 (Ohio Pub. Util. Comm'n Sept. 27,
1995).
---------------------------------------------------------------------------
3. Separate Presubscription for International Calls
a. Background and Comments
43. The NPRM sought comment on whether customers should be entitled
to choose a presubscribed carrier for international calls and on what
Commission action, if any, is necessary to implement dialing parity for
such calls.86
---------------------------------------------------------------------------
\86\ NPRM at para. 210.
---------------------------------------------------------------------------
44. Most parties maintain that the 1996 Act does not require, and
the Commission should not mandate, a separate presubscription choice
for international calling.87 Several parties take the position
that the toll dialing parity requirement applies to international
calling only to the extent that it entitles a customer to route
automatically without the use of an access code the customer's
international calls to the customer's presubscribed interLATA
carrier.88 A number of parties contend that the technology
required to support a separate presubscription choice for international
calling, the so-called multi-PIC or smart-PIC methodology, is not
currently available.89 USTA suggests that the cost of providing a
separate presubscription choice for international calling should be
weighed against the amount of customer demand for such an option, and
the harm to consumers that may result from a potentially greater number
of unauthorized carrier changes.90 AT&T, Ameritech, Sprint and the
Indiana Commission urge the Commission to revisit the issue of a
separate presubscription choice for international calling only after it
is demonstrated to be technically and economically feasible.91
---------------------------------------------------------------------------
\87\ See, e.g., SBC reply at 3 n.6; AT&T comments at 4 n.4.
\88\ See, e.g., SBC comments at 5.
\89\ Ameritech comments at 18-19; Bell Atlantic reply at 3; CBT
comments at 4-6; SBC comments at 5; U S WEST comments at 6; Sprint
comments at 4-6; USTA reply at 2; cf. Sprint comments at 6 (noting
implementation of multi-PIC system by GTE-Hawaiian Telephone Company
that offers customers a separate international presubscription
option).
\90\ USTA comments at 3.
\91\ Ameritech comments at 18-19; AT&T comments at 5 n.6; Sprint
comments at 5; Indiana Commission Staff comments at 9.
---------------------------------------------------------------------------
b. Discussion
45. While we believe that a separate presubscription choice for
international calling is consistent with the intent of the 1996 Act
because it could foster additional carrier competition, we recognize
that technical limitations preclude our imposing such a
[[Page 47294]]
nationwide requirement at this time.92 To the extent that such a
capability becomes technically feasible and is ordered in a particular
state, we find that the deployment of a separate presubscription choice
for international calling is consistent with the 1996 Act. We will
address in a further notice at a future date the issue of how soon a
separate presubscription choice for international calling will be
technically feasible on a nationwide basis.93
---------------------------------------------------------------------------
\92\ Bell Atlantic reply at 3; CBT comments at 4-6; SBC comments
at 5; U S WEST comments at 6; Sprint comments at 4-6; USTA reply at
2.
\93\ Sprint comments at 6 (noting development of multi-PIC
system by GTE-Hawaiian Telephone that offers customers a separate
international presubscription option). It is our understanding that
GTE Hawaiian Telephone Company has multi-primary interexchange
carrier capability that enables customers in Hawaii to select three
long-distance carriers, i.e., an intrastate, interstate, and
international carrier. See ex parte letter from Clarence Clay M.
Nagao, Chief Counsel, State of Hawaii Public Utilities Commission,
Department of Budget and Finance, to Mr. William F. Caton, Acting
Secretary, Federal Communications Commission, filed in CC Docket No.
96-98, July 2, 1996. We note that the arrangement by which GTE
Hawaiian Telephone Company provides a third carrier choice for
international calling is a unique, interim solution that uses a
combination of carrier identification codes and switch routing
databases. This solution is not suitable for nationwide deployment
because the switch database is too limited in size and the supply of
CICs too small to support an adequate number of interLATA/
international carrier combinations in many areas of the country. Ex
parte letter from F.G. Maxson, GTE Service Corporation, to William
F. Caton, Acting Secretary, Federal Communications Commission, filed
in CC Docket No. 96-98, August 6, 1996.
---------------------------------------------------------------------------
4. Full 2-PIC Presubscription Method
a. Background
46. In the NPRM, the Commission sought comment as to whether the
Commission should adopt a nationwide presubscription methodology for
implementing the toll dialing parity requirements.94 The NPRM also
noted that states have adopted a variety of intraLATA toll dialing
parity requirements and implementation methodologies.95
---------------------------------------------------------------------------
\94\ NPRM at para. 210.
\95\ Id.
---------------------------------------------------------------------------
47. Among the presubscription methodologies that states have
examined are the ``modified 2-PIC,'' the ``full 2-PIC,'' and the
``multi-PIC'' or ``smart-PIC'' methods.96 The modified 2-PIC
method generally allows a customer to presubscribe to a
telecommunications carrier for all interLATA toll calls and to
presubscribe to either the customer's presubscribed interLATA carrier
or the customer's local exchange carrier for all intraLATA toll calls.
The full 2-PIC method generally allows customers to presubscribe to a
telecommunications carrier for all interLATA toll calls and to
presubscribe to another telecommunications carrier (including, but not
limited to, the customer's local exchange carrier) for all intraLATA
toll calls. The multi-PIC or smart-PIC methods, as known today, would
allow customers to presubscribe to multiple carriers, each one of which
would be selected to transport a specified component of toll traffic.
---------------------------------------------------------------------------
\96\ Id.
---------------------------------------------------------------------------
b. Comments
48. Nearly all parties favor adoption of the full 2-PIC
method.97 Few parties favor deploying the modified 2-PIC
method.98 Likewise, few commenters favor immediate deployment of
the multi-PIC method.99 Several parties suggest that the multi-PIC
or smart-PIC methodology and technology may warrant consideration in
the future, but is currently unavailable.100 Others maintain that
the Commission should conclude that the 2-PIC approach is consistent
with the 1996 Act based on the theory that the 1996 Act does not
require more than a two-PIC capability to achieve toll dialing
parity.101
---------------------------------------------------------------------------
\97\ See, e.g., Michigan Commission Staff comments at 4; MCI
comments at 5-6, Pennsylvania Commission comments at 2; SBC reply at
2; PacTel reply at 10-11.
\98\ See, e.g., Sprint comments at 5; USTA comments at 3.
\99\ GSA/DOD reply at 4 (In initial comments, ``GSA favored a
'multi-PIC' arrangement. * * * Although there was conceptual support
for eventual implementation of the 'multi-PIC' methodology, it is
clear that the technical and economic feasibility of this approach
has not yet been demonstrated.''); GVNW comments at 6 (``[T]he FCC
should not require [the smart-PIC method] on a nationwide basis or
schedule, as this will result in uneconomic network upgrades, added
costs for the incumbent LECs, and higher prices to customers and
competitors'').
\100\ See, e.g., Ameritech comments at 18-19; AT&T comments at 5
n.6; CBT comments at 4; GVNW comments at 3; Indiana Commission Staff
comments at 9; Sprint comments at 5.
\101\ SBC reply at 3; GTE reply at 12-13.
---------------------------------------------------------------------------
c. Discussion
49. We adopt in this Order the full 2-PIC method as the minimum
presubscription standard. Under our rules and pursuant to section
251(d)(3),102 however, state commissions may impose more stringent
presubscription requirements, such as multi-PIC or smart-PIC.
---------------------------------------------------------------------------
\102\ 47 U.S.C. 251(d)(3).
---------------------------------------------------------------------------
50. We adopt the full 2-PIC method as the minimum presubscription
standard at this time for several reasons. We conclude that, as
compared with the modified 2-PIC method, the full 2-PIC method will
maximize choice for consumers and open the long-distance
telecommunications markets to a greater number of competitive services
providers, including smaller providers, and thus is more consistent
with the congressional objectives underlying enactment of section
251(b)(3). Second, this method clearly is preferred by the majority of
state regulators and telecommunications service providers.103
Third, as compared with the multi-PIC method, the technology for the
full 2-PIC method is widely available and well defined. By contrast,
there is no evidence in the record to support a finding that the
technical and economic feasibility of the multi-PIC method has been
demonstrated on a nationwide basis. We conclude that this national
standard should speed competitive entry into the intraLATA and
intrastate toll markets while providing states that are considering a
more stringent presubscription method, i.e., multi-PIC or smart-PIC,
flexibility to impose such additional requirements. Until the
Commission considers the issue of multi-PIC or smart-PIC methods in a
further notice, we believe that the states are best situated to
evaluate the technical feasibility and economic impact of such methods
on LECs, including smaller LECs, in their jurisdictions.
---------------------------------------------------------------------------
\103\ See, e.g., Pennsylvania Commission comments at 2; SBC
reply at 2; PacTel reply at 10-11.
---------------------------------------------------------------------------
5. Deployment of Presubscription Software in Each End Office
a. Background
51. With end office equal access, presubscription software is
installed at each end office switch within the LEC's service areas.
Toll calls are then directly routed at each end office switch to the
presubscribed provider of telephone toll service. With centralized
equal access, presubscription software is installed at a central tandem
switch location. With the latter, toll calls are routed from an end
office to a tandem switch for presubscription information.104
Providers of telephone toll service may connect at the tandem to
receive this traffic rather than at each individual end office that is
associated with the tandem.
---------------------------------------------------------------------------
\104\ In this context, presubscription information refers to the
information that is used by the switch to determine which
interconnecting carrier carries and bills for the call.
---------------------------------------------------------------------------
b. Comments
52. MCI raises the issue of whether presubscription software should
be deployed in each end office or at a single tandem location and
proposes that the Commission require end office equal access rather
than centralized equal access.105 Specifically, MCI argues that
end office equal access represents a superior form of access to the
extent that
[[Page 47295]]
it enhances redundancy and reduces post dial delays.106
Centralized equal access should not be permitted, MCI maintains,
insofar as that approach requires that all end offices receive the
equal access features from the tandem and any interruption in service
from the tandem can affect a larger number of subscribers on the
system.107 In addition, because calls are routed from the end
office to the tandem and back, MCI contends that centralized equal
access would result in significant post-dial delay.108 MCI does
suggest, however, that in areas that ``would not otherwise convert to
interLATA or intraLATA equal access, centralized equal access provides
consumers at least a limited form of carrier choice.'' 109
---------------------------------------------------------------------------
\105\ MCI comments at 5.
\106\ Id.
\107\ Id.
\108\ Id. MCI does not attempt to define or quantify the term
``significant.''
\109\ Id. at 5 n.7.
---------------------------------------------------------------------------
53. Two commenters who are centralized equal access providers
oppose MCI's position.110 Specifically, Iowa Network Services and
MIEAC counter that centralized equal access is not inferior to end
office equal access and repeatedly has been found to serve the public
interest by the Commission and numerous state regulatory
commissions.111 MIEAC takes issue with MCI's argument that
centralized equal access is inferior to end office equal access, noting
that recent technological advances, and the use of SS7 trunk signaling,
in particular, have improved call set up times and reduced post dial
delay.112 Iowa Network Services calls the argument that
centralized equal access provides less network redundancy a ``red
herring'' and notes its recent installation of a redundant fiber ring
facility to connect its participating exchanges, which will allow
instant rerouting of traffic in the case of a facilities equipment
failure.113 Iowa Network Services also operates a ``diversity
access tandem'' that provides switch redundancy should its primary
tandem fail.114 MIEAC argues that centralized equal access
networks fully comply with the toll dialing parity requirement of
section 251(b)(3) insofar as these networks support 2-PIC
presubscription.115 Finally, MIEAC and Iowa Network Services
contend that centralized equal access represents an appropriate method
of providing equal access in rural areas where it otherwise would not
be technically or economically feasible.116
---------------------------------------------------------------------------
\110\ See generally Iowa Network Services joint reply; MIEAC
reply.
\111\ Iowa Network Services joint reply at 4-7; MIEAC reply at
2-4.
\112\ MIEAC reply at 3.
\113\ Iowa Network Services joint reply at 5.
\114\ Id.
\115\ MIEAC reply at 3-4.
\116\ Id. at 5-7; Iowa Network Services joint reply at 2 (noting
that centralized equal access fosters intraLATA and interLATA
competition by making equal access technology available in exchanges
where installation of end office equal access is economically or
technically infeasible).
---------------------------------------------------------------------------
c. Discussion
54. The issue of presubscription software deployment was not raised
in the NPRM and, as a result, few commenters address it. We conclude
that the record is not sufficient for us to require LECs, pursuant to
section 251(b)(3), to provide end office equal access rather than
centralized equal access to competing providers of telephone toll
service. No specific information is provided, let alone consensus
reached in this record, on such threshold issues as the technical and
economic feasibility of placing the software in one location over
another. We note that while MCI and Iowa Network Services disagree
generally on the benefits of deployment locations, neither addresses
such important implementation issues as whether different switching
equipment owned by various companies might provide obstacles to
deployment, or the relevant costs associated with one deployment scheme
over another. Iowa Network Services, we further note, does not address
how its proposal would comport with the Commission's generally
prescribed requirement under which most LECs are required to implement
equal access at end offices.117 Based on the reasons stated above,
and based on our concern regarding the harm that could come to small
telecommunications services providers if we adopt MCI's proposal, we
decline to adopt at this time a requirement prescribing the location
for deployment of presubscription software under section 251(b)(3).
---------------------------------------------------------------------------
\117\ See generally MTS and WATS Market Structure, CC Docket No.
78-72, Phase III, 100 F.C.C. 2d 860 (1985) 50 FR 52964 (December 27,
1985).
---------------------------------------------------------------------------
C. Implementation Schedule for Toll Dialing Parity
1. Background and Comments
i. Timetable for BOCs
55. Section 271(e)(2)(A) requires a BOC to provide intraLATA toll
dialing parity throughout a state ``coincident with'' its exercise of
authority to provide in-region, interLATA services in that
state.118 Section 271(e)(2)(B) precludes most states from imposing
intraLATA toll dialing parity requirements on a BOC before the earlier
of the date on which a BOC is authorized to provide in-region,
interLATA services in a state or three years from the date of enactment
of the 1996 Act.119 The NPRM sought comment on what implementation
schedule should be adopted for all LECs.120
---------------------------------------------------------------------------
\118\ 47 U.S.C. 271(e)(2)(A).
\119\ 47 U.S.C. 271(e)(2)(B). Exceptions from this requirement
are made for single-LATA states and states that issued an order by
December 19, 1995, requiring intraLATA toll dialing parity. Id.
\120\ NPRM at para. 212.
---------------------------------------------------------------------------
56. The BOCs generally argue that section 271(e)(2) establishes the
relevant implementation schedule for all BOCs and, thereby, obviates
the need for a nationwide implementation schedule for BOCs.121 For
example, Ameritech argues that, except in single-LATA states and where
a state has previously ordered intraLATA presubscription, section
271(e)(2) requires a BOC to implement intraLATA toll dialing parity
``coincident with its exercise of in-region, interLATA authority'' or
three years after enactment of the 1996 Act.122 Other parties urge
the Commission to require BOCs to implement toll dialing parity in
advance of these dates on the theory that only the states, and not the
Commission, are constrained by the limitations in section
271(e)(2)(B).123 Frontier suggests that the Commission mandate
that dialing parity be made available immediately for interstate,
intraLATA toll calls.124 AT&T asserts that ``except as provided in
section 271(e)(2)(B), the Commission should require all Tier 1 LECs to
implement dialing parity, utilizing the Full 2-PIC method, by January
1, 1997.'' 125 NYNEX maintains that the Commission should
recognize and give effect to state orders granting deferrals or waivers
of the toll dialing parity requirements.126
---------------------------------------------------------------------------
\121\ See, e.g., Ameritech comments at 19.
\122\ Id.
\123\ See, e.g., Sprint comments at 6 n.3.
\124\ Frontier comments at 2.
\125\ AT&T comments at 5.
\126\ NYNEX comments at 3 n.7.
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ii. Timetable for All Other LECs
57. For all other LECs, other than BOCs, the 1996 Act provides no
timetable for implementing toll dialing parity. The NPRM sought comment
on what implementation schedule should be adopted for all LECs.127
---------------------------------------------------------------------------
\127\ NPRM at para. 212.
---------------------------------------------------------------------------
58. USTA argues that there is no need for a uniform implementation
schedule and suggests that the Commission permit states to adopt their
own timetables.128 PacTel similarly opposes our adoption of an
implementation
[[Page 47296]]
schedule and advocates that all LECs be permitted to design their own
schedules based on ``local conditions and state requirements.''
129 In contrast, MCI urges the Commission to adopt an
implementation schedule based on the concern that incumbent LECs, if
permitted to design their own timetables, would delay implementation
because they lack incentive to implement dialing parity quickly. TCC
proposes that non-BOC incumbent LECs should be required to provide toll
dialing parity by no later than January 1, 1997.130 NECA argues
that a LEC's obligation to provide dialing parity should be triggered
only upon the receipt of a bona fide request from a competitive toll
provider.131 Finally, MFS suggests that incumbent LECs be required
to implement intraLATA toll dialing parity within a year of the
effective date of the rules, or by the date previously ordered by a
state commission.132 MFS also asks the Commission to adopt rules
specifying that in any geographic area where a BOC is not required to
provide intraLATA presubscription pursuant to section 271(e)(2)(A), no
other LEC in that geographic area will be required to provide toll
dialing parity until the BOC is required to provide it.133
---------------------------------------------------------------------------
\128\ USTA reply at 3-4.
\129\ PacTel reply at 12.
\130\ TCC comments at 4.
\131\ NECA reply at 3-4; see also Rural Tel. Coalition comments
at 6-7; GVNW comments at 5.
\132\ MFS comments at 6.
\133\ Id.; cf. Ohio Commission comments at 9 (new entrant LECs
should be required to implement intraLATA toll dialing parity
coincident with their offering of local telephone service since new
entrants can equip their network switches to provide dialing parity
before installation).
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2. Discussion
59. As discussed above, we require all LECs to provide intraLATA
and interLATA toll dialing parity no later than February 8, 1999. In
addition, we require a LEC, including a BOC, to provide toll dialing
parity throughout a state based on LATA boundaries coincident with its
provision of in-region, interLATA or in-region, interstate toll
services in that state. As discussed below, for non-BOC LECs that
currently are providing, or within a year of release of this Order
begin to provide, in-region, interLATA or in-region, interstate toll
service, we provide a grace period during which those LECs will be able
to provide such toll service before having to provide toll dialing
parity to their customers. Moreover, non-BOC LECs that implement
intraLATA and interLATA toll dialing parity may choose whichever LATA
within their state that they deem to be most appropriate to define the
area within which they will offer intraLATA toll dialing parity. State
commissions in ruling upon such a choice of LATA association shall
determine whether the proposed LATA association is pro-competitive and
otherwise in the public interest. We note, however, as discussed above,
that states may redefine the toll dialing parity requirement based on
state, rather than LATA, boundaries where a state deems such a
requirement to be pro-competitive and otherwise in the public interest.
60. We decline to adopt the recommendations of parties that urge us
to require BOCs to provide toll dialing parity in a state before the
earlier of the date on which those BOCs receive authority to provide
in-region, interLATA services in that state or February 8, 1999.
Subject to the requirements of the 1996 Act, we do, however, authorize
states to determine whether a more accelerated implementation schedule
should be utilized for LECs operating within their
jurisdictions.134 Where a state issued an order by December 19,
1995 requiring a BOC to implement toll dialing parity in advance of the
implementation deadlines we establish, we do not intend to extend the
toll dialing parity implementation deadline for the BOC beyond the
implementation deadline established by that state. In addition, where a
state issued an order prior to the release of this Order requiring a
LEC, other than a BOC, to implement toll dialing parity in advance of
the implementation deadlines we establish, we do not intend to extend
the toll dialing parity implementation deadline for the LEC beyond the
implementation deadline established by that state.
---------------------------------------------------------------------------
\134\ See 47 U.S.C. 271(e)(2)(b).
---------------------------------------------------------------------------
61. We further conclude that LECs, other than BOCs, that begin
providing in-region, interLATA or in-region, interstate toll services
before August 8, 1997, including LECs that currently offer such
services, are not required to implement toll dialing parity until
August 8, 1997.135 We do not mandate compliance with the toll
dialing parity requirement by these LECs ``coincident with'' their
provision of in-region, interLATA or in-region, interstate toll
services because it would place certain carriers in violation of this
order upon its release and would impose an unreasonably short timetable
on others. To the extent that a LEC is unable to comply with the August
8, 1997 deadline, that LEC is required to notify the Commission's
Common Carrier Bureau by May 8, 1997. The notification must state, in
detail, the justification for the LEC's inability to comply by August
8, 1997 and set forth the date by which it will be able to implement
toll dialing parity.136 Finally, we have considered the arguments
of LECs that seek to make their toll dialing parity obligation
contingent upon the receipt of a bona fide request and conclude that
special implementation schedules for smaller LECs are unnecessary
because these LECs may petition their state commission, pursuant to
section 251(f)(2), for a suspension or modification of the application
of the dialing parity requirements.137
---------------------------------------------------------------------------
\135\ We note that the 1996 Act distinguishes between in-region
services, for which BOCs must receive Commission authority to
provide under section 271(d)(1), 47 U.S.C. 271(d)(1), and out-of-
region services, which BOCs are currently authorized to provide. See
47 U.S.C. 271(b)(1), (b)(2). We note that for non-BOC LECs, it is
the provision of toll services outside of the LEC's study area or
the provision of interstate toll services that triggers the duty to
provide toll dialing parity. We use the term in-region, interLATA or
in-region interstate toll services to include those toll services,
the provision of which by a LEC triggers the LEC's duty to provide
toll dialing parity.
\136\ As recently noted in the context of waiver petitions for
certain caller identification rules, the Commission will not
hesitate to take enforcement action, including monetary fines and
other remedial measures against carriers that are unable to provide
a compelling justification for failing to comply with Commission
rules, particularly when they have been given a reasonable period
within which to comply. See Rules and Policies Regarding Calling
Number Identification Service--Caller ID, CC Docket No. 91-281,
Memorandum Opinion and Order, DA 96-875 (1996) 61 FR 20746 (May 8,
1996).
\137\ 47 U.S.C. 251(f)(2).
---------------------------------------------------------------------------
62. In summary, we establish the following toll dialing parity
implementation schedule and filing deadlines for all LECs:
(a) Each LEC, including a BOC, must implement intraLATA and
interLATA toll dialing parity based on LATA boundaries no later than
February 8, 1999. If the state commission elects not to evaluate a
LEC's toll dialing parity implementation plan,138 the LEC must
file that plan with the Commission not later than 180 days before
February 8, 1999.
---------------------------------------------------------------------------
\138\ For a discussion of the content of and procedures relating
to the toll dialing parity implementation plans, see section II.B(2)
supra.
---------------------------------------------------------------------------
(b) Except as provided in subparagraph (c) below, a LEC, including
a BOC, that begins to provide in-region, interLATA toll services or in-
region, interstate toll services in a state before February 8, 1999,
must implement intraLATA and interLATA toll dialing parity based on
LATA boundaries coincident with its provision of in-region, interLATA
or in-region, interstate toll services. If the state commission elects
not to evaluate its toll dialing parity implementation
[[Page 47297]]
plan, the LEC must file such plan with the Commission not later than
180 days before the date on which it begins to provide in-region,
interLATA toll services.
(c) A LEC, other than a BOC, that begins to provide in-region,
interLATA or in-region, interstate toll services in a state before
August 8, 1997, must implement intraLATA and interLATA toll dialing
parity based on LATA boundaries by August 8, 1997. If the LEC is unable
to comply with this August 8, 1997, implementation deadline, the LEC
must notify the Commission's Common Carrier Bureau by May 8, 1997. At
that time it must state its justification for noncompliance by August
8, 1997, and set forth the date by which it will be able to implement
toll dialing parity. If the state commission elects not to evaluate the
LEC's toll dialing parity implementation plan, the LEC must file such
plan with the Commission not later than 90 days after publication of
this Order in the Federal Register.
63. We further conclude that the 1996 Act does not authorize the
Commission to give effect to a state order that purports to grant a BOC
a deferral, waiver or suspension of the BOC's obligation to implement
dialing parity. We note that section 251(f)(2) provides procedures for
suspending or modifying application of the dialing parity requirements
only for certain LECs, i.e., those ``with fewer than 2 percent of the
Nation's subscriber lines installed in the aggregate nationwide.''
139 Given that section 251 contains no comparable procedures for
larger LECs, we are persuaded that Congress intended the dialing parity
requirements that we adopt pursuant to section 251(b)(3) to apply,
without exception, to all LECs with 2 percent or more of the Nation's
subscriber lines.
---------------------------------------------------------------------------
\139\ 47 U.S.C. 251(f)(2).
---------------------------------------------------------------------------
D. Implementation of the Local Dialing Parity Requirements
1. In General
a. Background
64. The NPRM tentatively concluded that, pursuant to section
251(b)(3), a LEC is required to permit telephone exchange service
customers within a defined local calling area to dial the same number
of digits to make a local telephone call, notwithstanding the identity
of a customer's or the called party's local telephone service
provider.140 The NPRM sought comment on this tentative
conclusion.141
---------------------------------------------------------------------------
\140\ NPRM at para. 211.
\141\ Id.
---------------------------------------------------------------------------
b. Comments
65. Nearly all parties concur with the Commission's proposed
interpretation of the local dialing parity requirements of section
251(b)(3).142 Ameritech contends, however, that the 1996 Act
requires only that local calls between competing LECs be dialed without
the use of an access code.143 Ameritech states that, while the
Senate version of the dialing parity provision would have required LECs
to provide customers with the ability ``to dial the same number of
digits'' when using any carrier providing telephone exchange and
exchange access service in the same area, Congress narrowed the dialing
parity obligation in the final legislation to require only that calls
between competing LECs be dialed without the use of an access
code.144 In response to Ameritech's proposed interpretation of the
local dialing parity requirements, the Ohio Consumers' Counsel asserts
that it does ``not believe that consumers would see any real functional
difference between having to dial extra digits and having to dial an
access code'' and, thus, urges that customers not be required to dial
access codes or extra digits when using a competing provider's
services.145
---------------------------------------------------------------------------
\142\ See, e.g., ALTS comments at 4; GTE comments at 8; Ohio
Commission comments at 8.
\143\ Ameritech comments at 3-4. Notwithstanding its
interpretation of the local dialing parity requirements, Ameritech
notes that it has exceeded these requirements by establishing
interconnection arrangements that allow customers of competing LECs
to complete calls by dialing the same number of digits. Id. at 4.
\144\ Id.
\145\ Ohio Consumers' Counsel reply at 2.
---------------------------------------------------------------------------
66. Ameritech also asks the Commission to clarify that ``the
dialing parity obligation applies only to competing carriers that
provide both telephone exchange service and telephone toll service
(i.e., competing LECs).'' 146 Finally, USTA urges the Commission
to clarify that section 251(b)(3) does not include an obligation to
provide dialing parity to CMRS providers.147 USTA contends that
the provision of dialing parity to CMRS providers by LECs would
complicate implementation of ``sender pays'' arrangements that have
been adopted in certain states if dialing parity were interpreted to
preclude the use of extra digits and/or recorded announcements
associated with a ``sender pays'' arrangement.148 USTA expresses
concern that customers may receive bills for calling CMRS customers
without advance notice that they are going to be billed for such
calls.149
---------------------------------------------------------------------------
\146\ Ameritech comments at 3 n.6 (emphasis in original).
\147\ USTA comments at 5.
\148\ Id. In this context, the term ``sender pays'' refers to an
arrangement under which a customer who originates a call to a CMRS
customer pays the cost of airtime for terminating the call. Under a
sender pays arrangement, the customer typically receives information
regarding the price of the call before the call is placed. Once the
customer receives this information, the customer then may decide
whether or not to complete the call. Sender pays arrangements are
atypical insofar as it is the CMRS customer who generally pays the
cost of airtime for terminating calls.
\149\ Id.
---------------------------------------------------------------------------
c. Discussion
67. We adopt our tentative conclusion that, pursuant to section
251(b)(3), a LEC is required to permit telephone exchange service
customers within a defined local calling area to dial the same number
of digits to make a local telephone call, notwithstanding the identity
of a customer's or the called party's local telephone service provider.
As we stated in the NPRM, we believe that this interpretation of the
dialing parity requirement as applied to the provision of telephone
exchange service would best facilitate the introduction of competition
in local markets by ensuring that customers of competitive service
providers are not required to dial additional access codes or personal
identification numbers in order to make local telephone calls. We
disagree with Ameritech's view that Congress intended only to preclude
the use of access codes and did not intend to preclude the dialing of
extra digits. The fact that Congress ultimately adopted a dialing
parity definition that precludes ``the use of any access code''
150 does not constrain the Commission from precluding the dialing
of extra digits, including access codes. Given that the statute does
not define the term ``access code,'' we conclude that our
interpretation of the local dialing parity requirement will avoid
potential disputes concerning what is and what is not an ``access
code.'' We are also persuaded by the argument advanced by the Ohio
Consumers' Counsel that consumers would not perceive a functional
difference between having to dial extra digits and having to dial an
access code when using a competing provider's services.
---------------------------------------------------------------------------
\150\ 47 U.S.C. 153(15).
---------------------------------------------------------------------------
68. We conclude that Ameritech's additional argument that the
dialing parity obligation applies only to competing carriers that
provide both telephone exchange service and telephone toll service,
represents an impermissibly narrow reading of the statute. We find that
the phrase ``providers of telephone exchange service and telephone toll
service''
[[Page 47298]]
imposes an obligation on LECs to provide dialing parity to providers of
solely telephone exchange service, to providers of solely telephone
toll service, or to providers of both telephone toll and exchange
service. We believe that this interpretation is consistent with both
the language of the statute and Congress' intent to encourage the entry
of new competitors in both the local and toll markets.151 We
reject USTA's argument that the section 251(b)(3) dialing parity
requirements do not include an obligation to provide dialing parity to
CMRS providers.152 To the extent that a CMRS provider offers
telephone exchange service, such a provider is entitled to receive the
benefits of local dialing parity. Regarding USTA's argument that
applying section 251(b)(3) in a way that benefits CMRS providers could
complicate implementation of sender pays arrangements in some states,
we conclude that the record before us is insufficient to determine
whether, or under what circumstances, sender pays arrangements,
including those requiring the dialing of extra digits or recorded
announcements, are consistent with the 1996 Act. Although we do not
intend to preclude the states from lawfully enforcing legitimate
consumer protection policies that do not have an anticompetitive
impact, we cannot conclude on this record that the arrangements USTA
describes would be permissible. Finally, given our expectation that
local dialing parity will be achieved through LECs' compliance with
other section 251 requirements, we do not adopt a timetable for
implementing the local dialing parity requirements.
---------------------------------------------------------------------------
\151\ 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
(1865).
\152\ See section X of the First Report and Order for a
discussion of the applicability of section 251 to CMRS providers.
---------------------------------------------------------------------------
2. Local Dialing Parity Methodologies
a. Background and Comments
69. In the NPRM, we stated our expectation that the local dialing
parity obligations would not be achieved through
presubscription.153 Rather, we anticipated that a customer's
ability to select a telephone exchange service provider and make local
telephone calls without dialing extra digits will be accomplished
through the unbundling, number portability and interconnection
requirements of section 251.154 The NPRM sought information and
comment as to how the local dialing parity requirement should be
implemented.155
---------------------------------------------------------------------------
\153\ NPRM at para. 207 n.284.
\154\ Id.
\155\ NPRM at paras. 209, 211.
---------------------------------------------------------------------------
70. The parties generally agree that local dialing parity will be
accomplished through implementation of the unbundling, number
portability and interconnection requirements of section 251.156
Parties add to this list the 1996 Act's equal access
requirements.157 A few parties contend that local dialing parity
is assured once competing providers of telephone exchange service are
permitted nondiscriminatory access to telephone numbers.158
---------------------------------------------------------------------------
\156\ See, e.g., SBC comments at 3 n.4; NEXTLINK comments at 8.
\157\ See, e.g., BellSouth comments at 9.
\158\ See, e.g., U S WEST comments at 6.
---------------------------------------------------------------------------
b. Discussion
71. We anticipate that local dialing parity will be achieved upon
implementation of the number portability and interconnection
requirements of section 251. We also concur with the view that the
ability of competing local exchange service providers to receive
telephone numbers on a nondiscriminatory basis is critical to the
achievement of local dialing parity. We believe that the
interconnection requirements that section 251(c)(2) imposes on
incumbent local exchange carriers will reduce the likelihood that
customers of a competing LEC will have to dial an access code to reach
a customer of the incumbent LEC insofar as the two networks are
connected. Number portability will ensure that customers switching
local service providers will not need to dial additional digits to make
local telephone calls. Likewise, allowing every telecommunications
carrier authorized to provide local telephone service, exchange access,
or paging service in an area code to have at least one NXX in an
existing area code also reduces the potential local dialing disparity
that may result if competing LECs can only give customers numbers from
a new area code. We therefore decline to prescribe now any additional
guidelines addressing the methods that LECs may use to accomplish local
dialing parity. We also conclude that, contrary to the views expressed
by some parties, the provision of nondiscriminatory access to telephone
numbers, by itself, does not fulfill the local dialing parity mandate
of section 251(b)(3). Given that acquisition of a central office code
by a LEC would not necessarily ensure that the LEC's customers would be
relieved of an obligation to dial extra digits, access codes or some
other special dialing protocol, the provision of nondiscriminatory
access to telephone numbers does not by itself ensure local dialing
parity. Rather, we find that under section 251(b)(3) each LEC must
ensure that its customers within a defined local calling area be able
to dial the same number of digits to make a local telephone call
notwithstanding the identity of the calling party's or called party's
local telephone service provider.
3. Non-Uniform Local Calling Areas
a. Background
72. The NPRM tentatively concluded that, pursuant to section
251(b)(3), a LEC is required to permit telephone exchange service
customers within a defined local calling area to dial the same number
of digits to make a local telephone call, notwithstanding the identity
of a customer's or the called party's local telephone service
provider.159 The NPRM did not address the potential dialing parity
implications of non-uniform local calling areas 160 nor did it
address the potential impact of our proposed interpretation of the
local dialing parity obligation on local calling area
boundaries.161
---------------------------------------------------------------------------
\159\ NPRM at para. 211.
\160\ We use the term ``non-uniform local calling area'' to
refer to a situation in which a telephone exchange service
provider's local calling area is either larger or smaller than that
of another telephone exchange service provider that is providing
telephone exchange service in the same geographic area.
\161\ Insofar as parties contend that the section 251(b)(3)
dialing parity requirements compel the use of a ten-digit dialing
plan for local calls within an area code overlay (see, e.g., MFS
comments at 3-5), we note that these concerns are addressed more
fully below in paragraphs 286 through 287.
---------------------------------------------------------------------------
b. Comments
73. A number of parties express concern about the potential
interrelationship between our proposed interpretation of the local
dialing parity requirements and local calling area boundaries.162
For example, WinStar cautions the Commission that by requiring that
customers ``within a defined local calling area'' be able to dial the
same number of digits to make a local telephone call, certain parties
may interpret this to require that a competing provider of local
exchange service must define its local calling area
[[Page 47299]]
to match the local calling area of the incumbent LEC.163 GSA/DOD
maintains that dialing is not truly at parity if different carriers
have different definitions of the geographic areas in which calls can
be made with seven-digit dialing.164 To address the potential
dialing parity issue that may arise when a new entrant's ``network
coverage'' is more limited than the incumbent LEC's, GSA/DOD recommends
that the Commission adopt rules that ensure that local calling areas
are consistently defined for LEC wholesale and retail services.165
---------------------------------------------------------------------------
\162\ See, e.g., WinStar comments at 10-11; GSA/DOD comments at
4-5; Florida Commission comments at 3.
\163\ WinStar comments at 10-11 (``The Commission should
proceed carefully to ensure that it does not inadvertently limit
carriers from experimenting with local calling areas.''); see also,
U S WEST comments at 6 (where dialing parity disputes arise over
fact that local calling areas of two competing LECs do not match,
states should resolve such disputes since they are familiar with
local calling areas and calling patterns in that state).
\164\ GSA/DOD comments at 4.
\165\ Id. at 5.
---------------------------------------------------------------------------
74. GTE contends that ``[s]o long as new entrants have the
technical ability to deploy equipment necessary to offer the same
seven-digit dialing as the incumbent LEC, dialing parity should be
deemed to exist even if one or more of the new entrants ultimately
chooses to provide ten-digit dialing.'' 166 To illustrate its
point that all local calls cannot be dialed using the same number of
digits, NYNEX notes that in the New York City Metro LATA local calls
span three different area codes, with seven-digit dialing within an
area code and ten-digit dialing between area codes.167 Finally,
the Florida Commission expresses concern regarding the potential
customer confusion that may result if customers in local calling areas
are required to dial ten rather than the currently dialed seven digits
to make local ``Extended Calling Service'' calls.168
---------------------------------------------------------------------------
\166\ GTE comments at 8 n.10.
\167\ NYNEX comments at 3 n.6.
\168\ Florida Commission comments at 3.
---------------------------------------------------------------------------
c. Discussion
75. A telephone call requiring seven-digit dialing is not
necessarily a local call 169 and a telephone call requiring ten-
digit dialing is not necessarily a toll call.170 Disparity in
local dialing plans, by itself, does not contravene our interpretation
of the local dialing parity requirements unless such plans are anti-
competitive in effect.171 By requiring that all customers ``within
a defined local calling area'' be able to dial the same number of
digits to make a local telephone call, we do not intend to require a
competing provider of local exchange service to define its local
calling area to match the local calling area of an incumbent LEC. We
further do not intend to require a competing provider of telephone
exchange service that voluntarily chooses to provide ten-digit as
opposed to seven-digit dialing in a local calling area to modify its
dialing plan in this instance in order to conform to the dialing plan
of another LEC. No other commenter addressed GSA's proposal that the
Commission adopt rules that ensure that local calling areas are
consistently defined for LEC wholesale and retail services. Therefore,
we conclude that the record is insufficient to permit us to take such
action at this time.
---------------------------------------------------------------------------
\169\ We note that several states permit seven-digit dialing
for toll calls. North American Numbering Plan, Area Codes 1996
Update, Bellcore (January 1996) at 14. For example, within the 518
area code a call from Clifton Park, New York to Hague, New York is a
toll call that can be dialed with seven digits.
\170\ Section 3(48) defines ``telephone toll service'' as
``telephone service between stations in different exchange areas for
which there is made a separate charge not included in contracts with
subscribers for exchange service.'' 47 U.S.C. 153(48). By contrast,
charges for calls within a local calling area generally are not
assessed on a per call basis. Thus, the construct of local calling
areas serves as the basis by which carriers price their services.
\171\ See, e.g., the discussion at paras. 281-291 regarding the
discriminatory and anticompetitive nature of a service-specific or
technology-specific overlay in connection with area code relief
plans.
---------------------------------------------------------------------------
E. Consumer Notification and Carrier Selection Procedures
a. Background
76. Section 251(b)(3) does not specifically require that procedures
be established to permit consumers to choose among competitive
telecommunications providers (e.g., through balloting).172 The
NPRM sought comment as to whether the Commission should require LECs to
notify consumers about carrier selection procedures or impose any
additional consumer education requirements.173 We also sought
comment on an alternative proposal that would make competitive
telecommunications providers responsible for notifying customers about
carrier choices and selection procedures through their own marketing
efforts.174
---------------------------------------------------------------------------
\172\ 47 U.S.C. 251(b)(3).
\173\ NPRM at para. 213.
\174\ Id.
---------------------------------------------------------------------------
b. Comments
77. Several parties contend that the responsibility for consumer
education should be borne, at least in part, by the incumbent LECs
175 and claim that incumbent LECs are uniquely situated to assist
in this function.176 Conversely, others maintain that
responsibility for the notification and education of consumers should
be imposed on the carriers seeking those customers' business, as part
of those carriers' marketing efforts.177 GSA/DOD favors letting
carriers ``fight it out among themselves,'' noting that carriers
themselves will have every incentive to make sure that prospective
customers are aware of their choices.178 PacTel suggests that
states are in the best position to assess the informational needs of
their citizens.179 Several commenters express concern that any
customer notification requirement must recognize that the details of
any such notification plan should reflect local circumstances,
including local carrier selection options, rates and dialing
plans.180 Ameritech maintains that a ``carrier-neutral customer
notification of the toll dialing parity selection processes is in the
public interest and should be a part of the implementation of any toll
dialing parity plan.'' 181
---------------------------------------------------------------------------
\175\ See, e.g., ACSI comments at 10; Ameritech comments at 20;
California Commission comments at 4.
\176\ See, e.g., Illinois Commission comments at 67; ACSI
comments at 10 (incumbent LECs should be required to provide bill
inserts to customers alerting them to opportunity to select
alternative service provider).
\177\ See, e.g., CBT comments at 5; Bell Atlantic comments at 5;
Frontier comments at 4; BellSouth reply at 4; GTE reply at 15.
\178\ GSA/DOD comments at 6.
\179\ PacTel comments at 13.
\180\ See, e.g., Ameritech comments at 21; GTE comments at 12;
PacTel reply at 13.
\181\ Ameritech comments at 20.
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78. While several commenters urge the Commission to adopt rules for
balloting,182 the majority of parties urge us to reject this
option.183 Parties that oppose balloting argue that such decisions
should be left to the individual states 184 and claim that
balloting is confusing to customers,185 costly,186 and forces
consumers to make selections before they might otherwise choose to do
so.187 Commenters also argue that competition for customers will
ensure that carriers notify customers as to how their services can be
obtained.188 In stating its opposition to a balloting requirement,
MFS observes that:
\182\ See, e.g., NEXTLINK comments at 9; Excel comments at 7.
\183\ See, e.g., Ohio Consumers' Counsel comments at 3; SBC
reply at 1; MFS reply at 12; CBT reply at 3-4.
\184\ See, e.g., Florida Commission comments at 2; PacTel reply
at 13.
\185\ See, e.g., Ohio Commission comments at 7.
\186\ See, e.g., GTE comments at 13; Sprint comments at 4.
\187\ Ameritech comments at 20.
\188\ See, e.g., GTE comments at 13; U S WEST comments at 8.
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[[Page 47300]]
The long-distance market today differs markedly from the
situation in the mid-1980's, when non-dominant carriers were
virtually unknown to most consumers and balloting was mandated as a
way of educating consumers to their ability to choose a carrier. No
such education is needed today, because most consumers are well
aware of their long-distance choices, and the carriers have readily
---------------------------------------------------------------------------
available means of contacting those who are not.189
\189\ MFS comments at 6.
---------------------------------------------------------------------------
79. Commenters also raised a number of issues related to consumer
notification and carrier selection methods. For example, PacTel asserts
that ``the default carrier for both existing and new customers who do
not actively choose an intraLATA toll provider should be the dial-tone
provider.'' 190 Sprint agrees that ``existing customers who are
currently obtaining intraLATA toll service from the dial tone provider,
and do not indicate a desire to change carriers, should remain with
that intraLATA toll provider.'' 191 Sprint rejects PacTel's
proposal, however, ``to default new customers who do not choose an
intraLATA toll provider to the dial tone provider.'' 192
Concerning whether customers should be assessed a ``PIC change charge''
when they select an alternative provider of telephone toll or telephone
exchange service, parties propose allowing customers a ``grace period''
during which they could switch carriers without charge.193 The
Ohio Consumers' Counsel supports a cap on the cost of initiating both
local and toll service with a new carrier, noting that a ``customer's
old carrier should not be able to impose an `exit fee' upon the
customer who switches.'' 194 Finally, GVNW urges that the
Commission's rules, complaint procedures and penalties for ``slamming''
be applied to any carrier selection procedures that the Commission
adopts with respect to local exchange service providers.195
---------------------------------------------------------------------------
\190\ PacTel comments at 11.
\191\ Sprint reply at 5-6 n.8.
\192\ Id. On a related issue, AT&T urges the Commission to
intercede where abuse of the customer notification process occurs,
such as when a LEC uses its ``provision of exchange service to
influence toll PIC choices.'' AT&T comments at 6 n.9. AT&T adds that
the Commission should prohibit LECs from extending interLATA PIC
``freezes'' to intraLATA traffic. Id.
\193\ Ohio Commission comments at 7 (proposing 90 day grace
period with a charge for subsequent changes); Citizens Utilities
comments at 6-7 (proposing 6 month grace period).
\194\ Ohio Consumers' Counsel reply at 2.
\195\ GVNW comments at 7.
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c. Discussion
80. We agree with those commenters who observe that competitive
providers of telephone exchange and telephone toll service have an
incentive to make consumers aware of the choices available, and we
perceive no need to prescribe detailed consumer notification or carrier
selection procedures at this time. We do believe, however, that states
may adopt such procedures. The states are best positioned to determine
the consumer education and carrier selection procedures that best meet
the needs of consumers and telecommunications services providers in
their states. Thus, states may adopt consumer education and carrier
selection procedures that will enable consumers to select alternative
carriers for their local and toll services. We further agree that a
customer notification requirement should take into consideration local
circumstances. The states may adopt balloting, consumer education and
notification requirements for services originating within their states,
that are not anti-competitive in effect. States also may adopt measures
to prevent abuse of the customer notification and carrier selection
processes. All such procedures, however, must be consistent with the
guidelines set forth above with respect to the requisite categories of
toll traffic for which consumers must be entitled to presubscribe and
the toll presubscription method that we require carriers to implement.
We note that the consumer notification requirements already imposed by
states' intrastate, intraLATA toll dialing parity orders have required
LECs to inform customers either once or twice of their opportunity to
choose an alternative carrier.196 We anticipate that any
subsequently imposed consumer notification requirements would be no
more be burdensome, and, in particular, would not require more than two
notifications to consumers of their opportunity to choose alternative
carriers to transport their intraLATA toll calls.
---------------------------------------------------------------------------
\196\ See, e.g., Adoption of rules relating to intra-Market
Service Area presubscription and changes in dialing arrangements
related to the implementation of such presubscription, Interim Order
(Ill. Comm. Comm'n. Apr. 7, 1995).
---------------------------------------------------------------------------
81. We conclude that ``dial-tone providers'' should not be
permitted automatically to assign to themselves new customers who do
not affirmatively choose a toll provider. New customers of a telephone
exchange service provider who fail affirmatively to select a provider
of telephone toll service, after being given a reasonable opportunity
to do so, should not be assigned automatically to the customer's dial-
tone provider or the customer's preselected interLATA toll or
interstate toll carrier. Rather, we find that consistent with current
practices in the interLATA toll market, such nonselecting customers
should dial a carrier access code to route their intraLATA toll or
intrastate toll calls to the carrier of their choice until they make a
permanent, affirmative selection. This action eliminates the
possibility that a LEC could designate itself automatically as a new
customer's intraLATA or intrastate toll carrier without notifying the
customer of the existence of alternative carrier choices. Finally,
notwithstanding our decision to entrust the issues of consumer
notification and carrier selection to the states, we emphasize that all
telecommunications carriers remain subject to the requirements of
section 258 as well as any verification or ``anti-slamming'' 197
procedures that the Commission may adopt to prevent unauthorized
changes in a customer's selection of a provider of telephone exchange
or telephone toll service.198
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\197\ The Commission has defined slamming as the unauthorized
conversion of a customer's interexchange carrier by another
interexchange carrier, an interexchange resale carrier, or a
subcontractor telemarketer. Cherry Communications, Inc. Consent
Decree, 9 FCC Rcd 2986, 2987 (1994).
\198\ Section 258 makes it unlawful for any telecommunications
carrier to ``submit or execute a change in a subscriber's selection
of a provider of telephone exchange service or telephone toll
service except in accordance with such verification procedures as
the Commission shall prescribe.'' 47 U.S.C. 258(a). The section
further provides that:
[a]ny telecommunications carrier that violates the verification
procedures described in subsection (a) and that collects charges for
telephone exchange service or telephone toll service from a
subscriber shall be liable to the carrier previously selected by the
subscriber in an amount equal to all charges paid by such subscriber
after such violation.
47 U.S.C. 258(b). Section 258 extends the slamming prohibition
to all telecommunications carriers, not just interexchange carriers,
as is the case under the Commission's current Part 64 rules. See 47
CFR Sec. 64.1100.
---------------------------------------------------------------------------
F. Cost Recovery
a. Background
82. In the NPRM, the Commission noted that the 1996 Act does not
specify how LECs will recover the costs associated with providing
dialing parity to competing providers.199 The Commission therefore
sought comment on: (1) What, if any, standard should be used for
arbitration to determine the dialing parity implementation costs that
LECs should be permitted to recover; and (2) how those costs should be
recovered.200
---------------------------------------------------------------------------
\199\ NPRM at para. 219.
\200\ Id.
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b. Comments
83. At the outset, we note that there does not appear to be a
consensus among commenters as to either of the
[[Page 47301]]
two cost recovery issues raised in the NPRM. The parties are generally
divided into two positions: (1) Interexchange carriers and competitive
carriers prefer a Commission standard under which carriers could
recover from competing providers only the specific incremental costs of
providing intraLATA toll dialing parity; and (2) incumbent LECs and
several states prefer that no national standards be developed, and that
cost
FR Doc. 96-22045 Implementation of the Local Competition Provisions of the Telecommunications Act of 1996
recovery issues be left either to the states or to intercarrier
negotiations.
84. AT&T suggests that carriers only be entitled to recover
incremental costs directly associated with the implementation of
dialing parity, and states that the Commission should ``explicitly
exclude (a) recovery of costs intended to reimburse an incumbent
carrier for revenues it expects to lose as a result of implementing
dialing parity * * * as well as (b) costs associated with network
upgrades that are not necessary to implement dialing parity.'' 201
AT&T further suggests that the Commission mandate an ``Equal Access
Recovery Charge'' on all providers of toll service based on minutes of
use subject to dialing parity, and that this charge be tariffed
separately from any access charges, approved by the state commission,
and amortized over a period not to exceed eight years.202
---------------------------------------------------------------------------
\201\ AT&T comments at 7.
\202\ Id.
---------------------------------------------------------------------------
85. MCI appears to agree with AT&T's proposal, stating that
``incremental costs incurred to implement dialing parity should be
recovered from all carriers that carry intraLATA toll on a
presubscribed basis in accordance with cost causative principles.''
203 MCI also suggests that dialing parity costs be recovered on a
minutes-of-use basis, as an addition to the local switching rate
element, which would be separately identified in a tariff, and that
Commission rules for cost recovery be ``presumptively correct'' (i.e.,
states can depart from such rules if they can show their mechanism is
more effective).204 Several parties urge the Commission to draw
upon its cost recovery paradigms for interLATA equal access, and apply
the same basic principles to the intraLATA toll market.205
---------------------------------------------------------------------------
\203\ MCI comments at 3.
\204\ Id. at 7-8.
\205\ See, e.g., GVNW comments at 8; MCI comments at 7.
---------------------------------------------------------------------------
86. Many other competitive providers also advocate various forms of
incremental cost recovery, on a per-minutes of use basis, to be
assessed against all providers of presubscribed intraLATA toll
services; such costs could include, for example, hardware costs,
software costs, and consumer education costs.206 GSA/DOD asks the
Commission to ``view LEC claims for large cost compensation with
considerable skepticism,'' and suggests that the Commission
``distribute any verifiable incremental costs associated with achieving
dialing parity as a percentage surcharge on the bills of all carriers,
including the incumbent LECs.'' 207
---------------------------------------------------------------------------
\206\ See, e.g., Citizens Utilities comments at 6; GSA/DOD
comments at 6-8.
\207\ GSA/DOD comments at 6-7, 8.
---------------------------------------------------------------------------
87. Taking the opposite view, BOC commenters, together with GTE and
USTA, argue that there is essentially no need for the Commission to
adopt cost recovery measures for dialing parity, and that cost recovery
issues are best left for the states to address.208 Several state
public utility commissions also argue that, given the state-specific
nature of intraLATA cost recovery issues, and the omission of a
specific cost-recovery standard from Congress in section 251(b)(3), the
individual states are in the best position to address these
issues.209 In support of these arguments, some state commenters
have provided the Commission with detailed descriptions of their
current mechanisms for recovering intraLATA presubscription
costs.210
---------------------------------------------------------------------------
\208\ See Bell Atlantic comments at 5; GTE comments at 20-21;
NYNEX comments at 10-11; PacTel comments at 17; SBC comments at 9;
USTA comments at 4.
\209\ See Illinois Commission comments at 72; Indiana Commission
comments at 9; Ohio Consumers' Counsel comments at 4; and Ohio
Commission comments at 11.
\210\ Id.; see also Louisiana Commission comments at 7.
---------------------------------------------------------------------------
88. Ameritech argues that dialing parity costs ``should be
recovered under normal regulatory principles from the cost-causer,''
and Bell Atlantic argues that ``only carriers who will benefit from
intraLATA presubscription should pay the costs. Unless interexchange
carriers bear the full costs of implementing intraLATA presubscription,
exchange carrier customers who do not switch intraLATA toll carriers
and do not benefit from presubscription would ultimately be required to
pay for it.'' 211 On the other extreme, the Telecommunications
Resellers Association states that incumbent LECs should ``shoulder the
full financial burden of remedying this competitive imbalance [in the
intraLATA toll market].'' 212
---------------------------------------------------------------------------
\211\ Ameritech comments at 10; Bell Atlantic comments at 5.
\212\ Telecommunications Resellers Association comments at 8.
---------------------------------------------------------------------------
89. The reply comments reveal substantial disagreement among
carriers from the two opposing positions. Interexchange carriers and
competitive carriers reject the suggestion that they shoulder the full
cost burden for intraLATA dialing parity, and urge that, at a minimum,
costs be spread among all service providers that enjoy dialing
parity.213 AT&T states that ``the proposal by Ameritech and Bell
Atlantic to recover implementation costs exclusively from their
competitors underscores the need for explicit national rules * * *
[n]othing could be more * * * harmful to competition, than allowing
incumbent LECs to charge a fee for new entrants for the ``privilege''
of competing with them.'' 214 GSA/DOD also urges the Commission to
``reject'' the proposals of Bell Atlantic and SBC.215 MFS
correctly notes that there was ``little consensus'' on this issue, and
states ``it is entirely inappropriate in a competitive environment that
an individual carrier's costs be recovered from its competitors.''
216 The Ohio Consumer's Counsel states that Ameritech's ``cost-
causer'' proposal ``ignores the fact that the benefits of dialing
parity are network-wide.'' 217
---------------------------------------------------------------------------
\213\ See, e.g., Sprint reply at 12; Telecommunications
Resellers Association reply at 7; WinStar reply at 12.
\214\ AT&T reply at iii.
\215\ GSA/DOD reply at 8.
\216\ MFS reply at 14.
\217\ Ohio Consumers' Counsel reply at 4.
---------------------------------------------------------------------------
90. Incumbent LECs maintain that the Commission should not set
national cost recovery standards, and that this matter remains the
prerogative of the states.218 GTE ``strongly opposes'' AT&T's
suggestions, and PacTel states that ``LECs cost recovery should not be
limited by noncompensatory incremental methodologies or unreasonably
long amortization requirements.'' 219 SBC asserts that the
proposals of MCI and AT&T are ``examples of regulatory micro-
management, are inconsistent with Congressional intent, and would also
* * * place the major burden of dialing parity cost recovery squarely
on the backs of incumbent LECs.'' 220
---------------------------------------------------------------------------
\218\ See Bell South reply at 4; Bell Atlantic reply at 5; NYNEX
reply at 4; PacTel reply at 18; and USTA reply at 5.
\219\ PacTel reply at iii.
\220\ SBC reply at 8.
---------------------------------------------------------------------------
91. GCI states that ``costs should be recovered in a competitively
neutral manner because all LECs, not just incumbent LECs, must meet
this obligation.'' 221 Western Alliance contends that ``costs
incurred to achieve dialing parity should be included in the investment
recoverable through explicit
[[Page 47302]]
universal (service) supports.'' 222 Finally, NECA argues that
there is no need for the Commission to prescribe specific cost recovery
mechanisms.223
---------------------------------------------------------------------------
\221\ GCI reply at 2.
\222\ Western Alliance reply at 2 n.6.
\223\ NECA reply at 2.
---------------------------------------------------------------------------
c. Discussion
92. We conclude that, in order to ensure that dialing parity is
implemented in a pro-competitive manner, national rules are needed for
the recovery of dialing parity costs. We further conclude that these
costs should be recovered in the same manner as the costs of interim
number portability, as mandated in our recent Number Portability
Order.224 Our authority to promulgate national cost recovery rules
derives from section 251(d) of the 1996 Act and section 4(i) of the
1934 Act. In section 251(d), Congress directed the Commission to take
the necessary steps to implement section 251. Section 4(i) of the 1934
Act authorizes us to take any action we consider ``necessary and
proper'' to further the public interest in the regulation of
telecommunications. Because we determine that dialing parity is crucial
to the development of local exchange competition, we conclude that we
should establish pricing principles for the recovery of dialing parity
costs. Accordingly, we reject the arguments of incumbent LECs and
others who oppose national standards for cost recovery of the network
upgrades required to achieve dialing parity.
---------------------------------------------------------------------------
\224\ Telephone Number Portability, CC Docket No. 95-116, FCC
96-286 (July 2, 1996) (Number Portability Order) 61 FR 38605 (July
25, 1996).
---------------------------------------------------------------------------
93. Many of the network upgrades necessary to achieve dialing
parity, such as switch software upgrades, are similar to those required
for number portability. Moreover, with both dialing parity and number
portability, customer inconvenience represents the barrier to effective
competition Congress intends to eliminate, whether that inconvenience
results from the dialing of extra digits in the case of dialing parity,
or notification of family, friends and business contacts when a
customer is forced to change his or her number. For these reasons, we
determine that our recent Number Portability Order provides guidance
regarding which costs incumbent LECs should be able to recover in
implementing dialing parity, as well as how such costs should be
recovered. The rules adopted in the Number Portability Order apply only
to currently-available number portability mechanisms. We sought further
comment on cost recovery for long-term number portability, because
long-term number portability will involve a different kind of system
than currently available solutions. We tentatively concluded that under
section 251(e)(2), the same cost recovery principles should apply to
long-term number portability. In the case of dialing parity, there is a
similar distinction between currently-available solutions (i.e., full
2-PIC presubscription), and long-term solutions (i.e., multi-PIC or
smart-PIC methodologies). Like number portability, we may need to
revisit the issue of an appropriate cost recovery standard once other
presubscription technologies become available on a nationwide basis.
94. In the Number Portability Order, we concluded that costs for
number portability should be recovered on a competitively-neutral
basis.225 We also concluded that any recovery mechanism should:
(1) Not give one service provider an appreciable, incremental cost
advantage over another service provider, when competing for a specific
subscriber; and (2) not have a disparate effect on the ability of
competing service providers to earn a normal return.226 We
therefore reject the arguments of those commenters that assert that
only new entrants should bear the costs of implementing dialing parity,
because such an approach would not be competitively neutral. We also
concluded in the Number Portability Order that LECs could only recover
the incremental costs of implementing number portability. Because we
determine that number portability and dialing parity share significant
technical similarities and overcome similar barriers to competition, we
conclude that we should impose the same cost standard for dialing
parity costs that we have adopted for number portability costs. We
therefore agree with AT&T that LECs may not recover from other carriers
under a dialing parity cost recovery mechanism any network upgrade
costs not related to the provision of dialing parity.
---------------------------------------------------------------------------
\225\ Section 251(e)(2) of the 1996 Act states that ``the cost
of establishing * * * number portability shall be born by all
telecommunications carriers on a competitively neutral basis, as
determined by the Commission.'' This statutory provision does not
apply to the dialing parity requirement.
\226\ Number Portability Order at paras. 121-140.
---------------------------------------------------------------------------
95. In our Number Portability Order, we concluded that the costs of
long-term number portability that could be recovered through a
competitively-neutral mechanism included installation of number
portability-specific switch software, implementation of SS7 and IN or
AIN capability, and the construction of number portability
databases.227 We determined that states could use several
allocators, including gross telecommunications revenues, number of
lines, and number of active telephone numbers, to spread number
portability costs across all telecommunications carriers.228
Applying the same cost recovery principles to dialing parity, we
conclude that LECs may recover the incremental costs of dialing parity-
specific switch software, any necessary hardware and signalling system
upgrades, and consumer education costs that are strictly necessary to
implement dialing parity. These costs must be recovered from all
providers of telephone exchange service and telephone toll service in
the area served by a LEC, including that LEC, using a competitively-
neutral allocator established by the state.229 Although, under
section 251(e)(2), number portability costs must be recovered from all
telecommunications carriers, section 251(b)(3) only requires that
dialing parity be provided to providers of telephone exchange service
and telephone toll service. Therefore, we conclude that a
competitively-neutral recovery mechanism for dialing parity should only
allocate costs to this more limited class. States may use any of the
allocators described in the Number Portability Order, or any other
allocator that meets the criteria we have established. States should
apply the principles we adopt today, and the other guidelines for
recovering costs of currently available number portability measures, in
establishing more specific cost recovery requirements for dialing
parity.
---------------------------------------------------------------------------
\227\ Id. at para. 122.
\228\ Id. at paras. 134-36.
\229\ We recognize that, unlike the case for number portability
costs, states would not be able to establish a cost allocator based
on numbers of lines because such an allocator could not apportion
costs on a competitively neutral basis where dialing parity is
provided to a CMRS provider. We expect that states will establish a
competitively neutral allocator that can be used to apportion costs
among all providers.
---------------------------------------------------------------------------
G. Unreasonable Dialing Delays
96. For a discussion of the section 251(b)(3) prohibition on
unreasonable dialing delays, as that section applies to the provision
of local and toll dialing parity, see section III(E) below.
III. Nondiscriminatory Access Provisions
A. Definition of the Term ``Nondiscriminatory Access''
1. Background
97. Section 251(b)(3) requires all LECs to permit
``nondiscriminatory access'' to
[[Page 47303]]
telephone numbers, operator services, directory assistance, and
directory listings to competing providers of telephone exchange
service, and to competing providers of telephone toll service.230
In the NPRM, we tentatively concluded that ``nondiscriminatory access''
requires each LEC to permit the same degree of access that the LEC
itself receives for the services specified in section
251(b)(3).231 The Commission also asked for specific comment on
whether the nondiscriminatory access provisions of section 251(b)(3)
also impose a duty on LECs to resell operator and directory assistance
services to competing providers.232
---------------------------------------------------------------------------
\230\ 47 U.S.C. 251(b)(3).
\231\ See NPRM at para. 214.
\232\ See NPRM at paras. 216, 217.
---------------------------------------------------------------------------
2. Comments
98. A number of commenters concur that, as proposed in the NPRM,
``nondiscriminatory access'' should require each LEC to permit the same
access to these services that the LEC itself receives.233 Bell
Atlantic argues, however, that access need not be strictly equal, but
must ``simply be of a type that will permit the other carrier to
provide comparable services with no difference in quality perceptible
to callers.'' 234 Bell Atlantic cites the Modification of Final
Judgment (MFJ) for the proposition that ``equal access'' does not
require ``strict technical equality of services and facilities,'' but
rather it requires that consumers should perceive no qualitative
differences.235 Sprint objects to Bell Atlantic's use of
``customer perception'' as the nondiscriminatory access standard,
arguing that this standard would allow the incumbent LEC to
``discriminate against its competitors in ways not visible to the end
user.'' 236
---------------------------------------------------------------------------
\233\ See, e.g., AT&T reply at iii-iv; ACSI comments at 9;
California Commission comments at 5; Excel comments at 8; Florida
Commission comments at 5; MCI comments at 2; and Telecommunications
Resellers Association comments at 5.
\234\ See Bell Atlantic comments at n.11.
\235\ Id. at 6, citing United States v. Western Electric Co.,
569 F. Supp. 1057, 1063 (D.D.C. 1983). Bell Atlantic also states
that the Commission followed this approach in a 1985 ``equal
access'' order. Id. at 11, citing In the Matter of MTS and WATS
Market Structure (Phase III), Report and Order, CC Docket No. 78-72,
100 F.C.C. 2d. 860, 877 (1985) (MTS and WATS Order (III)).
\236\ Sprint reply at 9-10.
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99. Ameritech requests a clarification that a LEC's duty under
section 251(b)(3) is owed only to ``providers of telephone exchange and
telephone toll service.'' 237 Ameritech also argues that because
Congress did not expressly impose a strict equality standard in section
251(b)(3), as it did in section 251(c)(2)(C) for incumbent LECs, ``the
only logical interpretation is that LECs are required to provide access
* * * that is nondiscriminatory among carriers.'' 238 The Ohio
Consumer's Counsel responds that ``Ameritech is claiming that giving
all other carriers an equal level of degraded access, i.e., inferior to
that provided to itself, is 'non-discriminatory.' Surely Congress
contemplated nothing of the sort, as is recognized even by other
incumbent LECs.'' 239
---------------------------------------------------------------------------
\237\ Ameritech comments at 11.
\238\ Id. at 12-13. Section 251(c)(2)(C) imposes a duty on
incumbent LECs to provide interconnection that is ``at least equal
in quality to that provided by the local exchange carrier to itself
or to any subsidiary, affiliate, or any other party to which the
carrier provides interconnection.'' 47 U.S.C. 251(c)(2)(C).
\239\ Ohio Consumers' Counsel reply at 3.
---------------------------------------------------------------------------
100. As for resale, a number of commenters agree that LECs should
make operator and directory assistance services available for resale to
competing providers under section 251(b)(3), in order to further
nondiscriminatory access to such services.240 On the other hand,
several commenters contend that this provision does not imply any
resale requirements.241 AT&T argues that resale is not required
under section 251(b)(3), because ``to the extent that a local exchange
carrier provides transmission with, or as part of, its operator
services, the service must be made available for resale under sections
251(b)(1) and 251(c)(4) of the Act.'' 242 Bell Atlantic takes a
similar approach, arguing that, to the extent that a LEC provides
operator and directory assistance services that are ``telecommunication
services,'' the service must be made available for resale by LECs under
section 251(b)(1), and, if the services are telecommunication services
offered to retail customers, incumbent LECs must offer them for resale
at wholesale prices under section 251(c)(4).243
---------------------------------------------------------------------------
\240\ See, e.g., ALTS comments at n.4; MCI reply at 3; MFS reply
at 10; and Telecommunications Resellers Association comments at ii.
\241\ See, e.g., GTE comments at 16; Ameritech comments at n.16;
NYNEX comments at 6-7.
\242\ AT&T comments at n.13.
\243\ Bell Atlantic comments at 8.
---------------------------------------------------------------------------
3. Discussion
101. We conclude that the term ``nondiscriminatory access'' means
that a LEC that provides telephone numbers, operator services,
directory assistance, and/or directory listings (``providing LEC'')
244 must permit competing providers to have access to those
services that is at least equal in quality to the access that the LEC
provides to itself. We conclude that ``nondiscriminatory access,'' as
used in section 251(b)(3), encompasses both: (1) Nondiscrimination
between and among carriers in rates, terms and conditions of access;
and (2) the ability of competing providers to obtain access that is at
least equal in quality to that of the providing LEC.245 LECs owe
the duty to permit nondiscriminatory access to competing providers of
telephone exchange service and to providers of telephone toll service,
as the plain language of the statute requires. Such competing providers
may include, for example, other LECs, small business entities entering
the market as resellers, or CMRS providers.
---------------------------------------------------------------------------
\244\ We use the term ``providing LEC'' throughout this section
to refer to the LEC that is permitting nondiscriminatory access to
its services pursuant to section 251(b)(3). The term ``competing
provider'' refers to a provider of telephone exchange service or a
provider of telephone toll service that seeks nondiscriminatory
access from a providing LEC.
\245\ See also corresponding definition of ``nondiscriminatory''
in the First Report and Order at section V for the purposes of
section 251(c)(2).
---------------------------------------------------------------------------
102. Section 251(b)(3) requires that each LEC, to the extent that
it provides telephone numbers, operator services, directory assistance,
and/or directory listings for its customers, must permit competing
providers nondiscriminatory access to these services.246 Any
standard that would allow a LEC to permit access that is inferior to
the quality of access enjoyed by that LEC itself is not consistent with
Congress' goal to establish a pro-competitive policy framework.
---------------------------------------------------------------------------
\246\ See also First Report and Order at section V.
---------------------------------------------------------------------------
103. We are not persuaded by Bell Atlantic's statement that the
standard for nondiscriminatory access should focus only upon ``customer
perceptions'' of service quality. Such a standard overlooks the
potential for a providing LEC to subject its competitors to
discriminatory treatment in ways that are not visible to the customer,
such as the imposition of disparate conditions between similarly-
situated carriers on the pricing and ordering of services covered by
section 251(b)(3). While invisible to the customer, such conditions can
severely diminish a competitor's ability to provide exchange and/or
toll service on the same terms as the LEC permitting the access.
104. The MTS and WATS Order (III) does not preclude us from
requiring LECs to permit access that is at least equal in quality to
the access the LEC itself receives.247 In the MTS and WATS Order
(III), the Commission simply held that neither ``absolute technical
equality'' nor an ``overly quantitative and microscopic'' definition of
equal
[[Page 47304]]
access was desirable.248 We find that the nondiscrimination
standard established in this Order is consistent with those previous
decisions. We do not set forth in this Order an overly technical
definition of nondiscriminatory access.
---------------------------------------------------------------------------
\247\ MTS and WATS Order (III), 100 F.C.C. 2d at 860. See also
supra n. 234.
\248\ MTS and WATS Order (III), 100 F.C.C. 2d at 877.
---------------------------------------------------------------------------
105. We conclude that, to the extent all or part of any operator or
directory assistance services, and features that are adjunct to such
services, are not ``telecommunications services'' within the meaning of
section 3(44) 249 of the Communications Act of 1934, LECs that
provide such services must nonetheless make the services and features
available under section 251(b)(3). We recognize that resale of operator
services and directory assistance is a primary vehicle through which
competing providers, especially new entrants and small business
entities, can make operator services or directory assistance available
to their customers and that providing LECs are a primary source from
which competing providers can obtain these services.250 Operator
and directory assistance services, or the portions of such services,
that are ``telecommunications services'' are already subject to resale
requirements under: (1) Section 251(c)(4)(A), which requires incumbent
LECs ``to offer for resale at wholesale rates any telecommunications
service that the carrier provides at retail to subscribers who are not
telecommunications carriers''; and (2) section 251(b)(1), which imposes
a duty on all LECs not to prohibit the resale of their
telecommunications services, nor to impose unreasonable or
discriminatory conditions on the resale of such services.251
Operator and directory assistance services, however, generally use
various adjunct information features, e.g., rating tables or customer
information databases.252 We recognize that without access to such
information features, competing providers cannot make full use of such
services. Thus, to ensure that competing providers can obtain
nondiscriminatory access to operator services and directory assistance,
we require LECs to make such services available to competing providers
in their entirety.253
---------------------------------------------------------------------------
\249\ 47 U.S.C. 153(44).
\250\ See also infra para. 118, for discussion of the unbundling
of operator services and directory assistance under section
251(c)(3).
\251\ 47 U.S.C. 251(b)(1), (c)(4)(A). Operator services and
directory assistance are also unbundled network elements subject to
section 251(c)(3). See First Report and Order at section V. The 1934
Act, as amended, defines ``telecommunications service'' 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.'' 47 U.S.C. 153(46).
``Telecommunications'' is defined as ``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.'' 47 U.S.C. 153(43). ``Information service''
is defined as ``the offering of a capability for generating,
acquiring, storing, transforming, processing, retrieving, utilizing,
or making available information, via telecommunications * * *.'' 47
U.S.C. 153(20). See also First Report and Order at section V.
\252\ ``Rating tables'' are databases that cross-reference area
codes, numbers called, and time of day to determine the price to be
charged for telephone calls. Directory assistance may use databases
that contain customer names, numbers and addresses, and operator
services may use databases that contain customer billing information
(e.g., whether a customer will accept collect calls or third party
billing).
\253\ See infra paras. 108-151, for further discussion of
operator services and directory assistance.
---------------------------------------------------------------------------
B. Nondiscriminatory Access to Telephone Numbers
1. Definition
106. Currently, the largest LEC in each area code serves as the
Central Office (CO) code administrator for that area. In the NPRM, this
Commission proposed that the term ``nondiscriminatory access to
telephone numbers'' means that all LECs providing telephone numbers
must permit access to telephone numbers to competing providers in the
same manner that the LECs themselves receive such access.254 The
few commenters who addressed this issue support the extension of our
general definition of nondiscriminatory access to cover access to
telephone numbers.255 We conclude, consistent with the general
definition of nondiscriminatory access in para. 101, supra, that the
term ``nondiscriminatory access to telephone numbers'' requires a LEC
providing telephone numbers to permit competing providers access to
these numbers that is identical to the access that the LEC provides to
itself. In addition, as discussed in paras. 261-345, infra, the
delegation of the administration of numbering resources to a neutral
administrator will further the statutory objective that all competing
providers receive nondiscriminatory access to telephone numbers.
---------------------------------------------------------------------------
\254\ See NPRM at para. 215.
\255\ See, e.g., Telecommunications Resellers Association reply
at 5. See supra para. 101, for the general definition of
``nondiscriminatory access.''
---------------------------------------------------------------------------
2. Commission Action To Enforce Access to Telephone Numbers
107. In the NPRM, we sought comment on what, if any, Commission
action is necessary or desirable to implement the requirement under
section 251(b)(3) that LECs permit nondiscriminatory access to
telephone numbers.256 Many commenters state that no additional
Commission actions, beyond those already required by section 251(e),
are necessary.257 We conclude that issues regarding access to
telephone numbers will be addressed by our implementation of section
251(e) herein.258
---------------------------------------------------------------------------
\256\ NPRM at para. 215.
\257\ See, e.g., Bell Atlantic comments at 6; CBT comments at 6;
and U S WEST comments at 8. See generally infra paras. 261-308, for
a discussion of previous Commission actions in the area of number
administration.
\258\ See generally infra paras. 261-345.
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C. Nondiscriminatory Access to Operator Services
1. Definition of ``Operator Services''
a. Background and Comments
108. The 1996 Act does not define the term ``operator services.''
In the NPRM, the Commission proposed to use the definition of
``operator services'' in the Telephone Operator Consumer Services
Improvement Act (TOCSIA) of 1990.259 Section 226(a)(7), which was
added to the 1934 Act by TOCSIA, defines operator services as: ``any
automatic or live assistance to a consumer to arrange for billing or
completion, or both, of a telephone call through a method other than:
(1) Automatic completion with billing to the telephone from which the
call originated; or (2) completion through an access code by the
consumer, with billing of an account previously established with the
telecommunications service provider by the consumer.'' 260
---------------------------------------------------------------------------
\259\ 47 U.S.C. 226(a)(7); see NPRM at para. 294.
\260\ NPRM at para. 216.
---------------------------------------------------------------------------
109. Bell Atlantic, BellSouth and MCI agree with the proposed
definition of ``operator services.'' 261 AT&T, however, expresses
concern that this definition should not be used by incumbent LECs to
claim that they are then not obligated to make operator services,
including transmission of information, available for resale at
wholesale rates, pursuant to section 251(c)(4).262 AT&T thus
suggests that the Commission adopt the definition as proposed in the
NPRM, but explicitly state that the definition is applicable only in
the context of section 251(b)(3).263 AT&T asserts that the
traditional functions of ``emergency interrupt,'' ``busy line
verification,'' and ``operator-assisted directory assistance''
[[Page 47305]]
are within the meaning of ``operator services'' in this
context.264
---------------------------------------------------------------------------
\261\ See, e.g., Bell Atlantic comments at 8; BellSouth comments
at n.24; and MCI comments at 8.
\262\ See AT&T comments at 8. 47 U.S.C. 251(c)(4), inter alia,
requires incumbent LECs to offer for resale, at wholesale rates, any
telecommunications service that the carrier provides at retail to
subscribers who are not telecommunications carriers.
\263\ Id.
\264\ Id. at n. 11.
---------------------------------------------------------------------------
b. Discussion
110. TOCSIA defines operator services to be ``any automatic or live
assistance to a consumer to arrange for billing or completion, or both,
of a telephone call through a method other than: (1) Automatic
completion with billing to the telephone from which the call
originated; or (2) completion through an access code by the consumer,
with billing of an account previously established with the
telecommunications service provider by the consumer.'' 265 Based
on support in the record and the desirability of having a definition
consistent with that in the preexisting statute, we conclude that we
should adopt the definition of operator services as used in TOCSIA for
purposes of section 251(b)(3), with modifications. For purposes of
section 251(b)(3), we do not exempt (1) and (2), above, from the
definition of operator services. Accordingly, the term operator
services, for purposes of section 251(b)(3), means ``any automatic or
live assistance to a consumer to arrange for billing or completion, or
both, of a telephone call.'' Although commenters did not focus on this
issue, nor suggest that the exemptions be deleted from the TOCSIA
definition of ``operator services,'' we conclude that we should adopt a
modified definition of operator services for the purpose of
implementing section 251(b)(3). When enacted, the TOCSIA definition was
intended to address services from an aggregator location, rather than
addressing the types of operator services in general that would be
essential to competition in telecommunications markets. Operator
services are becoming increasingly automated, and thus excluding access
to automatic call completion from the obligations imposed by section
251(b)(3) could deny competitors access to a service that is essential
to competition in the local exchange market. We conclude that, for the
same reason, ``completion by an access code by the consumer,'' a common
means of completing calls made from payphones, should also be included
in the definition of operator services for section 251(b)(3).
---------------------------------------------------------------------------
\265\ 47 U.S.C. 226(a)(7).
---------------------------------------------------------------------------
111. Adopting a national definition of ``operator services'' based
on the TOCSIA definition, as modified above, will allow for consistency
and ease of compliance with the statute, specifically with respect to
services to which all LECs must permit nondiscriminatory
access.266 We further conclude that we should state explicitly
that busy line verification, emergency interrupt, and operator-assisted
directory assistance are forms of ``operator services,'' because they
assist customers in arranging for the billing or completion (or both)
of a telephone call. Thus, if a LEC provides these functions, the LEC
must offer them on a nondiscriminatory basis to all providers of
telephone exchange and/or toll service. To avoid confusion with the
TOCSIA definition at section 226, we state here that this definition
only applies for purposes of section 251. Finally, unlike the
definition of operator services in TOCSIA, we point out that our
definition of ``operator services'' under section 251(b)(3) is
applicable to both interstate and intrastate operator services.267
---------------------------------------------------------------------------
\266\ See also infra para. 146.
\267\ See First Report and Order at section V for discussion of
application of section 251 to interstate and intrastate matters.
---------------------------------------------------------------------------
2. Definition of ``Nondiscriminatory Access to Operator Services''
a. Background
112. In the NPRM, we proposed that the phrase ``nondiscriminatory
access to operator services'' should be interpreted to mean that a
telephone service customer, regardless of the identity of his or her
local telephone service provider, must be able to connect to a local
operator by dialing ``0,'' or ``0 plus'' the desired telephone
number.268
---------------------------------------------------------------------------
\268\ See NPRM at para. 216.
---------------------------------------------------------------------------
b. Comments
113. Several commenters agree with the Commission's interpretation
of this phrase as proposed in the NPRM.269 PacTel, however,
requests that we clarify that the ``0'' or ``0 plus'' requirement does
not mean ``that a customer must be able to access every LEC's operator
services or directory assistance using the same dialing scheme, but
rather only the services of the carrier selected to provide local
service.'' 270 AT&T requests that operator service connection
methods continue to include dialing ``00'' in order to access the pre-
selected long distance carrier operator.271 CBT asks that we find
that the nondiscriminatory access requirements only apply when a
competing local service provider is using either a LEC's local exchange
services on a resale basis or when the competing provider is using a
LEC's unbundled switch ports.272 GCI states that, in Alaska, LECs
currently do not provide ``0'' or ``0 plus'' the telephone number;
rather, interexchange carriers provide these services. GCI requests
that arrangements such as those in Alaska not be precluded.273
Bell Atlantic, USTA, and PacTel request that we state that, while LECs
must offer their operator services to their competitors, there is no
duty for a LEC to ensure that the competitors' customers have access to
these services.274 Finally, U S WEST states that ``regulatory
agencies should not mandate all carriers provide certain adjunct non-
essential services, including ``0'' and ``0+'' services. Nor should
regulatory agencies dictate the manner in which adjunct, non-essential
services are accessed.'' 275
---------------------------------------------------------------------------
\269\ See, e.g., AT&T comments at 9; MCI comments at 8; and
Telecommunications Resellers Association comments at 6.
\270\ See PacTel comments at 16.
\271\ See AT&T comments at 9.
\272\ See CBT comments at 6, 7.
\273\ See GCI reply at 3 n.4.
\274\ See Bell Atlantic comments at 7; USTA comments at ii;
PacTel comments at 15.
\275\ U S WEST comments at 8-9.
---------------------------------------------------------------------------
c. Discussion
114. We adopt the interpretation of ``nondiscriminatory access to
operator services'' that we proposed in the NPRM, with the following
clarifications. First, LECs are required to permit nondiscriminatory
access to operator services by competing providers, and have no duty,
apart from factors within their own control, to ensure that a competing
provider's customers can in fact access the services. We make this
clarification because the statute does not refer to the customers of
competing providers, and the record does not support such an
interpretation of the statutory language. Second, there is no
requirement that a LEC must provide call handling methods or different
credit card or other alternate billing arrangements different from
those it provides to itself or its affiliates. And finally, we find
that the duty to permit nondiscriminatory access to operator services
applies only to LECs that provide operator services to their own
customers.
115. Once a LEC permits a competing provider to have access to
operator services, this access may become degraded in the competing
provider's network by factors outside the control of the providing
LEC.276 On the other hand, when a LEC unbundles network loop
elements, the providing LEC may also retain maintenance and control
responsibilities over such elements.277
[[Page 47306]]
We require that, if a dispute arises between a LEC providing access to
operator services and a competing provider regarding the delivery of
such access, the initial burden is upon the providing LEC to
demonstrate with specificity: (1) That it has provided
nondiscriminatory access, and (2) that the degradation of access is not
caused by factors within the control of the providing LEC. Our use of
the term ``factors'' is not limited to network facilities, but also
includes human and non-facilities elements used in the provision of
operator services. A providing LEC must also demonstrate with
specificity that any degradation in access by competing providers is
not caused by, inter alia, the providing LEC's inadequate staffing,
poor maintenance or cumbersome ordering procedures.
---------------------------------------------------------------------------
\276\ For example, the customers of a competing provider may
experience dialing delays or call blockage due to inadequate
facilities or poor call management in the competing provider's
network.
\277\ We note that incumbent LECs have an obligation to offer
operator services and directory assistance on an unbundled basis
under section 251(c)(3). 47 U.S.C. 251(c)(3). See First Report and
Order section V.
---------------------------------------------------------------------------
116. We take into account PacTel's comments in concluding that the
nondiscriminatory access requirement of section 251(b)(3) does not
require that a customer be able to access every LEC's operator
services, but only the operator services offered by that customer's
chosen local service provider.278 Furthermore, section 251(b)(3)
neither specifically addresses nor precludes arrangements wherein
operator services are provided by interexchange carriers, as described
by GCI. Section 251(b)(3) requires all LECs, but not interexchange
carriers or other service providers, to permit nondiscriminatory access
to operator services. Thus, to the extent that an OSP is not within the
statutory definition of ``local exchange carrier,'' it is not required
by section 251(b)(3) to permit nondiscriminatory access to its operator
services.
---------------------------------------------------------------------------
\278\ The operator services provided by a customer's local
service provider, for example, could be that provider's own operator
services, resold operator services of a LEC providing
nondiscriminatory access, or operator services provided by an
independent OSP.
---------------------------------------------------------------------------
117. The ``00'' access method currently allows an end user to
connect to the operator services of his or her presubscribed long
distance carrier. Consistent with our definition of nondiscriminatory
access, we require that, if a LEC allows its customers access to
operator services of their presubscribed long distance carriers by
dialing ``00,'' it must permit competing providers to have access to
any features and functions that are necessary to enable the competing
provider to allow its customers likewise to obtain access to such
operator services by dialing ``00.'' We find that CBT's proposal to
limit a LEC's operator services obligations to only those competitors
reselling a LEC's services, or using a LEC's unbundled switch ports, is
inconsistent with the statute. The nondiscriminatory access provisions
of section 251(b)(3) are not confined to situations in which a
competing provider resells a LEC's services, or uses unbundled network
elements of a LEC. We do not agree with U S WEST's statement that it
would be inappropriate to mandate that all LECs who offer operator
services must accommodate ``0'' and ``0 plus'' dialing. This service is
not, as U S WEST states, an ``adjunct, non-essential'' service.
118. Finally, we note that in the First Report and Order we found
that operator services as well as directory assistance are network
elements that an incumbent LEC must make available to requesting
telecommunications carriers. In the absence of an agreement between the
parties, unbundled element rates for operator services and directory
assistance are governed by section 252(d)(1) and our rules
thereunder.279 The obligation of incumbent LECs to provide
operator services and directory assistance as unbundled elements is in
addition to the duties of all LECs (including incumbent LECs) under
section 251(b)(3) and the rules we adopt herein.280
---------------------------------------------------------------------------
\279\ See First Report and Order at section V.
\280\ See First Report and Order at section V.
---------------------------------------------------------------------------
3. Commission Action To Ensure Nondiscriminatory Access to Operator
Services
a. Background and Comments
In the NPRM, the Commission sought comment on what, if any,
Commission action is necessary or desirable to ensure nondiscriminatory
access to operator services under section 251(b)(3).281 Bell
Atlantic, GTE and PacTel assert that there is no need for the
Commission to adopt detailed rules in this area.282 On the other
hand, Sprint is ``concerned that leaving access to these services to
carrier negotiations will result in unreasonable delays and
discriminatory terms and conditions as between the incumbent LEC and
CLEC.'' 283 MFS and WinStar support an ``unambiguous national
policy'' of requiring incumbent LECs to make services available to new
entrants.284 MFS justifies this position by noting ``some
incumbent LECs say they already provide access, some say they are not
obligated to offer such offering for resale, some assert that they are
included in various unbundled elements or that they should not be
unbundled * * * incumbent LECs should not be allowed to unilaterally
decide whether, or to what extent to offer access to operator services,
directory assistance and directory listings.'' 285
---------------------------------------------------------------------------
\281\ See NPRM at para. 216.
\282\ See Bell Atlantic comments at 6; GTE reply at 18; and
PacTel comments at 14.
\283\ Sprint reply at 8.
\284\ MFS reply at 10, WinStar reply at 13.
\285\ MFS reply at 10.
---------------------------------------------------------------------------
120. The Telecommunications Resellers Association states that
``[p]rompt and strong Commission response to complaints alleging
failures by LECs to provide nondiscriminatory access to operator
services is required to ensure compliance with this requirement.''
286 Finally, the Florida Commission asserts that ``[s]tates should
be allowed to ensure compliance with the Act as it relates to these
services as defined in the NPRM.'' 287
---------------------------------------------------------------------------
\286\ Telecommunications Resellers Association comments at 7.
\287\ See Florida Commission comments at 5.
---------------------------------------------------------------------------
b. Discussion
121. We conclude that detailed Commission rules are not required to
implement the requirement under section 251(b)(3) that LECs must permit
competing providers nondiscriminatory access to operator services. We
recognize the need for flexibility in order for maximum access to
operator services when networks interconnect, as there may be a variety
of technical interconnection methods through which such
nondiscriminatory access to operator services can be achieved. We view
the definition of ``nondiscriminatory access to operator services'' set
forth in paras. 114-118, supra, as the overarching standard to which
LECs must adhere under section 251(b)(3). As noted, in part III (C)(2),
once a LEC permits nondiscriminatory access to operator services to its
competitors, that LEC has no further duty to ensure that the
competitor's customers can access those services. To the extent that a
dispute arises regarding a competing provider's access to operator
services, however, the burden is on the LEC permitting the access to
demonstrate with specificity that it has provided nondiscriminatory
access, and that any disparity is not caused by factors within its
control.
122. Beyond placing the initial burden of proof on the providing
LEC, we find that specific enforcement standards for nondiscriminatory
access to operator services are not required at this time. Rather,
disputes concerning nondiscriminatory access can be addressed under our
general
[[Page 47307]]
enforcement authority pursuant to Titles II and V of the Act.288
The 1996 Act also directs the Commission to establish such procedures
as are necessary for the review and resolution of complaints against
the BOCs within the statutory deadlines.289 This requirement will
be addressed in a separate proceeding.
---------------------------------------------------------------------------
\288\ See, e.g., 47 U.S.C. 208 (common carrier complaint
authority); see generally 47 U.S.C. 501-510. See also, First Report
and Order at section II (authority to take enforcement action).
\289\ See 47 U.S.C. 271(d)(6)(B).
---------------------------------------------------------------------------
4. ``Branding'' Requirements for Operator Services
a. Background
123. Section 226(b)(1)(A) of the Act and Part 64 of the
Commission's rules require an operator services provider (OSP) to
identify itself audibly and distinctly to the consumer at the beginning
of each interstate telephone call, before the consumer incurs any
charge for that call.290 This procedure is commonly referred to as
``call branding.'' In a recent Report and Order, the Commission amended
its rules to require ``branding'' to the parties on both ends of a
collect call.291
---------------------------------------------------------------------------
\290\ See 47 U.S.C. 226(b)(1)(A); see also 47 CFR 64.703(a)(1).
\291\ Amendment of Policies and Rules Concerning Operator
Service Providers and Call Aggregators, CC Docket No. 94-158, Report
and Order and Further Notice of Proposed Rulemaking, FCC 96-75
(1996) (OSP Order) 61 FR 15020 (April 4, 1996).
---------------------------------------------------------------------------
124. In using the term ``branding requirements'' in this context,
we do not refer to the section 226 requirements obligating OSPs to
identify themselves to consumers; rather, we refer to the obligations
beyond section 226, if any, of a LEC to a competing provider that is
using the LEC's facilities to provide its own operator services, or is
reselling the operator services of the LEC. In these situations, the
issue is whose brand should be used.
125. The NPRM did not ask whether branding of operator services
should be required under section 251(b)(3). This issue was raised by
several parties, however, in the context of nondiscriminatory access to
such services. Specifically, parties raised the question of whether
competing providers have the right to have resold operator services of
a LEC ``branded'' in the competing provider's name, in order to ensure
nondiscriminatory access and consumer perceptions of seamless service.
b. Comments
126. AT&T states that the Commission should reject claims that LECs
may refuse to comply with ``reasonable requests to brand resold
operator services as those of the reseller,'' and that the ``continued
use of the incumbent LEC's own brand with services that are resold to
CLEC customers would stifle competition and confuse customers.''
292 AT&T further recommends that ``equal opportunities for
branding'' be made available, asserting that if a LEC brands its own
operator services, it should ensure that other OSPs have the capability
to do the same; and if branding is infeasible for the OSP, the LEC
should not brand its service at all.293 Bell Atlantic and SBC
object to AT&T's proposal, because one possible outcome would be that
branding would not be performed on interstate calls, which would
violate current Federal and state statutes and regulations.294
---------------------------------------------------------------------------
\292\ AT&T reply at n.20.
\293\ See AT&T comments at n.12.
\294\ See Bell Atlantic reply at 5-6; SBC reply at 7.
---------------------------------------------------------------------------
127. USTA states that when there are no technical limitations to
branding, each LEC should be responsible for branding its own services,
and where multiple brands are infeasible, the branding announcement of
the facilities-based carrier should be used by ``default.'' 295
Bell Atlantic and CBT contend that the issue of branding operator
services is best left to inter-carrier negotiations, where technical
and cost issues can be resolved between the parties.296 PacTel
notes that ``in a resale environment, we accommodate the CLEC by not
branding our service at all. If a CLEC wants to brand its own operator
services, it can establish a facilities-based arrangement and set up
its own operator services.'' 297
---------------------------------------------------------------------------
\295\ See USTA reply at 6.
\296\ See Bell Atlantic reply at 5; CBT reply at 4-5.
\297\ PacTel reply at 15.
---------------------------------------------------------------------------
c. Discussion
128. Since these comments are a logical outgrowth of the language
in our NPRM, we address them herein. We recognize that branding plays a
significant role in markets where competing providers are reselling the
operator services of the providing LEC. Continued use of the providing
LEC's brand with a competing provider's customers clearly advantages
the providing LEC. Consistent with the requirements that we imposed on
incumbent LECs in the First Report and Order, we conclude that a
providing LEC's failure to comply with the reasonable, technically
feasible request of a competing provider for the providing LEC to
rebrand operator services in the competing provider's name, or to
remove the providing LEC's brand name, creates a presumption that the
providing LEC is unlawfully restricting access to these services by
competing providers.298 This presumption can be rebutted by the
providing LEC if it demonstrates that it lacks the capability to comply
with the competing provider's request. We note also that the Illinois
Commission recently ordered rebranding of operator services as those of
the reseller ``[t]o the extent that it is technically feasible,'' and
we do not preempt its intrastate branding requirements, nor any similar
requirements that other states may have enacted.299
---------------------------------------------------------------------------
\298\ See First Report and Order at section VIII .
\299\ See AT&T Communications of Illinois, and LDDS
Communications, Inc. d/b/a LDDS Metromedia Communications, Petition
for a Total Local Exchange Wholesale Service Tariff from Illinois
Bell Telephone Company d/b/a Ameritech Illinois and Central
Telephone Company Pursuant to Section 13.505.5 of the Illinois
Public Utilities Act, Illinois Commission, Dockets 95-0458 and 95-
0531 (consol.), Hearing Examiner's Proposed Order, May 16, 1996, pp.
52-54.
---------------------------------------------------------------------------
129. Any inter-carrier branding arrangements under which an
interstate operator services call made from an aggregator location
would not be branded would violate section 226 of the Act and part 64
of our rules. We therefore caution interconnecting carriers that, in
negotiating branding arrangements for operator services, they must
insure that such arrangements are consistent with Federal laws and
regulations requiring interstate OSPs to identify themselves.
D. Nondiscriminatory Access to Directory Assistance and Directory
Listings
1. Definition of ``Nondiscriminatory Access to Directory Assistance and
Directory Listings''
a. Background
130. In the NPRM, the Commission interpreted the phrase
``nondiscriminatory access to directory assistance and directory
listings'' to mean that the customers of all telecommunications service
providers should be able to access each LEC's directory assistance
service and obtain a directory listing on a nondiscriminatory basis,
notwithstanding: (1) The identity of a requesting customer's local
telephone service provider; or (2) the identity of the telephone
service provider for a customer whose directory listing is
requested.300
---------------------------------------------------------------------------
\300\ See NPRM at para. 217.
---------------------------------------------------------------------------
b. Comments
131. A number of commenters agree with our definition of
``nondiscriminatory access to directory assistance and directory
listings'' as
[[Page 47308]]
proposed in the NPRM.301 Many commenters combine their discussions
of what constitutes nondiscriminatory access for both operator services
and directory assistance.302 As with operator services, some
commenters assert that a LEC is not obligated to ensure that a
competing provider's customers have access to directory assistance and
directory listings.303 Bell Atlantic, for example, argues that
``[t]he exchange carrier, naturally, can control only its part of the
service, not what the other carrier provides.'' 304 CBT asks that
we find that the nondiscriminatory access requirements only apply when
a competing local service provider is using a LEC's local exchange
services on a resale basis or when the competing provider is using a
LEC's unbundled switch ports.305
---------------------------------------------------------------------------
\301\ See, e.g., AT&T comments at 9-10; SBC reply at 4; and
Telecommunications Resellers Association comments at 7.
\302\ See, e.g., CBT comments at 6. See, e.g., para. 113, supra.
\303\ See Ameritech comments at 10, USTA comments at 6-7. See
also supra para. 113.
\304\ Bell Atlantic comments at 7.
\305\ See CBT comments at 6, 7.
---------------------------------------------------------------------------
132. Finally, certain interexchange carriers ask that we require
that competing providers have access to the White Pages, Yellow Pages,
and ``customer guide'' sections of directories, in order to satisfy the
requirement of nondiscriminatory access to directory assistance and
directory listings.306 Sprint contends that ``CLECs should be
allowed to insert informational pages containing their business and
repair numbers in the incumbent LEC's white and yellow pages
directories at cost.'' 307 SBC strongly disagrees that section
251(b)(3) requires access to Yellow Pages, ``customer guides,'' and
informational pages, pointing out that the ``competitive checklist''
(section 271) provisions only require incumbent LECs to provide access
to White Pages listings.308
---------------------------------------------------------------------------
\306\ See, e.g., AT&T comments at n.14.
\307\ Sprint comments at 9-10.
\308\ See SBC reply at 6-7 (citing 47 U.S.C.
Sec. 271(c)(2)(B)(vii)).
---------------------------------------------------------------------------
c. Discussion
133. We conclude that we should adopt the definition of
nondiscriminatory access to directory assistance services proposed in
the NPRM, with the following modifications. Consistent with our
conclusion in para. 101, supra, we have modified this definition to
reflect that this duty is owed to competing providers of telephone
exchange service and/or telephone toll service, and not to ``all
telecommunications carriers.'' 309 This duty does not apply if a
LEC chooses not to offer directory assistance to its own
customers.310
---------------------------------------------------------------------------
\309\ See supra para. 101.
\310\ But see infra paras. 141-145, wherein we require all LECs,
regardless of whether or not they provide directory assistance to
their customers, to share subscriber listings, in readily accessible
formats, as an element of nondiscriminatory access.
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134. We agree that once a LEC permits a competitor
nondiscriminatory access to directory assistance and directory
listings, the LEC permitting the access is not responsible for ensuring
that the competitor's customers are able to access these services. As
with operator services, when a dispute arises as to the adequacy of the
access received by the competitor's customers, the burden is on the LEC
permitting access to the service to demonstrate with specificity: (1)
That it is permitting nondiscriminatory access to directory assistance
and directory listings; and (2) that the disparity in access is not
caused by factors within its control. As in paragraph 114, supra, we
conclude that the term ``factors'' is not confined to physical
facilities, but also includes human and non-facilities elements such as
staffing, maintenance and ordering.
135. The requirements for nondiscriminatory access to directory
assistance and directory listings are intertwined. Requiring
``nondiscriminatory access to directory listings'' means that, if a
competing provider offers directory assistance, any customer of that
competing provider should be able to access any listed number on a
nondiscriminatory basis, notwithstanding the identity of the customer's
local service provider, or the identity of the telephone service
provider for the customer whose directory listing is requested.311
We conclude that the obligation to permit access to directory
assistance and directory listings does not require LECs to permit
access to unlisted telephone numbers, or other information that a LEC's
customer has specifically asked the LEC not to make available.312
In previous orders, such as those addressing nondiscriminatory access
by interexchange carriers to Billing Name and Address (BNA)
information, we have taken action to ensure that customer privacy is
protected.313 In this Order, we require that in permitting access
to directory assistance, LECs bear the burden of ensuring that access
is permitted only to the same information that is available to their
own directory assistance customers, and that the inadvertent release of
unlisted names or numbers does not occur.314
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\311\ See infra para. 141.
\312\ Cf. 47 U.S.C. 222(f)(3) (definition of ``subscriber list
information''), which is limited to the listed names of subscribers
of a carrier.
\313\ See, e.g., Policies and Rules Concerning Local Exchange
Carrier Validation and Billing Information for Joint Use Calling
Cards, CC Docket No. 91-115, Third Order on Reconsideration, 11 FCC
Rcd 6835 (1996) 61 FR 08879 (March 6, 1996); see also Policies and
Rules Concerning Local Exchange Carrier Validation and Billing
Information for Joint Use Calling Cards, CC Docket No. 91-115,
Second Report and Order, 8 FCC Rcd 4478 (1993) 58 FR 36143 (July 6,
1993).
\314\ See also Implementation of the Telecommunications Act of
1996: Telecommunications Carriers' Use of Customer Proprietary
Network Information and Other Customer Information, CC Docket No.
96-115, FCC 96-221 (1996) 61 FR 26483 (May 28, 1996).
---------------------------------------------------------------------------
136. We find, as we did in paragraph 117, supra, that CBT's
proposal to limit the application of section 251(b)(3) to competing
providers of exchange and/or toll service who are providing services on
a resale basis, or using an incumbent LEC's unbundled switch ports is
unacceptable. We also take into account PacTel's comments in concluding
that section 251(b)(3) does not require that a customer be able to
access any LEC's directory assistance services, but only those services
provided through its chosen service provider. When a customer contacts
his or her provider's directory assistance services, the customer's
provider can obtain access to the directory listings of other carriers;
thus, the customer should be able to obtain any directory listing
(other than listings that are protected or not available, such as
unlisted numbers). We conclude, however, that a LEC that does not
provide directory assistance to its own customers does not have to
provide nondiscriminatory access to directory assistance to competing
providers.
137. On the basis of the record before us, we conclude that there
is no need for this Commission to state that the term ``directory
assistance and directory listings'' includes the White Pages, Yellow
Pages, ``customer guides,'' and informational pages. As a minimum
standard, we find that the term ``directory listing'' as used in
section 251(b)(3) is synonymous with the definition of ``subscriber
list information'' in section 222(f)(3).315
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\315\ The term ``subscriber list information'' at section
222(f)(3) means any information: (A) Identifying the listed names of
subscribers of a carrier and such subscribers' 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 (B) that the carrier or an
affiliate has published, caused to be published, or accepted for
publication in any directory format. 47 U.S.C. 222(f)(3) (A), (B).
---------------------------------------------------------------------------
[[Page 47309]]
2. Commission Action To Implement Nondiscriminatory Access to Directory
Assistance and Directory Listings
a. Background and Comments
138. In the NPRM, the Commission sought comment on what action, if
any, is necessary or desirable to implement the nondiscriminatory
access to directory assistance and directory listings requirements of
section 251(b)(3).316 Several parties assert that there is no need
for the Commission to adopt detailed rules addressing this
issue.317 In its comments, NYNEX described its current
arrangements for making its directory assistance and directory listing
services available to facilities-based and non-facilities-based
carriers.318
---------------------------------------------------------------------------
\316\ See NPRM at para. 217.
\317\ See, e.g., Bell Atlantic comments at 6; GTE reply at 18;
PacTel comments at 16.
\318\ See NYNEX comments at 7-8.
---------------------------------------------------------------------------
139.Sprint and MFS urge the Commission to establish national rules
requiring nondiscriminatory access to directory assistance and
directory listings for all local service providers.319
Furthermore, MCI recommends that the Commission establish requirements
that ensure that ``each provider of local service has access to
directory listings of other providers, and that these directory
listings are made available in readily usable format,'' and that these
listings be provided ``via tape or other electronic means, as is
frequently the practice today between incumbent LECs whose service
areas join.'' 320 PacTel and GTE urge the Commission to refrain
from mandating access to underlying directory assistance
databases.321 GTE cites ``serious technical and security
concerns,'' while PacTel argues that (1) the plain language of section
251(b)(3) does not require access to the underlying databases, and (2)
LECs are prohibited from disseminating certain directory listing
information without customers' permission in California and
Nevada.322 PacTel maintains that the intent of section 251(b)(3)
is not to permit ``unfettered access to all information on record.''
323
---------------------------------------------------------------------------
\319\ See, e.g., MFS reply at 10; Sprint reply at 8.
\320\ See MCI comments at 3, 9; see also MCI reply at 3.
\321\ See GTE reply at 19; PacTel reply at 15.
\322\ See GTE reply at 19; PacTel reply at 15.
\323\ PacTel reply at 15.
---------------------------------------------------------------------------
140. The Telecommunications Resellers Association states that
``prompt and strong'' Commission action is required to ensure
compliance with nondiscriminatory access to directory assistance and
directory listings.324 The Florida Commission asserts that
``[s]tates should be allowed to ensure compliance with the Act as it
relates to these services as defined in the NPRM.'' 325
---------------------------------------------------------------------------
\324\ See Telecommunications Resellers Association comments at
7.
\325\ See Florida Commission comments at 5.
---------------------------------------------------------------------------
b. Discussion
141. We conclude that section 251(b)(3) requires LECs to share
subscriber listing information with their competitors, in ``readily
accessible'' tape or electronic formats, and that such data be provided
in a timely fashion upon request. The purpose of requiring ``readily
accessible'' formats is to ensure that no LEC, either inadvertently or
intentionally, provides subscriber listings in formats that would
require the receiving carrier to expend significant resources to enter
the information into its systems. We agree with MCI that ``by requiring
the exchange of directory listings, the Commission will foster
competition in the directory services market and foster new and
enhanced services in the voice and electronic directory services
market.'' 326 Consistent with the definition of ``subscriber list
information'' in section 222(f)(3), we do not require access to
unlisted names or numbers.327 Rather, we require the LEC providing
the listing to share listings in a format that is consistent with what
that LEC provides in its own directory.
---------------------------------------------------------------------------
\326\ MCI comments at 9.
\327\ See 47 U.S.C. 222(f)(3) for the definition of ``subscriber
list information.''
---------------------------------------------------------------------------
142. We conclude that the fact that many LECs offer directory
assistance and listings for purchase or resale to competitors, as NYNEX
describes, does not obviate the need for any requirements in this area.
Under the general definition of ``nondiscriminatory access,'' competing
providers must be able to obtain at least the same quality of access to
these services that a LEC itself enjoys. Merely offering directory
assistance and directory listing services for resale or purchase would
not, in and of itself, satisfy this requirement, if the LEC, for
example, only permits a ``degraded'' level of access to directory
assistance and directory listings.328
---------------------------------------------------------------------------
\328\ See supra paras. 101-105.
---------------------------------------------------------------------------
143. We further find that a highly effective way to accomplish
nondiscriminatory access to directory assistance, apart from resale, is
to allow competing providers to obtain read-only access to the
directory assistance databases of the LEC providing access. Access to
such databases will promote seamless access to directory assistance in
a competitive local exchange market. We note also that incumbent LECs
must provide more robust access to databases as unbundled network
elements under section 251(c)(3).329
---------------------------------------------------------------------------
\329\ See supra para. 118, for a discussion of the relationship
between section 251(b)(3) and the requirements adopted in the First
Report and Order mandating unbundled access to operator and
directory assistance ser
FR Doc. 96-22045 Implementation of the Local Competition Provisions of the Telecommunications Act of 1996
vices.
---------------------------------------------------------------------------
144. We do not agree with PacTel's contention that certain state
laws restricting the types of information that LECs can disseminate
preclude us from requiring access to directory assistance databases. It
is not possible to achieve seamless and nondiscriminatory access to
directory assistance without requiring access to the underlying
databases. Consistent with our definition of nondiscriminatory access,
the providing LEC must offer its competitors access of at least equal
quality to that it receives itself. Competitors who access such LEC
databases will be held to the same standards as the database owner, in
terms of the types of information that they can legally release to
directory assistance callers. The LEC that owns the database can take
the necessary safeguards to protect the integrity of its database and
any proprietary information, or carriers can agree that such databases
will be administered by a third party. We note also that our holding
does not preclude states from continuing to limit how LECs can use
accessed directory information, e.g., prohibiting the sale of customer
information to telemarketers.330 Rather, we conclude only that
section 251(b)(3) precludes states from discriminating among LECs by
imposing different access restrictions on competing providers, thereby
allowing certain LECs to enjoy greater access to information than
others.331 Accordingly, states may not impose rules that would
[[Page 47310]]
allow a LEC to discriminate against competing providers.332
---------------------------------------------------------------------------
\330\ But see section 222(d)(3), which permits customer
information to be used for telemarketing to the customer `` * * *
for the duration of the call, if such call was initiated by the
customer and the customer approves of the use of such information to
provide such service.'' 47 U.S.C. 222(d)(3). See also our proceeding
to clarify the obligations of carriers with regard to section 222(c)
and 222(d). Implementation of the Telecommunications Act of 1996:
Telecommunications Carriers' Use of Customer Proprietary Network
Information and other Customer Information, CC Docket, No. 96-115,
FCC 96-221 (May 17, 1996) 61 FR 26483 (May 28, 1996).
\331\ Cf. 47 U.S.C. 222(e), which requires telephone exchange
service providers to ``provide subscriber list information gathered
in its capacity as a provider of such service on a timely and
unbundled basis, under nondiscriminatory and reasonable rates,
terms, and conditions, to any person upon request for the purpose of
publishing directories in any format.'' See 47 U.S.C. 222(f)(3) for
the definition of ``subscriber list information.''
\332\ See First Report and Order at section II for a discussion
of the applicability of our section 251 rules to intrastate and
interstate services.
---------------------------------------------------------------------------
145. We are not adopting specific enforcement standards at this
time. Disputes regarding nondiscriminatory access will be addressed
under our Title II and Title V enforcement authority.333
---------------------------------------------------------------------------
\333\ See supra para. 122. See also 47 U.S.C. 208 (common
carrier complaint authority) and 47 U.S.C. 501-510.
---------------------------------------------------------------------------
3. Branding of Directory Assistance
a. Background and Comments
146. To the extent that interstate directory assistance services
are within the definition of ``operator services'' in section 226(a)(7)
of the Act,334 the service provider is required to identify itself
to consumers at the beginning of a call.335 Parties raised the
issue of whether the competing provider has the right to have resold
directory assistance services of the LEC ``branded'' in its name, as an
element of nondiscriminatory access under section 251(b)(3). Thus this
issue is similar to that of branding of operator services in paras.
123-129, supra. The NPRM did not ask whether the branding of directory
assistance should be required under 251(b)(3) but commenters raised
this issue.
---------------------------------------------------------------------------
\334\ 47 U.S.C. 226(a)(7).
\335\ See 47 U.S.C. 226(a)(7), (b)(1). See generally supra
paras. 123-129.
---------------------------------------------------------------------------
147. AT&T suggests adding a requirement that if an incumbent LEC
brands its own directory services, the incumbent should ensure that
other directory assistance service providers can also brand their
services.336 CBT argues that branding is impractical and should be
left to intercarrier negotiations, stating that ``call branding can be
provided, though not without considerable added effort and expense, to
facilities-based providers who route traffic from their networks to the
incumbent LEC's network by trunk group. Providing branding for resold
services at the line number level is extremely difficult within the
limits of the public switched network. When dealing with multiple
resellers, there is no simple method for the incumbent LEC to determine
by individual line number which brand should be applied.'' 337
Bell Atlantic also suggests that this issue be left to carrier
negotiations.338
---------------------------------------------------------------------------
\336\ See AT&T comments at n.12.
\337\ CBT reply at 5.
\338\ See Bell Atlantic reply at 5.
---------------------------------------------------------------------------
b. Discussion
148. The record shows that this issue is a logical outgrowth of the
issues related to nondiscriminatory access to directory assistance
raised in the NPRM and thus should be addressed in this Order. As with
operator services, we recognize the major role that branding can play
in an environment where competing providers are reselling the directory
assistance services of the providing LEC. Consistent with the
requirements that we imposed on incumbent LECs in the First Report and
Order, therefore, we conclude that a providing LEC's failure to comply
with the reasonable, technically feasible request of a competing
provider for the providing LEC to rebrand directory assistance services
in the competing provider's name, or to remove the providing LEC's
brand name, creates a presumption that the providing LEC is unlawfully
restricting access to these services by competing providers.339
This presumption can be rebutted by the providing LEC demonstrating
that it lacks the capability to comply with the request of the
competing provider.340 Finally, as with operator services, we do
not preempt any branding requirements that state commissions may have
enacted for directory assistance services.
---------------------------------------------------------------------------
\339\ As with operator services, supra, we note that carriers
must comply with the branding requirements of section 226, to the
extent that their services are within the section 226 definitions.
See 47 U.S.C. 226.
\340\ See First Report and Order at section VIII.
---------------------------------------------------------------------------
4. Alternative Dialing Arrangements for Directory Assistance
a. Background and Comments
149. In the NPRM, the Commission sought comment on whether the
customers of competing providers of exchange and/or toll service would
be able to access directory assistance by dialing `411' or `555-1212,'
which are nationally-recognized numbers for directory assistance, or
whether alternative dialing arrangements would be necessary.
150. No commenters recommended that we require different
arrangements for dialing directory assistance. AT&T states that while
alternative protocols may be permitted, no carrier should be required
to use them.341 Bell Atlantic states that ``[n]o dialing
arrangements for directory assistance other than 411 and 555-1212 are
necessary. A facilities-based provider will be able to use these
numbers and route its customers' calls in whatever way it chooses (to
its own directory assistance, to that of the incumbent exchange carrier
or to that or any other provider). When a non-facilities-based provider
buys exchange service from the incumbent under section 251(c)(4), its
customers get exactly what the incumbent's receive, 411 and 555-1212
access to directory assistance.'' 342
---------------------------------------------------------------------------
\341\ See AT&T comments at 10.
\342\ Bell Atlantic comments at 8-9.
---------------------------------------------------------------------------
b. Discussion
151. With respect to the ability of customers to reach directory
assistance services through 411 or 555-1212 arrangements, we conclude
that no Commission action is required now. No commenter has proposed
that we require an alternative dialing arrangement. The record before
us indicates that permitting nondiscriminatory access to 411 and 555-
1212 dialing arrangements is technically feasible, and there is no
evidence in the record that these dialing arrangements will cease.
E. Unreasonable Dialing Delay
1. Definition and Appropriate Measurement Methods
a. Background and Comments
152. Section 251(b)(3) prohibits unreasonable dialing
delays.343 The NPRM sought comment on what constitutes an
unreasonable dialing delay for purposes of section 251(b)(3) and on
appropriate methods for measuring and recording such delay.344
---------------------------------------------------------------------------
\343\ 47 U.S.C. Sec. 251(b)(3).
\344\ See NPRM at para. 218.
---------------------------------------------------------------------------
153. U S WEST contends that the phrase ``unreasonable dialing
delay,'' as it appears in section 251(b)(3), applies only to the
provision of nondiscriminatory access to operator and directory
assistance services.345 GCI, on the other hand, asserts that the
unreasonable dialing delay provision applies to both the dialing parity
and nondiscriminatory access provisions of section 251(b)(3).346
MFS, NYNEX and Sprint recommend that we define ``dialing delay'' to
cover the period from when a user completes dialing to when the call is
``handed off'' to a connecting LEC, whenever multiple LECs are involved
in call completion.347 ALTS, however, suggests that we define
``dialing delay'' to cover the period from when the end user completes
dialing to the point where a network response is first
received.348
---------------------------------------------------------------------------
\345\ U S WEST comments at 11.
\346\ GCI reply at 2.
\347\ See Sprint comments at 10; MFS reply at 8; NYNEX comments
at 9.
\348\ ALTS comments at 6.
---------------------------------------------------------------------------
154. Several parties contend, however, that we should not adopt a
[[Page 47311]]
definition of ``dialing delay.'' 349 Bell Atlantic states that
there is ``no need to try to develop a definition of what constitutes
`unreasonable dialing delays.' To the extent that this ever becomes an
issue, it is best handled with a specific factual record.'' 350
---------------------------------------------------------------------------
\349\ See, e.g., Bell Atlantic comments at 9, U S WEST comments
at 11.
\350\ Bell Atlantic comments at 9.
---------------------------------------------------------------------------
155. Several parties recommend defining ``unreasonable'' as any
delay that exceeds that of the providing LEC.351 ACSI suggests
that the Commission ``declare a delay `unreasonable' if the average
access time for competing providers exceeds the average access time for
the LEC itself,'' and that ``* * * the LEC and competing providers
should get equal priority in LEC call processing systems, which would
result in identical dialing delays, on average, for LECs and competing
providers.'' 352 Other parties argue that LECs should not be held
responsible for unreasonable dialing delays that are not caused by
their networks or are not within their control.353
---------------------------------------------------------------------------
\351\ See, e.g., Excel comments at 8; Sprint comments at 11.
\352\ ACSI comments at 10.
\353\ See, e.g., GTE comments at 19; USTA reply at 6-7.
---------------------------------------------------------------------------
b. Discussion
156. We conclude that section 251(b)(3) prohibits ``unreasonable
dialing delays'' for local and toll dialing parity, and for
nondiscriminatory access to operator services and directory assistance.
The reference to ``unreasonable dialing delay'' is ambiguous because it
is in a prepositional phrase at the end of section 251(b)(3), following
references both to the duty to provide dialing parity and the duty to
permit nondiscriminatory access to telephone numbers, operator
services, directory assistance, and directory listings. In light of
this ambiguity, and the absence of legislative history, we look to the
purpose of section 251 and to the record to interpret the
``unreasonable dialing delay'' provision. Examining the statutory
language in light of the plainly pro-competitive thrust of these
section 251 requirements, we conclude that Congress intended the
dialing delay prohibition to apply to both the obligation to provide
dialing parity and the obligation to permit nondiscriminatory access to
operator services and directory assistance.354 Further, commenters
did not distinguish between dialing delay in dialing parity and
nondiscriminatory access contexts.
---------------------------------------------------------------------------
\354\ 47 U.S.C. 251(b)(3).
---------------------------------------------------------------------------
157. We conclude that a ``comparative'' standard for identifying
``unreasonable dialing delay'' is necessary in order to ensure that,
when competing providers obtain dialing parity and nondiscriminatory
access to operator services and directory assistance, such access does
not come with unreasonable dialing delays. We conclude, therefore, that
the dialing delay experienced by the customers of a competing provider
should not be greater than that experienced by customers of the LEC
providing dialing parity, or nondiscriminatory access, for identical
calls or call types. For the reasons stated below, we conclude that
this ``comparative standard'' is more appropriate in this context than
a specific technical standard.355
---------------------------------------------------------------------------
\355\ See infra paras. 163-164, for a discussion of specific
technical standards for dialing delay.
---------------------------------------------------------------------------
158. In our Number Portability Order,\356\ we indicated that ``at a
minimum, when a customer switches carriers, that customer must not
experience a greater dialing delay or call set up time * * * due to
number portability, compared to when the customer was with the original
carrier.'' 357 The standard that we are adopting for
``unreasonable dialing delay'' under section 251(b)(3) is consistent
with the standard we adopted in the Number Portability Order.
---------------------------------------------------------------------------
\356\ In the Matter of Telephone Number Portability, CC Docket
No. 95-116, First Report and Order and Further Notice of Proposed
Rulemaking, FCC 96-286 (July 2, 1996) (Number Portability Order) 61
FR 38605 (July 25, 1996).
\357\ Id. at para. 56.
---------------------------------------------------------------------------
159. We conclude that the statutory language on unreasonable
dialing delays places a duty upon LECs providing dialing parity or
nondiscriminatory access to operator services and directory assistance
to process all calls from competing providers, including calls to the
LEC's operator services and directory assistance, on an equal basis as
calls originating from customers of the providing LEC. In other words,
calls from a competing provider must receive treatment in the providing
LEC's network that is equal in quality to the treatment the LEC
provides to calls from its own customers. We recognize that LECs may
have the technical ability to identify whether a call is originating
from a competing provider (e.g., by cross-referencing the Automatic
Number Identification (ANI), or by identifying the connecting trunk
group). Thus there may exist on the part of the providing LEC the
ability to discriminate and to degrade service quality for a competing
provider's customers by introducing unreasonable dialing delays.
160. For operator services and directory assistance calls, such
dialing delay can be measured by identifying the time a call spends in
queue until the providing LEC processes the call. We recognize that the
time of arrival of a telephone call can be recorded (1) at the
originating LEC's switch; (2) upon entering the operator services or
directory assistance queue; and (3) at the time of answering by the
providing LEC's operators for such services. We believe that it is
possible to compare the treatment of calls placed by customers of the
competing provider with those of calls originating from the providing
LEC's customers, and thus determine if unreasonable dialing delays are
occurring. Such a comparison would hold all LECs responsible only for
delays within their control.
161. In the event that a dispute arises between a competing
provider and a providing LEC as to dialing delay, we conclude that the
burden is on the providing LEC to demonstrate with specificity that it
has processed the call on terms equal to that of similar calls
originating from its own customers. Such ``terms'' include the amount
of time a providing LEC takes to process incoming calls, the priority a
LEC assigns to calls, and might also take into account the number of
calls abandoned by the caller of the competing provider. Furthermore,
to the extent that states have adopted specific performance standards
for dialing delay between competing providers, we do not preempt such
standards, and states may enact more detailed standards.
162. We do not believe that measuring ``unreasonable dialing
delay'' from the period beginning when a caller completes dialing a
call and ending when the call is delivered (or ``handed off'') by the
LEC to another service provider is practical with respect to dialing
parity or nondiscriminatory access. While we understand that such a
measurement can be made, and is fully within the control of one LEC,
prohibiting a providing LEC from introducing dialing delay in the
originating segment of calls under its control benefits only the
customers of the providing LEC. The providing LEC already has
sufficient motivation to provide efficient service to its own
customers. Finally, we conclude that the proposal to measure dialing
delay from the completion of dialing to a network response (e.g., when
a caller receives busy-tone signalling information from the called
line) is unsatisfactory, because it fails to isolate the segments of a
call within an individual LEC's control.
[[Page 47312]]
2. Specific Technical Standard for Dialing Delay
a. Background and Comments
163. In the NPRM, the Commission asked commenters to identify a
specific period of time that would constitute an ``unreasonable dialing
delay.'' NYNEX was the sole commenter proposing a quantitative
measurement. In this regard, however, NYNEX recommends that the
Commission should issue a recommended maximum period of delay rather
than a mandatory standard.358 NYNEX states that ``an appropriate
recommendation for this time period is that it should not exceed 5
seconds.'' 359 The majority of commenters urge the Commission not
to impose a specific technical dialing delay standard at this
time.360 For example, GTE states that ``[n]umber portability,
dialing parity and other newly required actions will undoubtedly affect
network performance, including dialing delay, at least during a
transition period. Any current determination of an unreasonable delay
will be based on network designs that will bear little resemblance to
the network structures of tomorrow.'' 361 Finally, the Illinois
Commission states that it is currently studying the same issue for
number portability in Chicago, and suggests that the Commission may
wish to adopt the Illinois Commission's standard upon completion of its
study.362
---------------------------------------------------------------------------
\358\ See NYNEX comments at 9-10.
\359\ Id.
\360\ See, e.g., Bell Atlantic comments at 9; MFS reply at 8.
\361\ GTE comments at 19.
\362\ See Illinois Commission comments at 70.
---------------------------------------------------------------------------
b. Discussion
164. We conclude that the record does not provide an adequate basis
for determining a specific technical standard for measuring
unreasonable dialing delays. Commenters do not address separately the
dialing delay prohibition as it applies to each of the services covered
by section 251(b)(3): local and toll dialing parity, and
nondiscriminatory access to operator services and directory assistance.
We thus conclude that, until dialing delay can be reliably measured
after dialing parity is a reality, the ``comparative'' standard adopted
in paragraph 157, supra, will provide a workable national rule for the
industry. We intend to revisit the issue at a future date if we should
find that our ``comparative'' standard is inadequate to ensure fair
competition.
IV. Network Disclosure
165. Section 251(c)(5) of the 1996 Act requires incumbent LECs to
``provide reasonable public notice of changes in the information
necessary for the transmission and routing of services using that local
exchange carrier's facilities or networks, as well as of any other
changes that would affect the interoperability of those facilities or
networks.''
A. Scope of Public Notice
1. Definition of ``Information Necessary for Transmission and Routing''
a. Background and Comments
166. In our NPRM, we tentatively concluded that ``information
necessary for transmission and routing'' should be defined ``as any
information in the incumbent LEC's possession that affects
interconnectors' performance or ability to provide services.'' 363
---------------------------------------------------------------------------
\363\ NPRM at para. 189.
---------------------------------------------------------------------------
167. Most commenters support the tentative conclusion in the
NPRM.364 For example, MFS asserts that our definition would
``minimize the risk that an incumbent LEC could take actions
inconsistent with (interconnection and interoperability)'' and that the
term ``should be applied as broadly as possible.'' 365 MCI states
that a broad definition is ``necessary for new entrants to receive
notice of technical changes.'' 366 Time Warner also asserts that
``this broad-based definition * * * is critical to ensuring that
(incumbent local exchange carriers) fulfill all of the obligations
imposed upon them by Section 251(c).'' 367
---------------------------------------------------------------------------
\364\ See, e.g., ACSI comments at 11; ALTS comments at 2; AT&T
comments at 23; Bell Atlantic comments at 10; GCI comments at 4;
Illinois Commission comments at 59; MCI comments at 15; MFS comments
at 12-13; Ohio Commission comments at 4; Telecommunications
Resellers Association comments at 11; Time Warner comments at 3; U S
WEST comments at 12.
\365\ MFS comments at 12-13.
\366\ MCI comments at 15.
\367\ Time Warner comments at 3.
---------------------------------------------------------------------------
168. Some, mostly smaller, incumbent LECs disagree with our
proposed standard, stating that it is ``too broad,'' ``an onerous
burden,'' ``not necessary,'' and ``may not be possible.'' 368
Other incumbent LECs claim that network disclosure requirements should
be limited to ``changes that affect the interconnection or
interoperability of the network.'' 369 Their overarching concern
is that the proposed definition's reference to ``any information''
would be interpreted so broadly that virtually any network-related
information would fall within the ambit of the disclosure
requirement.370 Some incumbent LECs also express the fear that a
broad interpretation of the statute ``might expose (them) to unintended
liability for giving information that the local exchange carrier is not
qualified to provide'' or that the (local exchange carrier) might be
held liable for results of decisions that the interconnector made based
upon this information.'' 371 These incumbent LECs claim that
competing providers' informational needs would be fulfilled even if
public disclosure were limited to ``relevant interfaces or protocols.''
372 USTA suggests an alternate definition: ``all changes in
information necessary for the transmission and routing of services
using the local exchange carrier's facilities, or that affects
interoperability.''
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\368\ GVNW comments at 1; Ameritech comments at 26; Rural Tel.
Coalition comments at 2.
\369\ Bell Atlantic reply at 9.
\370\ GVNW comments at 1; Ameritech comments at 26.
\371\ GVNW comments at 1-2.
\372\ Nortel states that the incumbent local exchange carrier
should only ``provide the interface information,'' and the competing
service provider should then ``perform its own `reverse engineering'
in developing its own products so as to be compatible with the
interface.'' Nortel comments at 5.
---------------------------------------------------------------------------
169. According to some competing providers, narrowing the scope of
information that must be publicly disclosed would preserve the
information advantage that incumbent LECs possessed before the passage
of the 1996 Act.373 Also, AT&T notes that a narrowly constructed
disclosure requirement would contradict the language of the statute
that specifically identifies ``changes that would affect the
interoperability of those facilities or networks.'' 374 AT&T
states that some information ``is both necessary for proper
transmission and routing and can affect the network's
interoperability'' although it is not directly relevant to the
interconnection point.375 AT&T presents five examples of technical
changes that do not directly relate to the interconnection point but
that nevertheless could have ``profound'' implications for competing
service providers. These changes include those that (1) alter the
timing of call processing; (2) require competing service providers to
install new equipment, such as echo cancelers; (3) affect recognition
of messages from translation nodes; (4) alter loop impedance levels,
which could cause service disruptions; and (5) could disable a
competing service provider's loop testing facilities.376
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\373\ See, e.g., Time Warner comments at 3-4.
\374\ AT&T reply at 25-26.
\375\ Id.
\376\ AT&T reply at n.56.
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[[Page 47313]]
170. Some incumbent LECs suggest that network disclosure
requirements should also apply to competing service providers.377
MCI and MFS contend, however, that the plain language of the statute
requires imposition of public disclosure requirements only upon
incumbent LECs. MFS states that the duty to disclose change information
was imposed upon incumbent local exchange carriers because they have
sufficient ``control over network standards to harm competition'' and
the ``requisite size and market power to change their networks in a
manner that stymies competition.'' 378 MFS argues that imposing
notification requirements on competing service providers would be an
``empty exercise'' because ``new entrants * * * can do little, if
anything, to change their networks in a manner that adversely impacts
the (incumbent LECs).'' 379 MFS also argues that competing service
providers have ``powerful economic incentives'' for maintaining
compatibility with incumbent local exchange networks.380
---------------------------------------------------------------------------
\377\ Ameritech comments at 29; BellSouth comments at 2; NYNEX
comments at 15-16; Rural Tel. Coalition comments at n.4.
\378\ MFS reply at 26.
\379\ MFS reply at 26-27.
\380\ Id.
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b. Discussion
171. Section 251(c)(5) requires that information about network
changes must be disclosed if it affects competing service providers'
performance or ability to provide service. Requiring disclosure about
network changes promotes open and vigorous competition contemplated by
the 1996 Act. We find that additional qualifiers that restrict the
types of information that must be disclosed, such as ``relevant
information or protocols,'' would create uncertainty in application and
appear inconsistent with the statutory language. Timely disclosure of
changes reduces the possibility that incumbent LECs could make network
changes in a manner that inhibits competition. In addition, notice of
changes to ordering, billing and other secondary systems is required if
such changes will have an effect on the operations of competing service
providers, because the proper operation of such systems is essential to
the provision of telecommunications services.
172. We agree with MCI and MFS that the plain language of the
statute requires imposition of public disclosure requirements only upon
incumbent LECs.381 In addition, we conclude that imposing this
requirement upon competing service providers would not enhance
competition or network reliability. While competing service providers
must respond to incumbent LEC network changes, competing service
providers, in general, are not in a position to make unilateral changes
to their networks because they must rely so heavily on their connection
to the incumbent LEC's network in order to provide ubiquitous service.
Accordingly, competing service providers already face sufficient
incentives to ensure compatibility of their planned changes with the
incumbent LEC's network. In addition, if an incumbent LEC were
permitted to obtain such information from a competing service provider,
the incumbent LEC might be able to obtain the competing service
provider's business plans and thereby stifle competition.382
---------------------------------------------------------------------------
\381\ MCI reply at 7; MFS reply at 25, 26.
\382\ NCTA asserts that incumbent LECs are ``entirely capable of
providing adequate notice of their network changes without `full
disclosure of competing service provider's operations and future
plans.''' NCTA reply at 12.
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173. We conclude that our disclosure standard is consistent not
only with section 251(c)(5), but also with the requirements of the
``all carrier rule'' 383 and the scope of the Computer III
384 disclosure requirement, both of which have been applied to
incumbent LEC activities for some time. In light of these preexisting
requirements, we find that the standard we proposed in the NPRM is not
burdensome but reasonable, providing sufficient disclosure to insure
against anti-competitive acts as well as to ensure certain and
consistent disclosure requirements.
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\383\ Unless clearly specified otherwise, in this Order, we use
the term ``all carrier rule'' to refer to the Commission's network
disclosure rule contained in 47 CFR 64.702, as interpreted in the
Second Computer Inquiry. The all carrier rule obligates ``all
carriers owning basic transmission facilities (to release) all
information relating to network design * * * to all interested
parties on the same terms and conditions, insofar as such
information affects either intercarrier interconnection or the
manner in which interconnected (customer-premises equipment)
operates.'' Amendment of Section 64.702 of the Commission's Rules
and Regulations (Second Computer Inquiry), Memorandum Opinion and
Order on Reconsideration, 84 F.C.C.2d 50, 82-83 (1980) 46 FR 19852
(April 1, 1981), further recon., 88 FCC 2d 512 (1981), aff'd sub
nom. Computer and Communications Indus. Ass'n v. FCC, 693 F.2d 198
(D.C. Cir. 1982), cert. denied, 461 U.S. 938 (1983). The all carrier
rule also requires that ``[w]hen such information is disclosed to
the separate corporation it shall be disclosed and be available to
any member of the public on the same terms and conditions.'' See 47
CFR 64.702; Application of The Southern New England Tel. Co., 10 FCC
Rcd 4558, 4559 n.23 (1995); Competition in the Interstate
Interexchange Marketplace, Report and Order, 6 FCC Rcd 5880, 5911
n.270 (1991) (The all carrier rule obligates ``all carriers to
disclose, reasonably in advance of implementation, information
regarding any new service or change in the network.''); Competition
in the Interstate Interexchange Marketplace, Report and Order, 6 FCC
Rcd. 5880, 5911 n.270. (1991) 56 FR 55235 (October 25, 1991).
Another of the Commission's rules, 47 CFR 68.110(b), requires
similar disclosure to customers of network changes ``if such changes
can be reasonably expected to render any customer's terminal
equipment incompatible with telephone company communications
facilities, or require modification or alteration of such terminal
equipment, or otherwise materially affect its use or performance.''
We will refer to this rule specifically by number where necessary.
\384\ See infra para. 204 and n.449.
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174. We have considered the impact of our rules in this section on
small incumbent LECs, including Rural Tel. Coalition's and GVNW's
requests for a less inclusive definition of ``information necessary for
transmission and routing.'' 385 We do not adopt these proposals
because we are unable to grant such leniency to small businesses and
simultaneously ensure adequate information disclosure to facilitate the
development of a pro-competitive environment for every market
participant, including other small businesses. We note, however, that
under section 251(f)(1) certain small incumbent LECs are exempt from
our rules until (1) they receive a bona fide request for
interconnection, services, or network elements; and (2) their state
commission determines that the request is not unduly economically
burdensome, is technically feasible, and is consistent with the
relevant portions of section 254. In addition, certain small incumbent
LECs may seek relief from our rules under section 251(f)(2).386
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\385\ Rural Tel. Coalition comments at 2; GVNW comments at 1.
\386\ For a discussion of the implications and operation of
section 251(f), see First Report and Order at section XII.
---------------------------------------------------------------------------
2. Definition of ``Services''
a. Background and Comments
175. Commenters, including incumbent LECs, interexchange carriers,
and industry organizations, unanimously support our tentative
conclusion that the term ``services,'' as used in section 251(c)(5),
includes both telecommunications services and information services, as
defined in sections 3(46) and 3(20), respectively.387 Parties
agree that it is reasonable to require that providers of both
telecommunications and information services receive this information.
ALTS points out that exclusion of information services or
telecommunications services from our definition would be
[[Page 47314]]
``needlessly restrictive.'' 388 BellSouth also notes that the
inclusion of information services for public notice purposes should not
vest information service providers with substantive rights under
Section 251, except where they are also operating as a
telecommunications carrier under the 1996 Act.389
---------------------------------------------------------------------------
\387\ 47 U.S.C. Sec. 153(20), (46). See NPRM at para. 189; ALTS
comments at 2; Ameritech comments at 25; BellSouth comments at 3;
District of Columbia Commission comments at 6-7; GCI comments at 4;
Illinois Commission comments at 59; MCI comments at 15; MFS comments
at 12; Telecommunications Resellers Association comments at 11; U S
WEST comments at 12.
\388\ ALTS comments at 2.
\389\ BellSouth comments at 3.
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b. Discussion
176. We conclude that the term ``services'' includes both
telecommunications services and information services, as defined in
sections 3(46) and 3(20) of the Act, respectively. Providers of both
telecommunications services and information services may make
significant use of the incumbent LEC's network in making these
offerings. Accordingly, exclusion of either information services
providers or telecommunications services providers would be needlessly
restrictive. We also affirm that the inclusion of information services
for public notice purposes does not vest information service providers
with substantive rights under other provisions within section 251,
except to the extent that they are also operating as telecommunications
carriers.
3. Definition of ``Interoperability''
a. Background and Comments
177. The Commission tentatively concluded that the term
``interoperability,'' as used in section 251(c)(5), should be defined
as ``the ability of two or more facilities, or networks, to be
connected, to exchange information, and to use the information that has
been exchanged.'' 390 This definition of ``interoperability'' was
taken from the IEEE Standard Dictionary of Electrical and Electronics
Terms.391 Commenters, including incumbent LECs, interexchange
carriers, state commissions, and industry associations, are unanimous
in their support for our tentative conclusion.392 The Ohio
Commission also suggests that we expand our definition of
``interoperability'' to ``recognize that the exchange of traffic
between an (incumbent local exchange carrier) and an interconnector
must be seamless and transparent to both parties' end users.'' 393
No alternative definitions for the term ``interoperability'' were
proposed by commenting parties.
---------------------------------------------------------------------------
\390\ NPRM at para. 189.
\391\ See IEEE Standard Dictionary of Electrical and Electronics
Terms 461 (J. Frank ed. 1984).
\392\ ALTS comments at 2; Ameritech comments at 25; AT&T
comments at 23; District of Columbia Commission comments at 6-7; GCI
comments at 4; Illinois Commission comments at 4; MCI comments at
15; MFS comments at 12-13; Ohio Commission comments at 4;
Telecommunications Resellers Association comments at 12; U S WEST
comments at 12.
\393\ Ohio Commission comments at 4.
---------------------------------------------------------------------------
b. Discussion
178. We define the term ``interoperability'' as ``the ability of
two or more facilities, or networks, to be connected, to exchange
information, and to use the information that has been exchanged.'' As
this definition of ``interoperability'' was taken from the IEEE
Standard Dictionary of Electrical and Electronics Terms, we believe
that this well established and widely accepted industry standard can be
applied easily and consistently. We find that the concepts of
seamlessness and transparency are already adequately incorporated into
this definition's specific interoperability criteria, and that further
exposition of these concepts is not necessary.
4. Changes That Trigger the Public Notice Requirement
a. Background and Comments
179. In the NPRM, we noted that ``public notice is critical to the
uniform implementation of network disclosure, particularly for entities
operating networks in numerous locations across a variety of states.''
394 We requested comment as to what changes should trigger the
notice requirement.
---------------------------------------------------------------------------
\394\ NPRM at para. 190.
---------------------------------------------------------------------------
180. Several commenters suggest that timely notice should be
provided whenever an upcoming change in the incumbent LEC's network may
affect the way in which a competing provider offers its
service.395 Examples of such changes include, but are not limited
to, changes in transmission, signalling standards, call routing,
network configuration and logical elements.396 Also, commenters
assert that public notice should be required when a change will affect
the electronic interfaces, data elements, or transactions that support
ordering, provisioning, maintenance and billing of the network
facilities.397 The Illinois Commission notes, however, that the
types of changes that trigger public notice should not be ``micro-
defined'' because overly specific trigger requirements could create
situations in which carriers would not be required to provide public
notice if a particular change has not been clearly identified.398
ALTS also supports a broadly defined class of changes that trigger
network disclosure requirements, asserting that some changes, such as
those affecting provisioning and billing for a carrier's service, might
not otherwise be reported adequately, resulting in service
disruptions.399
---------------------------------------------------------------------------
\395\ ACSI comments at 11; ALTS comments at 2-3; AT&T comments
at 23; Cox comments at 9-10; GCI comments at 5; Ohio Commission
comments at 4; and Time Warner comments at 4.
\396\ ACSI comments at 11.
\397\ See, e.g., AT&T comments at 24; Time Warner comments at 4.
\398\ Illinois Commission comments at 59.
\399\ ALTS comments at 2, 3.
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181. Ameritech claims that disclosure obligations should only be
triggered by a new or ``substantially changed'' network interface, or a
change that ``otherwise affects the routing or termination of traffic
delivered to or from the incumbent LEC's network.'' 400 Ameritech
also claims that changes ``that do not impact interconnection and
interoperability * * * do not need to be disclosed at all.'' 401
AT&T observes, however, that public notice requirements should also
apply to some changes that do not directly relate to the interconnect
point.402
---------------------------------------------------------------------------
\400\ Ameritech comments at 26, 27.
\401\ Id.
\402\ AT&T reply at 26 n.56.
---------------------------------------------------------------------------
b. Discussion
182. We conclude that an incumbent LEC must provide public notice
in accordance with the rules and schedules we adopt in this proceeding,
once the incumbent LEC makes a decision to implement a change that
either (1) affects competing service providers' performance or ability
to provide service; or (2) otherwise affects the ability of the
incumbent LEC's and a competing service provider's facilities or
network to connect, to exchange information, or to use the information
exchanged. We believe that a broad standard is appropriate, to reduce
the possibility that incumbent LECs may fail to disclose information a
competing service provider may need in order to maintain adequate
interconnectivity and interoperability in response to incumbent LEC
network changes. Examples of network changes that would trigger public
disclosure obligations include, but are not limited to, changes that
affect: Transmission; signalling standards; call routing; network
configuration; logical elements; electronic interfaces; data elements;
and transactions that support ordering, provisioning, maintenance and
billing. This list is not exclusive but exemplary; incumbent LECs are
not exempted from public notice requirements for a particular change
that is not included among these examples.
[[Page 47315]]
5. Types of Information To Be Disclosed
a. Background
183. In the NPRM, we tentatively concluded that incumbent LECs
should be required to ``disclose all information relating to network
design and technical standards, and information concerning changes to
the network that affect interconnection.'' 403 We also tentatively
concluded that incumbent LECs specifically must provide: (1) The date
changes are to occur; (2) where changes are to be made or to occur; (3)
the type of changes; and (4) the potential impact of changes; and that
these four categories represented the ``minimum information that a
potential competitor would need in order to achieve and maintain
efficient interconnection.'' 404
---------------------------------------------------------------------------
\403\ NPRM at para. 190. We referred, as an example, to the
``All Carrier Rule,'' which requires public disclosure of ``all
information relating to network design and technical standards * * *
[affecting] interconnection * * * prior to implementation and with
reasonable advance notification.'' See note 383, supra.
\404\ NPRM at para. 190.
---------------------------------------------------------------------------
b. Comments
184. A number of commenters agree with our tentative conclusions
regarding the breadth of information that must be reported, as well as
our minimum reporting requirements.405 Ameritech, however, claims
that our requirement is ``too broad'' and would ``impose an onerous
burden'' on incumbent LECs, exceeding the statutory requirements of
section 251(c)(5).406 Ameritech asserts that ``excessive exchange
of information between competitors is inconsistent with * * * a
competitive marketplace'' and could spur ``allegations of collusion and
concerted action.'' 407 Cox and Time Warner, however, state that
uniform public notice of sufficient information can attenuate
anticompetitive behavior. ALTS, AT&T and MCI suggest that the
information that must be disclosed should include, but should not be
limited to, technical specifications and references to standards
regarding transmission, signaling, routing and facility assignment as
well as references to technical standards that are applicable to any
new technologies or equipment, or which may otherwise affect
interconnection.
---------------------------------------------------------------------------
\405\ Illinois Commission comments at 60; ALTS comments at 3;
AT&T comments at 23-24; District of Columbia Commission comments at
7; Excel comments at 10; GCI comments at 4-5; MCI comments at 15;
MFS comments at 12-13; NCTA comments at 12; Telecommunications
Resellers Association comments at 12.
\406\ Ameritech comments at 26.
\407\ Id.
---------------------------------------------------------------------------
185. A significant cross-section of commenters specifically
advocates disclosure of the potential impact of changes.408 For
example, Cox notes that disclosure should, at a minimum, enable a
competing service provider to understand: ``(1) How its existing
technical interconnection arrangements will be affected; and (2) how
the form and content of the information passed between the
interconnected networks will change.'' 409 ACSI clearly states
that ``the content of the notice should specifically identify * * * the
impact of the change on current interconnection or access
arrangements.'' 410
---------------------------------------------------------------------------
\408\ ACSI comments at 11; ALTS comments at 3; District of
Columbia Commission comments at 7; Excel comments at 10; GCI
comments at 5; MCI comments at 15; MFS comments at 12-13; Ohio
Commission comments at 5; TCC reply at 23; Telecommunications
Resellers Association comments at 12; Time Warner comments at 8.
\409\ Cox reply at 13.
\410\ ACSI comments at 11.
---------------------------------------------------------------------------
186. Some incumbent LECs, however, take exception to our tentative
conclusion to impose on them an obligation to make public disclosure of
the potential impact of network changes.411 They argue that this
obligation would require incumbent LECs to become ``experts on the
operations of other carriers,'' or impose a ``duty to know what (an)
interconnector's service performance abilities are.'' 412
Specifically, USTA expresses concern that this requirement ``could be
misconstrued as a duty to predict what the precise impact might be, or
to educate a competitor on how to re-engineer their network.'' 413
Ameritech claims that this requirement is ``unfair,'' and ``of little
or no value,'' and implies that this requirement creates a ``general
duty for (incumbent LECs) to operate their competitor's businesses or
help them market their services.'' 414 BellSouth asserts that
``the better approach would be to (disclose) information from which an
interconnecting carrier would be able to determine for itself whether
its service performance or abilities might be affected.'' 415
NYNEX alleges that ``(s)uch proposals are over-broad and unnecessary to
ensure * * * network interconnection/interoperability.'' 416 NYNEX
rejects responsibility for evaluating the effect that changes it would
make might have upon competing service providers and asserts that
``there is no basis for changing the traditional responsibility of each
carrier to maintain its own network and respond to technological and
market changes.'' 417 NYNEX also claims that while it has the
ability to ``make an assessment of the likely impact of a technical
change at the interface with a competitor's network,'' it would require
``detailed knowledge of a competitor's network architecture'' in order
to calculate the impact a change may have on a competing service
provider's performance.418
---------------------------------------------------------------------------
\411\ Ameritech comments at 28; BellSouth comments at 3; GVNW
comments at 3; NYNEX reply at 9; USTA reply at 11.
\412\ BellSouth comments at 3. See, e.g., Ameritech comments at
28; GVNW Comments at 3; NYNEX reply at 9.
\413\ USTA reply at 11.
\414\ Ameritech comments at 28.
\415\ BellSouth comments at 3.
\416\ NYNEX reply at 9.
\417\ Id.
\418\ NYNEX reply at 9 n.24.
---------------------------------------------------------------------------
187. MCI and TCC suggest that an incumbent LEC should also be
required to designate a contact for additional information in its
public notice. PacTel argues, in response, that such a requirement
would be ``impossible to fulfill'' because it would require an
incumbent LEC to designate a ``single omniscient individual.'' 419
MFS states that the public notice should also include: ``(a) The
charges that the incumbent LEC anticipates will apply to the carrier
for the change; (b) the specific number of circuits affected if the
change occurs at the time of the notification; (c) the projected
minimum, maximum, and average down times per affected circuit; (d)
alternatives available to the interconnector; 420 and (e) any
other information necessary to evaluate alternatives and effectuate
necessary changes or challenges.'' 421 The Ohio Commission, in
contrast, claims that information relating to network design should be
excepted from public disclosure, and that incumbent LECs should only be
obliged to disclose information regarding changes to existing
interconnection arrangements.422
---------------------------------------------------------------------------
\419\ PacTel reply at 6-7.
\420\ Although MFS does not elaborate on this requirement, we
interpret this suggestion as a request that an incumbent LEC
identify in its public notice a range of proposed competing service
provider responses to the planned change that will maintain
interconnectivity and interoperability of the carriers' networks.
\421\ MFS comments at 14.
\422\ Ohio Commission comments at 5.
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c. Discussion
188. We conclude that we should adopt a requirement of uniform
public notice of sufficient information to deter anticompetitive
behavior and that, at a minimum, incumbent LECs should give competing
service providers complete information about network design, technical
standards and planned changes to the network. Specifically, public
notice of changes shall consist of: (1) The date changes are to occur;
(2) the location at which changes are to occur; (3) types of changes;
(4) the reasonably foreseeable impact of changes to be
[[Page 47316]]
implemented, and (5) a contact person who may supply additional
information regarding the changes. Information provided in these
categories must include, as applicable, but should not be limited to,
references to technical specifications, protocols, and standards
regarding transmission, signaling, routing and facility assignment as
well as references to technical standards that would be applicable to
any new technologies or equipment, or that may otherwise affect
interconnection.
189. We find that making available a contact person will simplify
the public notification process and reduce the risk that the
notifications will be misunderstood or misconstrued. Commenters have
requested that public notices include a variety of specific information
categories, some of which may not be covered by the specific categories
identified in the NPRM. Such specific information, however, may be
inapplicable, unnecessary or proprietary in some circumstances and
inadequate or confusing in others. Accordingly, we require instead that
incumbent LECs identify a contact person. Such a contact need not be
``omniscient,'' but rather should be able to serve as an initial
contact point for the sharing of information regarding the planned
network changes.
190. Providing notice of the reasonably foreseeable potential
impact of changes does not require incumbent LECs to educate a
competitor on how to re-engineer its network, or to be experts on the
operations of other carriers, or impose a duty to know the competing
service provider's service performance or abilities. Rather, we intend
that incumbent LECs perform at least rudimentary analysis of the
network changes sufficient to include in its notice (where appropriate)
language reasonably intended to alert those likely to be affected by a
change of anticipated effects. We find that such cautionary language
will be a valuable, but not burdensome, element of reasonable public
notice.
191. We do not limit network disclosure to information pertinent to
those changes in incumbent LEC network design or technical standards
that will affect existing interconnection arrangements, as requested by
the Ohio Commission. Such a limitation is neither consistent with the
obligations imposed by section 251(c)(5) nor consistent with the
development of competition. In formulating interconnection and service
plans, both actual and potential competing service providers need
information concerning network changes that potentially could affect
anticipated interconnection, not just those changes that actually
affect existing interconnection arrangements.
B. How Public Notice Should Be Provided
1. Dissemination of Public Notice Through Industry Fora and
Publications
a. Background
192. Section 251(c)(5) requires incumbent LECs to provide
``reasonable public notice'' of relevant network changes. In the NPRM,
the Commission requested comment on how this notice should be provided.
The Commission tentatively concluded that ``full disclosure of the
required technical information should be provided through industry fora
or in industry publications.'' 423 The Commission stated that
``this approach would build on a voluntary practice that now exists in
the industry and would result in broad availability of the
information.'' 424 The Commission sought comment on this tentative
conclusion. The Commission also requested comment on whether a
reference to information on network changes should be filed with the
Commission and, if so, where that information should be located.
---------------------------------------------------------------------------
\423\ The Commission gave as examples the Network Operations
Forum (NOF) and the Interconnection Carrier Compatibility Forum
(ICCF). NPRM at para. 191.
\424\ NPRM at para. 191.
---------------------------------------------------------------------------
b. Comments
193. Most commenters agree with our tentative conclusion in the
NPRM that existing industry fora and publications are appropriate
vehicles for public notice of network changes.425 Bell Atlantic
notes that ``industry participants with an interest in new interfaces
routinely monitor publications and announcements for disclosures.''
426 Some incumbent LECs support the use of industry fora and
publications because they are well established, already in place, reach
the targeted audience, have worked effectively for a number of years,
or allow for widespread dissemination.427 USTA states that
``voluntary practices can serve as a platform from which to implement
this act.'' 428
---------------------------------------------------------------------------
\425\ ALTS comments at 3-4; Ameritech comments at 28-29, reply
at 17-18; AT&T comments at 24; Bell Atlantic comments at 10; Cox
reply at 13; GCI comments at 5; Illinois Commission comments at 62;
MCI comments at 15; MFS reply at 25; NCTA reply at 11; NYNEX
comments at 15, reply at 10; PacTel comments at 7, reply at 6;
Teleport comments at 11; Telecommunications Resellers Association at
12. See also NPRM at para. 191.
\426\ Bell Atlantic also states that exchange carriers should be
able to satisfy their disclosure obligation by indicating their
intention to deploy specifications at the time that they are
published by a standards organization. Bell Atlantic comments at 10-
11.
\427\ Ameritech reply at 17-18; GTE comments at 7.
\428\ USTA comments at 11-12.
---------------------------------------------------------------------------
194. Several commenters, however, caution that industry fora and
publications should not be the only vehicles used for the public
dissemination of network change information 429 and request
flexible disclosure methods.430 Although MCI does not object to
utilizing industry fora and publications, MCI cautions against over
reliance on these vehicles because it ``do[es] not believe that * * *
parties affected by technical changes [will] receive information in
sufficient detail, objectivity, and timeliness.'' 431 Many
commenters indicate that additional disclosure vehicles are required
because not all carriers participate in these fora on a regular basis
(partly as a result of limited resources) 432 or because the BOCs,
in the past, have used industry fora to limit competitors' access to
full and timely information in order to put them at a competitive
disadvantage.433 Several commenters have noted the potential of
the Internet as a vehicle for providing public notice of network
changes.434 Others specifically suggest that incumbent LECs should
be required to file technical change information with the Commission
``in order to ensure a complete, reliable, and consistent body of
information that all parties may utilize.'' 435 Some incumbent
LECs, however, disagree, arguing that the Commission need not become a
repository of disclosure notices because such Commission filings would
be ``redundant with existing industry functions and contrary to the
Commission's current initiative to eliminate unnecessary filings.''
436
---------------------------------------------------------------------------
\429\ E.g., Cox reply at 12; MCI comments at 17; GVNW comments
at 4; Rural Tel. Coalition comments at 3.
\430\ E.g., Rural Tel. Coalition comments at 3,5.
\431\ MCI comments at 17-18.
\432\ See, e.g., Cox comments at 11, reply at 13; MCI comments
at 17; GVNW comments at 4; Rural Tel. Coalition comments at 3.
\433\ MCI comments at 17-18, reply at 7. Bell Atlantic refutes
this allegation. Bell Atlantic reply at 10.
\434\ See, e.g., ALTS comments at 3-4; U S WEST comments at 14;
MCI comments at 17; Time Warner comments at 10 n.12; MFS reply at
25; TCC reply at 24.
\435\ MCI comments at 19; MFS comments at 13. See also Time
Warner comments at 10 (establishing the Commission as a ``central
point of reference'' could be less burdensome on incumbent LECs than
other means of providing public notice).
\436\ BellSouth comments at 4 n.11. See also NYNEX reply at 10;
PacTel reply at 6.
---------------------------------------------------------------------------
195. Bell Atlantic suggests that ``direct disclosure to a mailing
list of interconnectors should also be allowed.'' 437 MFS proposes
extending direct mail notification to ``any other
[[Page 47317]]
carrier * * * who specifically requests such notice.'' 438 PacTel,
however, claims that imposing these sorts of requirements would
``impose excessive and unnecessary costs on (incumbent) LECs.''
439
---------------------------------------------------------------------------
\437\ Bell Atlantic comments at 10.
\438\ MFS comments at 14, reply at 25.
\439\ PacTel reply at 6.
---------------------------------------------------------------------------
196. BellSouth argues that no Commission rule is necessary because
current voluntary practices are ``sufficient to ensure that this
information is broadly available.'' 440 Similarly, GVNW suggests
that information should only be passed to competing service providers
``case by case * * * as required.'' 441 Several commenters,
however, disagree. Time Warner, for example, contends that ``the
Commission must adopt a uniform * * * rule which prescribes a specific
method by which notification and disclosure must be provided'' and that
will allow interested parties to gain ready access to the information
they require.442
---------------------------------------------------------------------------
\440\ BellSouth comments at 4.
\441\ GVNW comments at 4.
\442\ Time Warner comments at 9. See also AT&T reply at 27 n.58.
(arguing that the very existence of such broad disagreement on this
issue itself bespeaks the need for a uniform national rule and that
the absence of a uniform public disclosure requirement would lead to
``disparate application of a uniform federal statutory duty, unduly
narrow interpretations of that duty by [independent local exchange
carriers] * * * and competitive harm to new entrants'').
---------------------------------------------------------------------------
197. The District of Columbia Commission asserts that state
commissions may also require information to be filed at the state
level, and may need the same information in order to comply with
section 252. As such, state commissions could also be used to make
information available to small competing service providers. AT&T,
however, argues that there are no specific differences among the
various states that are ``material'' to our network disclosure
requirements.443
---------------------------------------------------------------------------
\443\ AT&T reply at n.59.
---------------------------------------------------------------------------
c. Discussion
198. We conclude that incumbent LECs may fulfill their network
disclosure obligations either (1) by providing public notice through
industry fora, industry publications, or on their own publicly
accessible Internet sites; or (2) by filing public notice with the
Commission's Common Carrier Bureau, Network Services Division, in
accordance with the format and method requirements of the rules we are
adopting in this proceeding. In either case, the public notice must
contain the minimum information categories identified in paragraph 188,
above. Incumbent LECs using public notice methods other than Commission
filings must file a certification with the Common Carrier Bureau,
Network Services Division, identifying the proposed change(s), stating
that public notice has been given in compliance with this Order,
identifying the location of the information describing the change and
stating how the information can be obtained by interested parties. This
certification must also comply with the rules we adopt in this
proceeding.
199. As discussed above, we conclude that industry fora, industry
publications, and the Internet may be used to make public disclosure of
network changes and required technical information. We affirm our
belief that ``this approach would build on a voluntary practice that
now exists in the industry and would result in broad availability of
the information.'' 444 Reliance solely on voluntary participation
in industry fora and publications, however, may inhibit the ability of
some small carriers to disseminate or receive this information. Because
of their more limited resources, some smaller incumbent LECs and
competing service providers do not participate in these fora on a
regular basis; nevertheless, all carriers, competing service providers,
and potential competitors must have equal opportunities to provide and
to receive change information on a national scale. We believe that wide
availability of pertinent network change information effectively
removes potential barriers to entry, which could otherwise frustrate
the efforts of new competitors. As a consequence, we conclude that the
Commission should function as a ``backstop'' source of information for
other interested parties. Accordingly, in lieu of disclosure in
industry fora, publications, or the Internet, an incumbent LEC may file
network change information directly with the Commission. In the
alternative, if an incumbent LEC chooses to provide public notice
through one or more industry fora or publications, or the Internet, we
require that it also file a certification with the Commission
containing the information outlined above. We are confident that even
small incumbent LECs with limited resources will be able to use one of
these alternatives to give public notice of network changes.
---------------------------------------------------------------------------
\444\ NPRM at para. 191.
---------------------------------------------------------------------------
200. An incumbent LEC must maintain both the information disclosed
in its public notice and any nondisclosed supporting information that
is nevertheless relevant to the planned change, until the change is
implemented. As discussed in paragraph 235, infra, once a change is
implemented in the incumbent LEC's network, information on the change
must be disclosed under the general interconnection obligations imposed
by section 251(c)(2).
201. We find that information filed with the Commission under
section 251(c)(5) should eventually be made available on the FCC Home
Page or through other online access vehicles, such as ``LISTSERV''
subscription mailings or others, and we intend to explore this option
fully for the future. In addition, we will explore vigorously the
possibility that hypertext links from the Commission Home Page to
incumbent LEC Internet sites could both facilitate public notice and
centralize access to change information. We find that direct mail
notification alone does not comport with our interpretation of ``public
notice'' as used in this proceeding, because such direct mailings do
not provide notice to the ``public,'' but rather provide individual
notice to a selected group of recipients. Such mailings could, however,
supplement other methods of notification.
202. We also address the impact on small incumbent LECs. We agree
with GVNW 445 and Rural Tel. Coalition 446 that we can
mitigate the impact of our rules on small incumbent LECs by allowing
public notice to be given at several alternative locations. Because
many of these carriers lack the resources to participate in industry
fora, we have also provided low cost alternatives, including Internet
postings or Commission filings. We expect that our requirement that
either public notice or certification be filed with the Commission will
allow small entities, both incumbent LECs and new entrants, to locate
network change information quickly and inexpensively. In any event,
under section 251(f)(1), certain small incumbent LECs are exempt from
our rules until (1) they receive a bona fide request for
interconnection, services, or network elements; and (2) their state
commission determines that the request is not unduly economically
burdensome, is technically feasible, and is consistent with the
relevant portions of section 254. In addition, certain small incumbent
LECs may seek relief from our rules under section 251(f)(2).447
---------------------------------------------------------------------------
\445\ GVNW comments at 4.
\446\ Rural Tel. Coalition comments at 3,5.
\447\ For a discussion of the implications and operation of
section 251(f), see First Report and Order, section XII.
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[[Page 47318]]
2. When Should Public Notice of Changes be Provided?
a. Background
203. Section 251(c)(5) requires an incumbent LEC to provide
``reasonable public notice'' of certain changes to its network. In the
NPRM, we tentatively concluded that this statutory language requires
incumbent LECs: (1) To provide notice of these changes within a
``reasonable'' time in advance of implementation; and (2) to make the
information available within a ``reasonable'' time if responding to an
individual request.448 We sought comment on what constitutes a
reasonable time in each of these situations, and on whether the
Commission should adopt a specific timetable for disclosure of
technical information.
---------------------------------------------------------------------------
\448\ NPRM at para. 192.
---------------------------------------------------------------------------
204. In the NPRM, we specifically sought comment on whether we
should adopt a disclosure timetable similar to that adopted by the
Commission in the Computer III proceeding.449 In Phase II of that
proceeding, the Commission required AT&T and the BOCs to disclose
information about network changes or new network services that affect
the interconnection of enhanced services with the network at two points
in time.450 First, these carriers were required to disclose such
information at the ``make/buy'' point--that is, when the carrier
decides to make itself, or to procure from an unaffiliated entity, any
product the design of which affects or relies on the network
interface.451 Second, carriers were required to release publicly
all technical information at least twelve months prior to the
introduction of a new service or network change that would affect
enhanced service interconnection with the network.452 If a carrier
could introduce a new service between six and twelve months of the
make/buy point, public disclosure was permitted at the make/buy point,
but in no event could the carrier introduce the service earlier than
six months after the public disclosure.453
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\449\ Amendment of Section 64.702 of the Commission's Rules and
Regulations (Computer III), Phase I, 104 F.C.C.2d 958 (1986) (Phase
I Order), recon., 2 FCC Rcd 3035 (1987) (Phase I Recon. Order),
further recon., 3 FCC Rcd 1135 (1988) (Phase I Further Recon.
Order), second further recon., 4 FCC Rcd 5927 (1989) (Phase I Second
Further Recon.), Phase I Order and Phase I Recon. Order vacated,
California v. FCC, 905 F.2d 1217 (9th Cir. 1990) (California I);
Phase II, 2 FCC Rcd 3072 (1987) (Phase II Order) 52 FR 20714 (1987),
recon., 3 FCC Rcd 1150 (1988) (Phase II Recon. Order), further
recon., 4 FCC Rcd 5927 (1989) (Phase II Further Recon. Order), Phase
II Order, vacated, California I, 905 F.2d 1217 (9th Cir. 1990);
Computer III Remand Proceedings, 5 FCC Rcd 7719 (1990) 56 FR 00965
(December 17, 1990) (ONA Remand Order), recon., 7 FCC Rcd 909
(1992), 57 FR 05391 (January 24, 1992), pets. for review denied
California v. FCC, 4 F.3d 1505 (9th Cir. 1993) (California II);
Computer III Remand Proceedings: Bell Operating Company Safeguards
and Tier 1 Local Exchange Company Safeguards, 6 FCC Rcd 7571 (1991)
(BOC Safeguards Order), 57 FR 4373 (February 5, 1992); BOC
Safeguards Order, vacated in part and remanded, California v. FCC,
39 F.3d 919 (9th Cir. 1994) (California III), cert. denied, 115
S.Ct. 1427 (1995).
\450\ Phase II Recon. Order, 3 FCC Rcd at 1164. Although the
Ninth Circuit vacated the Phase II Recon. Order, the Commission
reimposed the network disclosure requirements on remand. See BOC
Safeguards Order, 6 FCC Rcd at 7602-7604.
\451\ Phase II Recon. Order, 3 FCC Rcd at 1164.
\452\ Id. at 1164-65.
\453\ Id. at 1165.
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205. The disclosure obligations imposed by section 251(c)(5) are
broader than those adopted in the Computer III proceeding. While
Computer III applies only to the BOCs and to AT&T, section 251(c)(5)
imposes disclosure requirements on all incumbent LECs. Furthermore,
while the Computer III disclosure requirements apply only to technical
information related to new or modified network services affecting the
interconnection of enhanced services to the BOC networks, section
251(c)(5) mandates disclosure of a much broader spe
FR Doc. 96-22045 Implementation of the Local Competition Provisions of the Telecommunications Act of 1996
ctrum of
information.454 Accordingly, we sought comment in the NPRM on
whether the Commission should adopt a timetable comparable to that
imposed in Computer III for section 251(c)(5) network disclosure
purposes and, if so, how such a timetable should be implemented.
---------------------------------------------------------------------------
\454\ See discussion of the definitions of ``information
necessary for the transmission and routing of services'' and
``interoperability,'' supra.
---------------------------------------------------------------------------
b. Comments
206. Most commenters express support for our tentative conclusion
that section 251(c)(5) requires incumbent LECs to disclose publicly
information on network changes within a reasonable time in advance of
implementation.455 No commenters suggest that the timing of
disclosure is not governed by section 251(c)(5)'s ``reasonableness''
standard, although at least two commenters appear to indicate that it
would be reasonable to implement network changes immediately upon
disclosure.456 Commenters also support our tentative conclusion
that an incumbent LEC must make this information available within a
``reasonable'' time if responding to an individual request.457
Time Warner requests a concrete standard in this area and suggests that
the Commission should indicate that, once an incumbent LEC has released
a public notice of change under section 251(c)(5), it must respond to
individual requests for detailed, technical information concerning
network changes under section 251(c)(5) within ten business days of
receiving the request.458
---------------------------------------------------------------------------
\455\ See, e.g., Ameritech comments at 29; GCI comments at 5;
MCI comments at 15; Time Warner comments at 6; U S WEST reply at 1.
\456\ BellSouth argues that ``the Commission should permit the
offering of the new interface immediately upon the disclosure of the
requisite information.'' BellSouth comments at 5; see also Nortel
comments at 4.
\457\ See, e.g., MCI comments at 15.
\458\ Time Warner comments at 11.
---------------------------------------------------------------------------
207. Commenters were split on whether we should adopt a specific
disclosure timetable for section 251(c)(5) purposes. Several commenters
459 oppose the adoption of a specific timetable, primarily arguing
that: (1) Any regulations adopted under section 251(c)(5) should define
only minimum guidelines, allowing the states flexibility under section
251(d)(3) to adopt more stringent disclosure requirements dictated by
local conditions; (2) a fixed disclosure timetable will needlessly or
arbitrarily delay the introduction of new services or technical
advances; (3) overly long advance disclosure periods will put the
incumbent LECs at a competitive disadvantage because competitors will
be able to bring planned services to market more quickly; (4) the
industry already has in place detailed disclosure guidelines that are
widely followed on a voluntary basis and that obviate the need for
independent Commission examination of this issue; and (5) the
Commission's existing ``all carrier'' rule, which contains a flexible
standard, adequately addresses the obligations imposed by section
251(c)(5).460 GVNW warns that the interval from the make/buy
decision to in-service for small LECs is often less than twelve months
and states that the Commission should not require technology to be
implemented at a slower pace than is technically feasible merely to
satisfy a notice requirement.461 Commenters also argue that
carriers already face powerful incentives to ensure that their networks
interconnect properly because the reputation of both the incumbent LEC
and the interconnecting LEC are at stake if service fails.462 In
addition, BellSouth claims that section 251(c)(5) is ``self-
effectuating and needs no interpretive regulations.'' 463
---------------------------------------------------------------------------
\459\ See, e.g., Ameritech comments at 29; BellSouth comments at
2, 5; District of Columbia Commission comments at 6, 7-8; GVNW
comments at 5; Bell Atlantic reply at 8-9.
\460\ The requirements of the all carrier rule are discussed in
note 383 supra.
\461\ GVNW comments at 4.
\462\ See, e.g., Ameritech comments at 30.
\463\ BellSouth comments at 1.
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[[Page 47319]]
208. Several other commenters argue that, while a disclosure
timetable may be necessary, the Computer III requirements are too
rigid. The District of Columbia Commission notes that any eventual
disclosure timetable must balance ``the need to ensure the earliest
possible disclosure of information needed by competitors (against) the
need to impose the least administrative burden on'' incumbent
LECs.464 Accordingly, the District of Columbia Commission
maintains that state commissions should be afforded flexibility to set
timetables that are appropriate in light of local conditions.465
Several commenters note existing industry notification timing standards
adopted and issued by the Industry Carriers Compatibility Forum
(``ICCF'') 466 and argue that widespread industry use of these
standards has obviated the need for an additional Commission-imposed
timetable.467 MCI, however, cautions that these existing industry
guidelines are inadequate because industry fora, in general, have
historically been controlled by the RBOCs.468 U S WEST supports
disclosure at the ``make/buy'' point, but argues that additional notice
should not be required for deployment of standard interfaces and
services.469 While MCI supports adoption of the Computer III
timetable in this proceeding, it requests that, in addition: (1) We
impose a mandatory 6-month disclosure period for network changes that
can be implemented within 6 months of the ``make/buy'' point; and (2)
we clarify that incumbent LECs must disclose relevant information they
discover after services have been introduced, if such information would
have been subject to prior disclosure.470 AT&T also supports the
general parameters of the Computer III timetable, but requests that we
specifically impose a one year minimum advance disclosure obligation on
changes to network elements or operations support system
technology.471 Similarly, while ACSI notes that the Computer III
timetable is a ``useful starting place,'' it argues for a minimum one-
year notice period for modification of the physical form of
interconnection, with an additional 6 month period in which use of the
changes by a competing service provider is permissive only.472
---------------------------------------------------------------------------
\464\ District of Columbia Commission comments at 8.
\465\ Id.
\466\ Industry Carriers Compatibility Forum, Recommended
Notification Procedures to Industry for Changes in Access Network
Architecture, ICCF 92-0726-004, Rev. 2 (January 5, 1996).
\467\ USTA comments at 13; NYNEX comments at 16-17; SBC comments
at 14.
\468\ MCI reply at 7.
\469\ U S WEST comments at 13.
\470\ MCI comments at 20-21.
\471\ AT&T comments at 25.
\472\ ACSI comments at 12.
---------------------------------------------------------------------------
209. Cox argues that disclosure should be made at the ``earliest
possible time'' and, in particular, at the time the decision is made
internally to implement a change, with the ``make/buy'' point being
considered the ``absolute latest date'' on which disclosure is
permitted.473 In addition, Cox requests that we obligate incumbent
LECs to disclose any unimplemented network changes that are subject to
the section 251(c)(5) notice requirement at the outset of
interconnection negotiations.474
---------------------------------------------------------------------------
\473\ Cox comments at 10-11.
\474\ Id. at 11.
---------------------------------------------------------------------------
210. MFS proposes a tripartite scheme, loosely based on the
Computer III timetable, that classifies certain changes as ``major,''
``location,'' or ``minor.'' 475 ``Major'' changes, would be
defined as those ``introducing any change in network equipment,
facilities, specifications, protocols, or interfaces that will require
other parties to make any modification to hardware or software in order
to maintain interoperability.'' Major changes would be subject to 18
months advance notice. ``Location'' changes would be defined as those
``that require changes in the geographic location to which traffic is
routed, or at which unbundled network elements can be obtained, but
(that) do not otherwise change the manner of interconnection or of
access''; such changes could be implemented on 12 months notice.
``Minor'' changes, including those in ``numbering, routing
instructions, signalling codes, or other information necessary for the
exchange of traffic that do not require construction of new facilities
or changes in hardware or software'' could be made upon notice in
accord with the time intervals prescribed by the ICCF.476
---------------------------------------------------------------------------
\475\ MFS comments at 15-16.
\476\ These intervals are prescribed in the ICCF Recommended
Notification Procedures. See note 466 supra.
---------------------------------------------------------------------------
211. Many commenters recognize the need for a concrete disclosure
timetable. AT&T argues that the broad disagreement among commenters
itself is evidence that section 251(c)(5) is not self-
effectuating.477 AT&T opposes the state-by-state approach
advocated by the District of Columbia Commission, as well as the case-
by-case approach advocated by Rural Tel. Coalition, because these
approaches could lead to the disparate application of the uniform
statutory duty imposed by section 251(c)(5). AT&T notes that the record
does not reflect any material conditions that vary among states or
justify differing rules. In addition, AT&T disputes the applicability
of the ICCF timetable, since that document sets forth only guidelines
to be used by the independent LECs in notifying the BOCs of network
changes.478
---------------------------------------------------------------------------
\477\ AT&T reply at 27.
\478\ Id.
---------------------------------------------------------------------------
212. Of the commenters supporting concrete federal standards, most
support the adoption of the Computer III disclosure timetable.479
PacTel notes that existing Commission disclosure requirements are
familiar to the industry and adequate to meet the requirements of
section 251(c)(5); accordingly it supports the establishment of ``safe
harbor'' rules based on Computer III and the disclosure requirements
contained in our existing rules.480 As discussed above, although
it advocates certain revisions, U S WEST agrees that ``disclosure
pursuant to the Computer [III] Rules would seem to satisfy the
requirements of the (1996) Act.'' 481 GTE notes that the ``make/
buy'' point is an appropriate disclosure trigger because it ensures
both the delivery of timely information to parties that use the
networks and the promotion of carriers' development efforts to support
network innovation.482
---------------------------------------------------------------------------
\479\ See, e.g., Teleport comments at 11; GCI comments at 5;
AT&T reply at 27.
\480\ PacTel comments at 5. See 47 CFR 64.702(d)(2), 68.110(b).
\481\ U S WEST comments at 12-13.
\482\ GTE reply at 7-8 and comments cited at 7 n.15.
---------------------------------------------------------------------------
213. Several commenters urge us to adopt rules prohibiting an
incumbent LEC from disclosing network changes to certain preferred
entities, including long distance or equipment manufacturing
affiliates, prior to public disclosure.483
---------------------------------------------------------------------------
\483\ See, e.g., Time Warner comments at 8; NCTA reply at 12;
Ohio Consumer's Council reply at 5-6.
---------------------------------------------------------------------------
c. Discussion
214. We find that it would be unreasonable to expect other
telecommunications carriers or information services providers to be
able to react immediately to network changes that the incumbent LEC may
have spent months or more planning and implementing; accordingly we
reject requests to permit incumbent LECs to implement changes
immediately on disclosure. In order to clarify incumbent LECs'
obligations to disclose these changes a ``reasonable time in advance of
implementation,'' we adopt a disclosure timetable based on that
developed in the Computer III proceeding. Under this timetable,
[[Page 47320]]
incumbent LECs will be required to disclose planned changes, subject to
the section 251(c)(5) disclosure requirements, at the ``make/buy''
point,484 but a minimum of twelve months before implementation. If
the planned changes can be implemented within twelve months of the
make/buy point, then public notice must be given at the make/buy point,
but at least six months before implementation.
---------------------------------------------------------------------------
\484\ The definition of the ``make/buy'' point for section
251(c)(5) purposes is discussed infra at paras. 216-217.
---------------------------------------------------------------------------
215. With respect to changes that can be implemented within six
months of the make/buy point, incumbent LECs may wish to provide less
than six months notice. In such a case, the incumbent LEC's
certification or public notice filed with the Commission, as
applicable, must also include a certificate of service: (1) Certifying
that a copy of the incumbent LEC's public notice was served on each
provider of telephone exchange service that interconnects directly with
the incumbent LEC's network a minimum of five business days in advance
of the filing; and (2) providing the name and address of all such
providers of local exchange service upon which the notice was served.
The Commission will issue public notice of such short-term filings.
Such short term notices will be deemed final on the tenth business day
after the release of the Commission's public notice unless a provider
of information services or telecommunications services that directly
interconnects with the incumbent LEC's network files an objection to
the change with the Commission and serves it on the incumbent LEC no
later than the ninth business day following the release of the
Commission's public notice. If such an objection is filed, the
incumbent LEC will have the opportunity to respond within an additional
five business days and the Common Carrier Bureau, Network Services
Division, will issue, if necessary, an order determining the reasonable
public notice period.
i. The Section 251(c)(5) Timetable
216. Without adequate notice of changes to an incumbent LEC's
network that affect the ``information necessary for the transmission
and routing'' of traffic, a competing service provider may be unable to
maintain an adequately high level of interoperability between its
network and that of the incumbent LEC. This inability could degrade the
quality of transmission between the two networks or, in a worse case,
could interrupt service between the two service providers.485
Under the rules we adopt today, incumbent LECs must disclose changes
subject to section 251(c)(5) at the ``make/buy'' point, i.e., the time
at which the incumbent LEC decides to make for itself, or procure from
another entity, any product the design of which affects or relies on a
new or changed network interface,486 but at least twelve months in
advance of implementation of a network change. In Computer III, the
Commission defined ``product'' in the enhanced services context to be
``any hardware or software for use in the network that might affect the
compatibility of enhanced services with the existing telephone network,
or with any new basic services or capabilities.'' 487 We believe
that this definition can be used to craft a definition of ``product''
for purposes of section 251(c)(5). Accordingly, for purposes of network
disclosure under section 251(c)(5), we define ``product'' to be ``any
hardware or software for use in an incumbent LEC's network or in
conjunction with an incumbent LEC's facilities that, when installed,
could affect the compatibility of the network, facilities or services
of an interconnected provider of telecommunications or information
services with the incumbent LEC's network, facilities or services.''
---------------------------------------------------------------------------
\485\ Because the incumbent LECs control the vast majority of
both facilities and customers in most markets, the impact of such
difficulties, at least at present, would be felt most acutely by a
competing service provider.
\486\ BOC Safeguards Order, 6 FCC Rcd at 7603. The Commission
has stated that, ``make/buy applies not only to a carrier's decision
to make or buy products to implement a change in the network, but
also to any decision to make or buy products that would rely on such
changes.'' Phase II Order, 2 FCC Rcd at 3087. The precise definition
of the ``make/buy'' point has been clarified in some detail. See,
e.g., id.; Phase I Order, 104 F.C.C.2d at 1080-86; Computer and
Business Equip. Mfrs. Assoc. Petition for Declaratory Ruling
Regarding Section 64.702(d)(2) of the Commission's Rules and the
Policies of the Second Computer Inquiry, Report and Order (``CBEMA
Order''), 93 F.C.C.2d 1226, 1243-44 (1983).
\487\ Phase I Order, 104 F.C.C.2d at 1084.
---------------------------------------------------------------------------
217. We recognize that some network changes that affect
interconnection, e.g., some location changes, may not require an
incumbent LEC to make or buy any products. Disclosure of such changes,
however, may be required under section 251(c)(5). For purposes of
section 251(c)(5), therefore, we clarify that the ``make/buy'' point
includes the point at which the incumbent LEC makes a definite decision
to implement a network change in order to begin offering a new service
or change the way in which it provides an existing service. Such a
``definite decision'' requires the incumbent LEC to move beyond
exploration of the costs and benefits of a change or the feasibility of
a change. Instead, a ``definite decision'' is reached when the
incumbent LEC determines that the change is warranted, establishes a
timetable for anticipated implementation, and takes the first step
toward implementation of the change within its network.488
---------------------------------------------------------------------------
\488\ Cf. Phase II Order, 2 FCC Rcd at 3087.
---------------------------------------------------------------------------
218. We recognize that many changes to an incumbent LEC's network
that are subject to disclosure under section 251(c)(5) can be fully
implemented less than twelve months after the make/buy point.
Accordingly, if the service using the network changes can be initiated
within twelve months after the make/buy date, public notice must be
given on the make/buy date, but at least six months before
implementation of the planned changes.
219. We agree with several commenters that competing service
providers should not require a full six months to respond to some
categories of relatively minor network changes and that we would
needlessly slow the pace of technical advance were we to require a full
six months notice in such a case. As evidence of this fact, several
commenters have submitted or referred us to industry guidelines
developed by ICCF, which detail recommended notice periods of 45 days
to six months for certain network changes.489 Based on the record
before us, we agree that six months may be too long a minimum in some
circumstances. We conclude, however, that neither the ICCF guidelines
nor any other categorization scheme adequately encompasses every
potential change affecting interconnection that an incumbent LEC may
wish to make to its network. In addition, for changes that can be
implemented in less than six months, the length of time required for
notice to be considered ``reasonable'' may vary considerably based on
advances in technology, the specific implementation plan developed by
an incumbent LEC, the particular capabilities of interconnecting
carriers to adapt, and the willingness of the incumbent LEC to be
forthcoming with information. Based on these considerations, we find
that a fixed timetable for such short-term notices would not be
appropriate.
---------------------------------------------------------------------------
\489\ ICCF Recommended Notification Procedures. See supra note
466.
---------------------------------------------------------------------------
220. Accordingly, with respect to changes subject to section
251(c)(5) disclosure that the incumbent LEC wishes to implement on less
than six months' notice, we require that the incumbent LEC's Commission
filing, whether certification or public notice, also include a
certificate of service: (1)
[[Page 47321]]
Certifying that a copy of the incumbent LEC's public notice was served
on each provider of telephone exchange service that interconnects
directly with the incumbent LEC's network a minimum of five business
days in advance of the filing; and (2) providing the name and address
of all such providers of local exchange service upon which the notice
was served. Such filings must be clearly titled ``Short Term Public
Notice (or Certification of Short-Term Public Notice) Pursuant to Rule
51.333(a).''
221. The Commission will issue a public notice of such short-term
filings separate from its public notice of other section 251(c)(5)
filings. Unlike six-month or twelve-month notices, certain interested
parties will have an opportunity to file objections to such short-term
public notices. Specifically, short term notices will be deemed final
on the tenth business day after the release of the Commission's public
notice unless a provider of information services or telecommunications
services that directly interconnects with the incumbent LEC's network
files an objection to the change with the Commission and serves it on
the incumbent LEC no later than the ninth business day following the
release of the Commission's public notice. Such an objection must
state: (1) Specific reasons why the objector is unable to implement
adjustments to accommodate the incumbent LEC's changes by the date the
incumbent LEC has specified, including specific technical information,
questions, or other assistance required that would allow the objector
to accommodate those changes; (2) specific steps the objector is taking
to implement changes to accommodate the incumbent LEC's changes on an
expedited basis; (3) the earliest possible date by which the objector
anticipates that it can accommodate the incumbent LEC's changes,
assuming it receives the assistance requested in item (1) (not to
exceed six months from the date the incumbent LEC gave its original
public notice); (4) the affidavit of the objector's president, chief
executive officer, or other corporate officer or official with suitable
authority to bind the corporation and knowledge of details of the
objector's inability to adjust its network on a timely basis that he or
she has read the objection, that the statements contained in it are
true, that there is good ground to support the objection, and that it
is not interposed for purposes of delay; and (5) any other information
relevant to the objection. Because the power to interpose such
objections could vest competing service providers with extensive power
to delay implementation of changes, we caution competing service
providers that we will not hesitate to intervene where necessary to
ensure that objections are not posed merely to delay implementation of
incumbent LEC network changes and that abuse of the Commission's
processes for such a purpose would expose a competing service provider
to sanctions.490
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\490\ See 47 CFR 1.17, 1.52.
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222. If one or more objections are filed, the incumbent LEC will
have five additional business days (i.e., until no later than the
fourteenth business day following the release of the Commission's
public notice) within which to file a response to the objection(s) and
serve it on all objectors. Such a response shall: (1) Include
information responsive to the allegations and concerns identified by
objectors; (2) state whether the implementation date(s) proposed by the
objector(s) would be acceptable; (3) indicate any specific technical
assistance that the incumbent LEC is willing to give to the
objector(s); and (4) state any other information relevant to the
incumbent LEC's response. In the case of such contested short-term
public notices, the Common Carrier Bureau will issue an Order fixing a
reasonable public notice period. In the alternative, if the incumbent
LEC does not file a response within the five-day time period allotted,
or if the response accepts the latest date stated by an objector in
response to item (3) of its objection, then the incumbent LEC's public
notice shall be deemed amended to specify implementation on the latest
date stated by an objector in item (3) of its objection without further
Commission action.
223. At the make/buy point, incumbent LEC plans should be
sufficiently developed that the incumbent LEC could provide adequate
and useful information to competing service providers. At earlier
stages of the planning process, options are still being explored and
alternatives weighed. Disclosure at such an early stage could cause
interconnecting carriers to waste resources in an effort to respond to
network changes that may not occur or that occur ultimately in a
significantly different way. As the process of implementing the planned
changes into the network goes forward, specific information may also
require revision. Accordingly, we require an incumbent LEC to keep its
public notice information complete, accurate, and up-to-date in
whatever forum it has chosen for disclosure.
224. We agree with several commenters that incumbent LECs should
not make preferential disclosure to selected entities prior to
disclosure at the make/buy point. Accordingly, we prohibit disclosure
to separate affiliates, separated affiliates,491 or unaffiliated
entities (including actual or potential competing service providers),
until the time of public notice.
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\491\ 47 U.S.C. 274.
---------------------------------------------------------------------------
ii. Other Disclosure Proposals
225. We find that section 251(d)(3) does not require the Commission
to preserve state authority over the timing of public notice of changes
to the ``information necessary for the transmission and routing'' of
traffic. Section 251(d)(3) prevents the Commission from ``preclud[ing]
the enforcement of any (state commission) regulation, order or
policy,'' to the extent that such regulation, order or policy
``establishes (LEC) access and interconnection obligations,'' 492
is ``consistent with the requirements of (section 251)'' 493 and
does not ``substantially prevent implementation of this section and the
purposes of this part.'' 494
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\492\ 47 U.S.C. 251(d)(3)(A).
\493\ 47 U.S.C. 251(d)(3)(B).
\494\ 47 U.S.C. 251(d)(3)(C).
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226. Public notice requirements that varied widely from state to
state could subject both incumbent LECs and potential competing service
providers to burdensome, duplicative, and potentially inconsistent
obligations that would impermissibly hamper the achievement of the
goals of section 251. Such varied filings requirements would obligate
incumbent LECs to file in, and potential interconnecting carriers to
canvass, a multitude of state-level fora in order to glean information
concerning network changes. Incumbent LECs that operate in multiple
states could be required to disclose a single network-wide change
piecemeal in a variety of state filings; interconnecting carriers would
then need to retrieve the information, also piecemeal, from many
different locations. Neither section 251(c)(5) nor a fixed disclosure
timetable limits the range of network changes an incumbent LEC might
make; rather incumbent LECs remain free to make any otherwise
permissible change upon appropriate notice. Accordingly, particularly
with respect to entities whose operations span several states, clear,
national rules are essential to the uniform implementation of network
disclosure.495
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\495\ See NCTA comments at 12.
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[[Page 47322]]
227. Several commenters argue that a fixed disclosure timetable
will needlessly or arbitrarily delay the introduction of technical
advances or new services. It is our intention in this proceeding,
however, to develop disclosure rules that minimize unnecessary delay by
providing competing service providers with adequate, but not excessive,
time to respond to changes to an incumbent LEC's network that affect
interconnection. The primary concern reflected in section 251(c)(5) is
continued interconnection and interoperability. If proper planning
occurs, however, the delay associated with this goal should be minimal.
228. At least one commenter argues that, because incumbent LECs and
competing service providers have a common interest in ensuring that
their networks function together properly--an interest that removes
incentives to withhold vital interconnection information and obviates
the need for fixed, enforceable advance disclosure obligations
496--any fixed timetables for disclosure should be negotiated
between carriers as part of individual interconnection agreements. We
disagree. The mere fact that interconnection failures can adversely
affect both an incumbent LEC and a competing service provider does not
remove the incumbent LEC's incentives to delay release of information
concerning network changes solely in order to inconvenience its
competitors. The impact of such failures would fall disproportionately
on the competing service provider because, at least in the near term,
the incumbent LEC's network will connect most of the customers in its
service area directly, without using any facilities of a competing
service provider. Indeed, we believe that this is the reason that
Congress chose to place this obligation on incumbent LECs only and not
on all LECs. In addition, notice of network changes provided to an
interconnecting carrier, pursuant to a privately negotiated agreement,
will not necessarily be provided to members of the public who are not
parties to the specific agreement.497 Accordingly, while carriers
may negotiate individual notice arrangements (consistent with the
preferential disclosure prohibitions discussed in paragraph 224, above)
as part of private interconnection agreements, we are unable to rely on
such private notice to satisfy section 251(c)(5)'s duty to provide
reasonable public notice.
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\496\ Ameritech comments at 30, reply at 17.
\497\ Although the contents of privately negotiated
interconnection agreements themselves must be disclosed to the
public through state level filings, see 47 U.S.C. 252(h),
information exchanged pursuant to the terms of such an
interconnection agreement might not be provided at all to this
Commission, state commissions or the public.
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229. Although advance disclosure periods will place competing
service providers on notice of certain products and services the
incumbent LECs intend to bring to market, we do not believe that this
information will automatically translate into a competitive advantage
for the competing service providers. The incumbent LEC's network
disclosure obligations are intended to allow competing service
providers to make required changes to their own networks in order to
maintain interoperability and uninterrupted, high quality service to
the public. These obligations are designed to prevent incumbent LECs
from using their currently substantial percentages of subscribers and
highly developed networks anticompetitively to prevent the entry of
potential competitors.
230. Several commenters have argued that existing practices under
industry issued, ICCF guidelines 498 or the Commission's ``all
carrier'' rule,499 satisfy the requirements of section 251(c)(5)
and that no further Commission action is necessary. We disagree. The
guidelines that commenters bring to our attention are neither
compulsory nor enforceable at the Commission. We cannot rely on
continued goodwill among carriers that soon may be locked in
competition to assure timely disclosure of network changes. Similarly,
we cannot trust in the ``mutually satisfactory arrangements for timely
information exchange'' that GVNW alleges IXCs and small LECs reached to
ease the conversion to equal access.500 Our new rules, and the new
market dynamics, may not produce such agreements.
---------------------------------------------------------------------------
\498\ ICCF Recommended Notification Procedures. See supra note
466.
\499\ See supra n.383.
\500\ GVNW comments at 5.
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231. While we are aware of no specific complaints concerning the
functioning of the ``all carrier rule,'' the advent of competition for
basic telephone service in the local market will require rules that are
specific, easily enforced and very clear. In this respect, we believe
that the all carrier rule standard lacks adequate specificity to
function efficiently in the section 251 context. Requiring carriers to
litigate the meaning of ``reasonable'' notice through our complaint
process on a case-by-case basis might slow the introduction and
implementation of new technology and services, and burden both carriers
and the Commission with potentially lengthy, fact-specific enforcement
proceedings. A fixed timetable will create a clear, specific standard
that will be more easily and quickly enforceable and that will better
facilitate the development of competition and serve the public
interest.
232. At least one commenter urges us to adopt the Computer III
timetable merely as a ``safe harbor'' provision.501 If we were to
do so, however, we would open the notice process to many of the same
risks that lead us to reject the all carrier rule. Under ``safe
harbor'' rules, competing service providers' notice complaints could
become bifurcated into an initial inquiry as to whether an incumbent
LEC met the safe harbor provisions of the timetable. If the answer were
in the negative, a second, fact-specific inquiry as to whether notice
was nevertheless reasonable, would then follow. The delay in resolving
such disputes would not serve the public interest. We believe the
better course is to adopt a binding, fixed standard applicable to
notice by all incumbent LECs.
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\501\ PacTel comments at 6.
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233. MFS's proposed regulatory structure based on a tripartite
scheme, classifying changes as ``major,'' ``location,'' or ``minor,''
subject to advance disclosure of 18 months, 12 months, and according to
industry standards, respectively, is flawed in several respects.
Initially, section 251(c)(5) disclosure applies to a broad spectrum of
potential network changes and we are not confident that MFS's
definitions, or any similar definitions, could adequately capture and
clarify every potential alteration affecting interconnection that an
incumbent LEC could make to its network. Categorization debates would
inevitably arise among carriers concerning the status of specific,
planned changes. Reasonable public notice is a function of the length
of time an incumbent LEC will take to implement a change and the length
of time an interconnecting carrier will need to respond. Fixed 18-month
and 12-month disclosure periods will not be flexible enough to take
advantage of advances in technology that may permit increasingly rapid
implementation of and reaction to network changes. Also, we find that
the extended notice periods MFS proposes are too long. MFS provides no
evidence or explanation to support its assertion that competing service
providers will need a minimum of 18 months notice of major
changes,502 and the record
[[Page 47323]]
contains broad support for the 12 month notice period from Computer
III.503 While we intend that competing service providers have
adequate notice of planned network changes, we acknowledge the valid
concerns of some commenters that overextended advance notification
intervals could needlessly delay the introduction of new services,
provide the interconnecting carrier with an unfair competitive
advantage, or slow the pace of technical innovation.504
---------------------------------------------------------------------------
\502\ Cf. NYNEX reply at 10-11 (Such a long notice period would
``hamstring technological progress and deny customer benefits''); U
S WEST reply at 2-3.
\503\ See, e.g., AT&T comments at 24-25 (Noting that the time
periods from Computer III are familiar to incumbent LECs and a one-
year minimum for certain changes would be sufficient advance notice
to alternative LECs); MCI comments at 16 (agreeing 12 months advance
notice is sufficient); Cox comments at 11 (``The proposal in the
[NPRM] represents the minimum possible standard for disclosure'').
\504\ Cf. Phase II Order, 2 FCC Rcd at 3087 (``[W]hile we
believe enhanced service providers are entitled to receive network
information on a timely basis, we are also concerned that premature
disclosure of this information could impair carriers' development
efforts and inhibit network innovation'').
---------------------------------------------------------------------------
iii. Application to Network Changes in Progress
On the effective date of the rules implementing incumbent LECs'
network disclosure obligations under section 251(c)(5), some incumbent
LECs may be implementing network changes that the new rules otherwise
would have required them to disclose. With respect to these changes, we
do not perceive a need to delay implementation, and no commenter has
requested that we do so. We do require, however, that incumbent LECs
give public notice of such changes as soon as it is practical, and that
notice in accordance with the section 251(c)(5) network disclosure
rules be given: (1) before the incumbent LEC begins offering service
using the changes to its network; and (2) no later than 30 days after
the effective date of the rules adopted in this Order.
235. We similarly find no need to adopt rules obligating incumbent
LECs to make any formal, initial public disclosure of comprehensive
information concerning their networks to provide background information
against which connecting carriers could then evaluate changes. In the
First Report and Order, we have concluded that, under section
251(c)(2), incumbent LECs are under an obligation to provide,
interconnection for purposes of transmitting and routing telephone
exchange traffic alone, exchange access traffic alone, or both.505
Implicit in this obligation under section 251(c)(2) is the obligation
to make available to requesting carriers information indicating the
location and technical characteristics of incumbent LEC network
facilities. Accordingly, actual or potential competing service
providers needing this type of baseline information may request it from
the incumbent LEC under section 251(c)(2); subsequent changes to this
information will be addressed by the section 251(c)(5) rules we adopt
today.
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\505\ First Report and Order at section IV.
---------------------------------------------------------------------------
iv. Small Business Considerations
236. We have considered the impact of our rules on small incumbent
LECs. We agree with GVNW that many network changes may not require
twelve months advance disclosure. Accordingly, we have provided for six
month, or shorter, notice periods, when such changes can be
accomplished quickly. In addition, we note that, under section
251(f)(1), certain small incumbent LECs are exempt from our rules until
(1) they receive a bona fide request for interconnection, services, or
network elements; and (2) their state commission determines that the
request is not unduly economically burdensome, is technically feasible,
and is consistent with the relevant portions of section 254. In
addition, certain small incumbent LECs may seek relief from our rules
under section 251(f)(2).506
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\506\ For a discussion of the implications and operation of
section 251(f), see First Report and Order, section XII.
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C. Relationship With Other Public Notice Requirements and Practices.
1. Relationship of Sections 273(c)(1) and 273(c)(4) With Section
251(c)(5).
a. Background
237. Section 273(c)(1) requires each BOC to maintain and file with
the Commission ``full and complete information with respect to the
protocols and technical requirements for connection with and use of its
telephone exchange facilities,'' in accordance with Commission
rules.507 Section 273(c)(4) obligates the BOCs to provide timely
information on the planned deployment of telecommunications equipment
to interconnecting carriers providing telephone exchange
service.508 We sought comment in the NPRM on the relationship
between these sections and the network disclosure obligations contained
in section 251(c)(5).509
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\507\ 47 U.S.C. 273(c)(1). The Commission will address section
273 in a separate rulemaking proceeding.
\508\ 47 U.S.C. 273(c)(4).
\509\ NPRM at para. 193.
---------------------------------------------------------------------------
b. Comments
238. Ameritech states that the requirements of section 251(c)(5)
``should be reconciled with [the] related obligations'' set forth in
section 273(c)(1) and 273(c)(4).'' 510 Bell Atlantic suggests that
sections 251(c)(5) and 273(c)(1) cover the same type of technical
information.511 Bell Atlantic further recommends that we find that
``timely'' release of the information covered by section 273(c)(4)
means that the information should be made available ``a sufficient time
in advance that the competing service providers may make any necessary
changes to their networks.'' 512 SBC comments that the disclosure
obligations imposed by sections 251(c)(5), 273(c)(1), and 273(c)(4) are
``substantially similar.'' 513 MCI argues that section 273(c)(1)
imposes on the RBOCs substantially the same information disclosure
obligations that 251(c)(5) imposes on the incumbent LECs in general,
with the exception that 273(c)(1) explicitly obligates the RBOCs to
file the information with the Commission.514 MCI further argues
that section 273(c)(4)'s ``timely'' disclosure requirement goes beyond
that contained in section 251(c)(5).515
---------------------------------------------------------------------------
\510\ Ameritech comments at 31.
\511\ Bell Atlantic comments at 12.
\512\ Id. Bell Atlantic advocates the same ``reasonable advance
notice'' standard for use in connection with section 251(c)(5).
\513\ SBC comments at 13-14.
\514\ MCI comments at 19.
\515\ Id.
---------------------------------------------------------------------------
239. USTA suggests that ``there is no basis to impose different
requirements on the BOCs for purposes of compliance with section
273(c)(1) than those they are required to follow for section 251(c)(5).
This is in fact one area in which uniformity would provide a benefit to
the industry and would be administratively simple.'' 516 In
contrast, the Rural Tel. Coalition argues that the requirements of
section 273 apply only to the BOCs and ``are not expected to correlate
with the requirements of 251(c)(5) that apply to all incumbent LECs.''
517 The Rural Tel. Coalition states that the Commission should
fashion flexible notice requirements under these sections, recognizing
differences in size, market power, and ability to impact competing
service providers' operations that exist among the BOCs and independent
LECs, and competing service providers.518 AT&T also disagrees with
USTA, arguing that the Commission filing contemplated by section
273(c)(1) is more detailed than
[[Page 47324]]
the disclosure mandated in section 251(c)(5).519
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\516\ USTA comments at 13.
\517\ Rural Tel. Coalition comments at 4.
\518\ Id. at 4-5.
\519\ AT&T comments at 24, reply at 28.
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c. Discussion
240. Because the BOCs clearly meet the 1996 Act's definition of an
``incumbent LEC,'' 520 the minimum disclosure requirements of
section 251(c)(5) apply to the BOCs. We will address the specific
implications of section 273, including the question whether section 273
imposes additional disclosure requirements on the BOCs, in a separate
rulemaking proceeding.
---------------------------------------------------------------------------
\520\ 47 U.S.C. 251(h).
---------------------------------------------------------------------------
2. Relationship of Sections 251(a) and 251(c)(5) With Section 256
a. Background
241. Section 251(a) sets forth general duties of telecommunications
carriers, including the duty to interconnect directly or indirectly
with the facilities and equipment of other telecommunications carriers,
and the duty not to install network features, functions or capabilities
that do not comply with the guidelines and standards established
pursuant to section 255 521 and 256.522 Section 251(c)(5)
sets forth the duty of all incumbent LECs to provide reasonable public
notice of changes in the information necessary for the transmission and
routing of services using the incumbent LEC's network.523 The goal
of section 256, entitled ``Coordination for Interconnectivity,'' is
``to promote nondiscriminatory accessibility by the broadest number of
users and vendors of communications products and services to public
telecommunications networks used to provide telecommunications
service'' and defines the Commission's role in achieving this
goal.524 In the NPRM, we sought comment on the relationship of
sections 251(a) and 251(c)(5) with section 256.525
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\521\ Section 255, ``Access by Persons with Disabilities,'' will
be addressed in a separate rulemaking proceeding.
\522\ 47 U.S.C. 251(a).
\523\ 47 U.S.C. 251(c)(5).
\524\ 47 U.S.C. 256.
\525\ NPRM at para. 193.
---------------------------------------------------------------------------
b. Comments
242. We received few comments on this issue. USTA states that, ``in
developing oversight procedures for public telecommunications network
interconnectivity standards under Section 256, the Commission can
assist in alerting the industry to general types of technology changes
which may lead to specific upgrades or modifications by individual
carriers.'' 526 In addition, USTA notes that all
telecommunications carriers are obligated by section 251(a)(2) to
comply with standards prescribed under sections 255 and 256 and,
accordingly, cautions that the section 256 process should be conducted
with carriers' section 251(a)(2) obligations in mind.527 USTA
therefore suggests the possibility that an industry group could develop
a set of uniform guidelines for use by all carriers in providing notice
of changes that could affect interconnection or
interoperability.528
---------------------------------------------------------------------------
\526\ USTA comments at 13.
\527\ Id. at 13-14.
\528\ Id. at 14.
---------------------------------------------------------------------------
243. Ameritech comments that section 251(c)(5) is only one part of
the overall regulatory structure for coordinating network planning by
the industry and facilitating interconnection and
interoperability.529 Based on this analysis, Ameritech argues that
the notification obligations section 251(c)(5) imposes should be
extended to all LECs under section 256.530
---------------------------------------------------------------------------
\529\ Ameritech comments at 31.
\530\ Id.
---------------------------------------------------------------------------
c. Discussion
244. Section 251(a)(2) imposes a duty on all telecommunications
carriers to act in ways that are not inconsistent with any guidelines
and standards established under section 256. Section 251(c)(5) imposes
network disclosure obligations on incumbent LECs that are related to
the goals of section 256, inasmuch as section 251(c)(5) sets forth one
specific procedure to promote interconnectivity. We do not decide here
whether compliance with section 251(c)(5) is sufficient to satisfy
section 256, however. The Network Reliability and Interoperability
Council will develop recommendations to the Commission on the
implementation of section 256.531 We intend to address carrier and
Commission obligations under section 256 in a future rulemaking
proceeding.
---------------------------------------------------------------------------
\531\ At its meeting on July 15, 1996, the Network Reliability
and Interoperability Council discussed (1) barriers to
interconnectivity; (2) how the FCC most efficiently can oversee
network planning to assure interoperability; (3) need for standards-
setting; and (4) the overall reliability of networks. See
Communications Daily, June 11, 1996 (announcing July 15 meeting);
Public Notice, NYNEX CEO Seidenberg to Head New Network Reliability
and Interoperability Council, 1996 WL 185795 (F.C.C. April 18,
1996).
---------------------------------------------------------------------------
D. Enforcement and Safeguards
1. Enforcement Mechanisms
a. Background and Comments
245. In the NPRM, we sought comment on what enforcement mechanism,
if any, we should use to ensure compliance with the section 251(c)(5)
public notice requirement.532 Bell Atlantic, in conjunction with
its advocacy of a flexible disclosure standard based on
``reasonableness,'' suggests that the Commission review complaints of
premature implementation on a case-by-case basis and, where necessary,
issue cease-and-desist orders.533 Ameritech and GTE argue that no
specific, additional enforcement mechanisms are necessary, because
there is no evidence that existing industry practices are producing
network conflicts or hardships, or are otherwise not working.534 U
S WEST suggests that, if carriers fail to make timely disclosure,
additional enforcement options can be considered in the future.535
In contrast, NCTA states that we must adopt meaningful sanctions to
enforce our new network disclosure rules, including significant
monetary sanctions whenever a competitor's service is disrupted because
of an incumbent LEC's failure to comply with the notice
requirements.536 Cox argues that any incumbent LEC found to
violate section 251(c)(5)'s disclosure requirements should be required
to inform all affected customers of interconnecting carriers that the
incumbent LEC's actions caused any adverse effects attributable to the
improperly disclosed network changes.537
---------------------------------------------------------------------------
\532\ NPRM at para. 193.
\533\ Bell Atlantic comments at 12.
\534\ Ameritech comments at 29; GTE reply at 10.
\535\ U S WEST reply at 3.
\536\ NCTA comments at 12.
\537\ Cox comments at 12.
---------------------------------------------------------------------------
246. MFS states that the Commission should adopt rules that would:
(1) Require each incumbent LEC to respond to Commission questions
regarding the information previously made available regarding any
network changes within the scope of section 251(c)(5), and to
supplement the information if requested by the Commission; (2)
establish a procedure for temporarily blocking any proposed network
change until the Commission has time to investigate any alleged
violations, with respect to either provision of notice, or the nature
of the network change; and (3) allow the Commission, for good cause, to
issue an order, without prior notice or hearing, requiring an incumbent
LEC to cease and desist from making any specified changes for a period
of up to 60 days to permit Commission investigation of alleged
violations.538 Time Warner
[[Page 47325]]
suggests that any failure to comply with the rules we establish should
be addressed through our existing section 208 complaint
process.539
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\538\ MFS comments at 16. MFS does not explain what type of
network change might require Commission investigation or what type
or level of allegations we should considered sufficient in issuing
cease and desist orders.
\539\ Time Warner comments at 11.
---------------------------------------------------------------------------
b. Discussion
247. It is essential to the development of local competition that
incumbent LECs comply with the network disclosure obligations of
section 251(c)(5). Even if a competing provider of local exchange
service had made significant inroads into the incumbent LEC's customer
base, it would have to transmit a substantial number of its customers'
calls to the incumbent LEC's network for termination. If these calls
cannot be terminated reliably, customers will be more reluctant to use
the competing provider's services.
248. We recognize the importance of compliance with our network
disclosure rules, and note that many of the specific enforcement
sanctions offered by commenters may have merit. The commenters'
suggestions indicate a belief that the Commission should delay or
prohibit the implementation of changes if we receive sufficiently
credible allegations of notice violations. Our existing enforcement
authority would permit us to impose such a sanction and we will not
hesitate to do so in appropriate circumstances. The Commission,
however, also has a range of other penalties it could impose to ensure
incumbent LEC compliance with the network disclosure rules. The record
currently before us does not reveal a need for us to mandate specific
enforcement procedures in the section 251(c)(5) context. Rather, we
will intervene in appropriate ways if necessary to ensure adequate
disclosure of public notice information, should sanctions become
necessary to encourage full compliance with our network disclosure
rules.540 In addition, we intend to explore how we can increase
the efficiency of the current section 208 formal complaint process in a
separate rulemaking proceeding.
---------------------------------------------------------------------------
\540\ See, e.g., 47 U.S.C. 154(i), 154(j), 206-209, 218; 47 CFR
0.91, 0.291.
---------------------------------------------------------------------------
2. Protection of Proprietary Information, Network and National Security
a. Background and Comments
249. In the NPRM, we sought comment on the extent to which
safeguards may be necessary to ensure that information regarding
network security, national security and the proprietary interests of
manufacturers and others is not compromised by the section 251(c)(5)
network disclosure process.541
---------------------------------------------------------------------------
\541\ NPRM at para. 194.
---------------------------------------------------------------------------
250. BellSouth states that, to address these concerns, the
Commission should permit disclosing incumbent LECs to require the
recipient of such information to execute a confidentiality agreement,
which could be drafted to include liquidated damages, indemnification,
or other appropriate remedial provisions.542 In addition,
BellSouth requests that the Commission confirm that incumbent LECs are
not obligated to disclose proprietary information of third parties, but
may instead require competing service providers to negotiate directly
with the third party for access.543
---------------------------------------------------------------------------
\542\ BellSouth comments at 5. See Illinois Commission comments
at 63.
\543\ Id. at 6.
---------------------------------------------------------------------------
251. GVNW suggests that we limit incumbent LEC disclosure only to
references to industry and manufacturers' specifications that are
widely available, and to other information required to interconnect at
the interface, which would reduce the amount of proprietary or
sensitive information that would be subject to disclosure.544 In
addition, GVNW and the Rural Tel. Coalition state that an incumbent LEC
should not be obligated to disclose the specific location of physical
plant facilities except under strict nondisclosure agreements, in order
to preserve the LEC's competitive position and protect against
potential terrorist disruptions.545
---------------------------------------------------------------------------
\544\ GVNW comments at 5. Ameritech advocates a similar
narrowing of the disclosure obligation. Ameritech comments at 26
n.52.
\545\ Id.; Rural Tel. Coalition comments at 4.
---------------------------------------------------------------------------
252. Noting that the telecommunications equipment market is
competitive, Nortel states that a manufacturer would be seriously
disadvantaged if its proprietary information were disclosed to
competitors.546 In addition, Nortel argues that, in such a case,
manufacturers would face substantially reduced incentives to develop
advanced products.547 Motorola, Inc., expresses its agreement with
both BellSouth and Nortel 548 and comments that disclosure of
proprietary information may undermine the competitive position of U.S.
manufacturers in the global market.549 Motorola, Inc., also asks
us to clarify that no disclosure is required of technical information
at ``testing'' or ``trial'' stages,550 where typically a carrier
is evaluating new technology in the field.551
---------------------------------------------------------------------------
\546\ Nortel comments at 3; Motorola, Inc. reply at 5. Citing
similar concerns, GTE urges us to strike a balance between the
information necessary to ensure seamless interconnection and the
protection of proprietary information. GTE comments at 6.
\547\ Id.
\548\ Motorola, Inc. comments at n.4.
\549\ Motorola, Inc. reply at n.5.
\550\ Id. at 6.
\551\ Id.
---------------------------------------------------------------------------
253. Sprint, in ex parte comments, states that nondisclosure
agreements related to the marketing of new services that will be
available from both carriers may be appropriate.552 Sprint also
notes, however, that many routine network upgrades, such as
establishment of new central offices, remote offices, or tandems,
elimination of tandem locations, changes in the incumbent LEC's SS 7
network, and basic software upgrades, may not require the use of
nondisclosure agreements.553 While agreeing that network and
national security issues deserve the highest attention, Teleport
expresses concern that proprietary interest claims could be used to
keep essential network interconnection information from potential
competitors.554
---------------------------------------------------------------------------
\552\ Ex parte letter from Jay C. Keithley, Sprint, to Mr.
William F. Caton, Acting Secretary, Federal Communications
Commission, filed in CC Docket No. 96-98, June 26, 1996, at 2.
\553\ Id.
\554\ Teleport comments at 12.
---------------------------------------------------------------------------
b. Discussion
254. Having reviewed the record, we conclude that the judicious use
of nondisclosure agreements will help protect incentives to develop
innovative network improvements, and will also protect against
potential threats to both national and network security by limiting the
flow of detailed information concerning the operation of the national
telecommunications network.555 Accordingly, we will permit the use
of nondisclosure agreements, subject to certain restrictions.
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\555\ Should these agreements prove inadequate for this purpose,
we would revisit this issue.
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255. Incumbent LECs have a statutory obligation to provide
``reasonable public notice of changes in the information necessary for
the transmission and routing of services using that (incumbent LEC's)
facilities or network, as well as of any other changes that would
affect the interoperability of those facilities and networks,''
556 as defined in this proceeding. Under another provision of the
1996 Act, however, the BOCs and any entities that they own or otherwise
control must protect ``the proprietary information submitted for
procurement decisions from release not specifically authorized by the
owner of such information.'' 557 Thus a rule requiring a BOC to
provide
[[Page 47326]]
change information publicly, without any provision for the use of a
nondisclosure agreement, could place a BOC in the position of having to
choose between compliance with the Commission's rule and compliance
with section 273(e)(5). We also find that requiring disclosure to the
public of competitively sensitive, proprietary, or trade secret
information without allowing for the possible use of nondisclosure
agreements would be inconsistent with section 251(c)(5)'s requirement
that incumbent LECs provide ``reasonable public notice'' (emphasis
added). It would not be ``reasonable'' to require such disclosures
because they have significant implications with respect to network and
national security, as well as the development of competition and
innovative network improvements. Accordingly, we find that section
251(c)(5) requires incumbent LECs to provide notice of planned changes
to the public sufficient to allow an interested party to assess the
possible ramifications of the change and evaluate whether it needs to
seek disclosure of additional information. The five categories of
information disclosure we mandate here will meet this standard.
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\556\ 47 U.S.C. 251(c)(5).
\557\ 47 U.S.C. 273(e)(5).
---------------------------------------------------------------------------
256. We do not anticipate that the minimum public notice
requirements we are adopting will obligate carriers to disclose
competitively sensitive, proprietary, or trade secret information in
the public arena. In addition, despite the concerns of Motorola, Inc.,
Nortel, and others, we do not anticipate that the level of information
required by a competing service provider either to transmit and to
route services, or to maintain interoperability will, in the ordinary
case, include proprietary information. In the event that such
information is required, however, an incumbent LEC's public notice must
nevertheless identify the type of change planned in sufficient detail
to place interested persons on notice that they may potentially be
affected, and must state that the incumbent LEC will make further
information available to persons signing a nondisclosure agreement. We
believe that suitably fashioned nondisclosure agreements can
appropriately balance the competing service provider's need for
knowledge of network changes with the interests of the incumbent LEC
and equipment manufacturers in retaining control of proprietary
information.
257. Accordingly, to the extent that otherwise proprietary or
confidential information of an incumbent LEC falls within the scope of
the network disclosure obligation of section 251(c)(5), it must be
provided by that incumbent LEC on a timely basis. If an interconnecting
carrier or information service provider requires genuinely proprietary
information belonging to a third party in order to maintain
interconnection and interoperation with the incumbent LEC's network,
the incumbent LEC is permitted to refer the competing service provider
to the owner of the information to negotiate directly for its release.
While the incumbent LEC might represent the most expedient source of
the required information, third parties would be less able to protect
themselves from misuse of their proprietary information and preserve
potential remedies if the incumbent LEC were to disclose directly a
third party's proprietary information directly in response to a
request.
258. We are concerned that protracted negotiation periods over the
terms of a suitable nondisclosure agreement, or the payment of fees or
royalties, could consume a significant portion of a competing service
provider's notice period. The rules we adopt today require that, except
under short-term public notice procedures, an incumbent LEC must give
public notice of network changes a minimum of either six months or
twelve months in advance of implementation. We find that these periods
will provide adequate notice to interconnecting carriers and
information service providers, to ensure that a high level of
interconnectivity and interoperability can be maintained between
networks. These periods, however, are not excessive and will not allow
excessive time for the negotiation of the terms of nondisclosure
agreements. Because section 251(c)(5) places an affirmative obligation
on the incumbent LEC to ensure reasonable public notice of changes to
its network, we require that disclosure of information designated by
the incumbent LEC as proprietary, whether owned by the incumbent LEC or
a third party, be accomplished on appropriate terms as soon as possible
after an actual or potential competing service provider makes a request
to the information owner for disclosure. Specifically, upon receipt by
the incumbent LEC of a competing service provider's request for
disclosure of confidential or proprietary information, the applicable
public notice period will be tolled to allow the interested parties to
agree on suitable terms for a nondisclosure agreement. This tolling is
consistent with the incumbent LEC's public notice obligations and will
preserve the competing service provider's ability to implement required
changes in its own network to accommodate those planned by the
incumbent LEC. In accordance with its obligation to keep the public
notice information complete, accurate, and up-to-date, the incumbent
LEC must, if necessary, amend its public notice: (1) On the date it
receives a request from a competing service provider for disclosure of
confidential or proprietary information, to state that the notice
period is tolled; and (2) on the date the nondisclosure agreement is
finalized, to specify a new implementation date.
259. Given these incentives, we conclude that it is unnecessary
either to adopt a precise definition of ``competitively sensitive'' or
``proprietary'' information, or to mandate the terms of nondisclosure
agreements. The Computer III rules, upon which we have modeled the
disclosure timetable for use in the section 251(c)(5) context,
explicitly permit the use of nondisclosure agreements in connection
with carrier disclosure of planned changes to the enhanced services
industry at the ``make/buy'' point.558 In that proceeding also,
the Commission explicitly rejected requests to prescribe a specific
type of agreement, instead holding that:
\558\ Phase II Order, 2 FCC Rcd at 3092.
---------------------------------------------------------------------------
we do not think it necessary or helpful for us to dictate the
terms of these private agreements. Nondisclosure agreements are
widely used in telecommunications, as well as in other fields. We
believe it better to leave the exact specifications of the terms of
such agreement to the parties. We would of course be prepared to
intervene should parties bring to our attention evidence of
noncompliance with the requirements established in this
proceeding.559
\559\ Id. at 3092-93.
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Although we recognize that legitimate concerns exist regarding the
security of proprietary information, the potential exists for some
incumbent LECs to use such concerns as either a shield against the
entry of competitors into their markets, or a sword to hamper the
competitor's business operations. We emphasize that incumbent LECs are
required to provide adequate access to even proprietary information if
a competing service provider needs that information to make adjustments
to its network to maintain interconnection and interoperation.
260. We agree with Motorola, Inc., that market and technical trials
are not subject to disclosure under section 251(c)(5). Trials are not
considered regular service and, because the validity of the incumbent
LEC's trial results rests, in part, on successful interconnection, the
incumbent LEC has sufficient incentives ensure that competing service
providers receive
[[Page 47327]]
adequate information. Notice of trials may be given, as needed, on a
private, contractual basis.
V. Numbering Administration
261. The Commission has repeatedly recognized that access to
telephone numbering resources is crucial for entities wanting to
provide telecommunications services because telephone numbers are the
means by which telecommunications users gain access to and benefit from
the public switched telephone network.560 In enacting the 1996
Act, Congress also recognized that ensuring fair and impartial access
to numbering resources is a critical component of encouraging a
robustly competitive telecommunications market in the United States.
Congress has required the Commission to designate an impartial
administrator of telecommunications numbering and has conferred upon
the Commission exclusive jurisdiction over those portions of the North
American Numbering Plan (NANP) that pertain to the United
States.561
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\560\ See Administration of the North American Numbering Plan,
CC Docket No. 92-237, Report and Order, 11 FCC Rcd 2588, 2591 (1995)
(NANP Order) 60 FR 38737 (July 28, 1995).
\561\ 47 U.S.C. 251(e)(1).
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A. Designation of an Impartial Number Administrator
1. Background
262. Section 251(e)(1) requires the Commission to ``create or
designate one or more impartial entities to administer
telecommunications numbering and to make such numbers available on an
equitable basis.'' 562 In the NPRM, we tentatively concluded that
action taken by the Commission in its July 1995 NANP Order satisfied
this requirement.563 In that Order, the Commission directed that
functions associated with NANP administration be transferred to a new
administrator of the NANP, unaligned with any particular segment of the
telecommunications industry. In the NPRM, we sought comment on whether
this action satisfied the section 251(e)(1) requirement that we
designate an impartial administrator.
---------------------------------------------------------------------------
\562\ Id.
\563\ See NANP Order. The NANP Order was initiated in response
to Bellcore's stated desire to relinquish its role as NANP
administrator. See Letter from G. Heilmeier, President and CEO,
Bellcore to the Commission (August 19, 1993). Bellcore, however,
will continue performing its NANP Administration functions until
those functions are transferred to a new NANP administrator pursuant
to the NANP Order.
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2. Comments
263. There is nearly unanimous agreement that action taken by the
Commission in the NANP Order satisfies the requirement of Section
251(e)(1).564 GTE states that the NANP Order ``will ensure that
numbering mechanisms are applied in a carrier-neutral fashion,
consistent with the objectives of the 1996 Act.'' 565 Parties,
contending that number administration now performed by Bellcore
potentially disadvantages non-BOC providers of telecommunications
services by delay or denial of numbering resources to them,
nevertheless urge the Commission to move quickly to implement the NANP
Order fully.566 Moreover, some argue that to give the NANP Order
full effect, the North American Numbering Council (NANC) must be
convened promptly.567 CTIA states that until that time,
``cont
FR Doc. 96-22045 Implementation of the Local Competition Provisions of the Telecommunications Act of 1996
entious numbering issues will either go unresolved, leading to
additional pressure on already burdened numbering resources, or these
issues will be resolved by the remnant of a monopoly era system.''
568 One commenter, Beehive, argues that the NANP Order does not
meet the requirements of section 251(e)(1) because it does not address
toll free number administration.569
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\564\ See, e.g., Ameritech comments at 22; District of Columbia
Commission comments at 1; GCI comments at 5; NYNEX comments at 18;
AT&T reply at 2-3.
\565\ See, e.g., GTE reply at 34.
\566\ See, e.g., CTIA comments at 4; MCI comments at 10.
\567\ See, e.g., AT&T comments at 11. The North American
Numbering Council (NANC) is a Federal Advisory Committee created for
the purpose of addressing and advising the Commission on policy
matters relating to administration of the NANP. NANC will provide
the Commission advice reached through consensus to foster efficient
and impartial number administration.
\568\ See, e.g., CTIA comments at 4.
\569\ Beehive comments at 2-4.
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3. Discussion
264. We conclude that the action taken in the NANP Order satisfies
the section 251(e)(1) requirement that the Commission create or
designate an impartial numbering administrator. The NANP Order requires
that functions associated with NANP administration be transferred to a
new NANP administrator. In the NANP Order, the Commission articulated
its intention to undertake the necessary procedural steps to create the
NANC.570 Additionally, it directed the NANC to select as NANP
administrator an independent, nongovernment entity that is not closely
associated with any particular industry segment.571 These actions
satisfy section 251(e)(1).
---------------------------------------------------------------------------
\570\ NANP Order, 11 FCC Rcd at 2608.
\571\ Id. at 2610, 2614, 2617.
---------------------------------------------------------------------------
265. Commenters' arguments that we have not fulfilled our duty
pursuant to section 251(e)(1) because the NANC has not been convened
and has not selected a new NANP administrator are not persuasive. In
the NANP Order, we required that there be a new, impartial number
administrator and established the model for how that administrator will
be chosen. We thus have taken ``action necessary to establish
regulations'' leading to the designation of an impartial number
administrator as required by section 251(e)(1).
266. We disagree with Beehive's contention that the NANP Order does
not meet the requirements of section 251(e)(1) because it does not
address toll free number administration. In the NANP Order, we directed
the NANC to provide recommendations on the following question: ``What
number resources, beyond those currently administered by the NANP
Administrator should the NANP Administrator administer?'' 572 Our
purpose in directing NANC to address this question was to develop a
record with respect to commenters' suggestions that the new
administrator assume additional responsibilities beyond those of the
current NANP administrator, if necessary, to facilitate competition in
telecommunications services. By asking this question and seeking
recommendations from the NANC, we set into motion a process designed to
foster competition in all telecommunications services, including toll
free, through neutral numbering administration. While the NANP Order
outlines broad objectives for number administration for all
telecommunications services, the specific details of implementation for
toll free services are addressed in the ongoing toll free proceeding,
CC Docket No. 95-155.
---------------------------------------------------------------------------
\572\ Id. at 2610.
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B. Delegation of Numbering Administration Functions
267. In this section, we address the role of state public utility
commissions in numbering administration. We authorize states to perform
the task of implementing new area codes subject to our numbering
administration guidelines contained in the Ameritech Order and further
clarified in this Order. We also incorporate the petition for
declaratory ruling, the application for review, and the record in that
proceeding and address the Texas Commission's pleadings regarding its
[[Page 47328]]
plan for area code relief in Dallas and Houston which includes wireless
overlays. We view prompt examination of the Texas Commission's plan as
necessary because the area codes currently assigned to these cities
have already reached exhaust.573
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\573\ Area code exhaust occurs when nearly all of the NXXs in a
given numbering plan area (NPA) have been consumed. Area code
exhaust is a subset of number exhaust, which describes the situation
in which numbers used for any purpose to support telecommunications
services are consumed. NPAs are known commonly as area codes. The
second three digits of a telephone number are known as the NXX code
or Central Office code (CO code) . Typically there are 792 NXX codes
available for assignment in an area code (every possible combination
of three digits excluding numbers beginning with a 0 or 1 and
numbers ending with 11).
---------------------------------------------------------------------------
1. Delegation of Matters Related to Implementation of New Area Codes
a. Background
268. Section 251(e)(1) confers upon the Commission ``exclusive
jurisdiction over those portions of the North American Numbering Plan
that pertain to the United States,'' but states that ``(n)othing in
this paragraph shall preclude the Commission from delegating to state
commissions or other entities all or any portion of such
jurisdiction.'' 574 In response to this provision, the Commission
tentatively concluded in the NPRM that it should authorize state
commissions to address matters involving the implementation of new area
codes so long as they act consistently with the Commission's numbering
administration guidelines.575
---------------------------------------------------------------------------
\574\ 47 U.S.C. 251(e)(1).
\575\ NPRM at para. 256.
---------------------------------------------------------------------------
b. Comments
269. Most parties contend that the Commission should ``retain (its)
plenary authority over all facets of (numbering) administration with
delegation to states of only certain limited functions.'' 576
PageNet urges that any delegation ``should be clearly defined as to
scope, review standards, and decision time limits.'' 577
Similarly, Time Warner recommends that any such delegation be
accomplished in conformity with the Commission's guidelines.578
Bell Atlantic/NYNEX Mobile, while stating that states may be in the
best position to implement area code relief tailored to the particular
needs of their residents, warns that the Commission must intervene
promptly when any state ``departs from federal numbering policies
prohibiting discrimination against any type of carrier.'' 579
---------------------------------------------------------------------------
\576\ ALTS comments at 8; See also Frontier comments at 5; GCI
comments at 5; Indiana Commission Staff comments at 3; NYNEX
comments at 18.
\577\ PageNet comments at 6.
\578\ Time Warner comments at 18.
\579\ Bell Atlantic/NYNEX Mobile reply at 2.
---------------------------------------------------------------------------
270. While some commenters argue that the Ameritech Order strikes a
``proper jurisdictional balance,'' permitting state commissions to make
initial determinations regarding area code administration, subject to
Commission review,'' others request further clarification of the
federal and state role in numbering.580 The Texas Commission
specifically requests that the ``FCC clarify the states' roles in
number administration by expanding on statements in the Ameritech Order
and elsewhere regarding the balance of authority between the FCC and
the states.'' 581
---------------------------------------------------------------------------
\580\ See Ameritech Order, 10 FCC Rcd 4596. 60 FR 19255 (January
23, 1995). See, e.g., AT&T reply at 7; Bell Atlantic comments at 9;
Pennsylvania Commission comments at 5; ACSI comments at 12.
\581\ Texas Commission comments at 6.
---------------------------------------------------------------------------
c. Discussion
271. We retain our authority to set policy with respect to all
facets of numbering administration in the United States. By retaining
authority to set broad policy on numbering administration matters, we
preserve our ability to act flexibly and expeditiously on broad policy
issues and to resolve any dispute related to numbering administration
pursuant to the 1996 Act. While we retain this authority, we note that
the numbering administration model established in the NANP Order will
allow interested parties to contribute to important policy
recommendations.
272. We authorize the states to resolve matters involving the
implementation of new area codes. State commissions are uniquely
positioned to understand local conditions and what effect new area
codes will have on those conditions. Each state's implementation method
is, of course, subject to our guidelines for numbering administration,
including the guidelines enumerated in the Ameritech Order and in this
Order as detailed below. We note that this authorization for states to
resolve matters involving implementation of new area codes is effective
immediately. Because of the need to avoid disruption in numbering
administration, there is good cause for this action pursuant to 5
U.S.C.553(d)(3). Some states have implemented new area codes prior to
our release of this order. We ratify their actions insofar as they are
consistent with these guidelines.
2. Area Code Implementation Guidelines
a. Background
273. When almost all of the central office (CO) codes in an area
code are consumed, a new area code must be assigned to relieve the
unmet demand for telephone numbers. Prior to the enactment of the 1996
Act, state commissions approved plans developed and proposed by the
LECs, as CO code administrators, for implementing new area codes. New
area codes can be implemented in three ways. Traditionally, states have
preferred to implement new area codes through a geographic split, in
which the geographic area using an existing area code is split into two
parts, and roughly half of the telephone customers continue to be
served through the existing area code and half must change to a new
area code. States can, however, simply require a rearrangement of
existing area code boundaries to accommodate local needs. The third
method available to them is called an area code overlay, in which the
new area code covers the same geographic area as an existing area code;
customers in that area may thus be served through either code.
274. In the Ameritech Order, the Commission recognized the states'
role in area code relief, attempted to clarify the balance of
jurisdiction over numbering administration between the Commission and
the states, and enumerated guidelines governing number administration.
Additionally, the Ameritech Order declared that Ameritech's proposed
wireless-only area code overlay would be unreasonably discriminatory
and anti-competitive in violation of the Commission's guidelines and
the Communications Act of 1934. The NPRM sought comment on whether the
Commission should reassess the jurisdictional balance between the
Commission and the states that was crafted in the Ameritech Order in
light of Congress' grant to the Commission of exclusive jurisdiction
over numbering administration, with permission to assign to the states
any portion of that authority.582 The NPRM also sought comment on
what action the Commission should take when a state appears to be
acting inconsistently with the Commission's numbering administration
guidelines.583
---------------------------------------------------------------------------
\582\ See 47 U.S.C. 251(e)(1).
\583\ NPRM at para. 257.
---------------------------------------------------------------------------
[[Page 47329]]
b. Comments
275. Several commenters request that we clarify the Ameritech Order
to prohibit service-specific overlays.584 Others request
clarification about all area code overlays, not just service-specific
overlays. NCTA, for example, argues that all overlays deter the
development of local competition. If competitors are relegated to new
area codes, it says, potential customers will be forced to change their
telephone numbers to obtain service from competitors.585 NCTA adds
that a customer is unlikely to trade a familiar code for a number that
may appear to involve a toll charge, or to purchase additional lines
from a competitor if those lines receive a different area code than
other lines in their home or business.586 Customers who do change
to competing LECs, it claims, will have to dial ten or eleven digits to
place local calls to incumbent LEC customers in the same local calling
area. By contrast, NCTA maintains that incumbent LEC customers will be
able to reach most other local customers through traditional seven-
digit dialing.587 Sprint agrees that all overlays are anti-
competitive and argues that the industry should adopt a geographic
split approach.588
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\584\ See, e.g., Cox comments at 6 n.11; PageNet comments at 23;
SBC comments at 11; WinStar reply at 16; Vanguard reply at 5.
\585\ NCTA comments at 9.
\586\ Id.
\587\ Id. See also MFS comments at 8-9.
\588\ Sprint reply at 13. See also Cox reply at 3-5; MCI
comments at 11; WinStar reply at 17.
---------------------------------------------------------------------------
276. MCI urges the Commission to allow an overlay only when it is
the only practical alternative, and suggests that such circumstances
might include: (a) Exhaust in a small metropolitan area; (b) multiple
nearly-simultaneous area code exhausts; or (c) when exhaust is so
imminent that a split cannot be implemented quickly enough.589
Numerous commenters suggest that the Commission should clarify the
Ameritech Order by imposing conditions on the adoption of area code
overlays.590 Suggested conditions include: (a) Mandatory ten-digit
dialing for all calls within the overlay area; 591 (b) permanent
service provider local number portability; 592 and (c) the
reservation for each competing LEC authorized to operate within a
numbering plan area (NPA) of at least one NXX code from the original
area code.593
---------------------------------------------------------------------------
\589\ MCI comments at 12.
\590\ See, e.g., Cox comments at 5, 6 n.12; MFS comments at 8-9;
California Commission comments at 8; MCI comments at 12-14; NCTA
comments at 10; WinStar reply at 17.
\591\ See, e.g., MFS comments at 8-9; California Commission
comments at 8; MCI comments at 12-13; WinStar reply at 17; PageNet
comments at 8.
\592\ See, e.g., MFS comments at 8-9; Cox comments at 5;
California Commission comments at 8; MCI comments at 12-14 (overlays
should be conditioned upon the substantial mitigation of the cost of
interim local number portability to competing LECs pending the
implementation of permanent local number portability); NCTA comments
at 10; WinStar reply at 17.
\593\ See, e.g., MFS comments at 8-9; MCI comments at 12-13 (all
remaining NXXs in the old NPA should be assigned to competitors).
---------------------------------------------------------------------------
277. Cox asserts that area code overlays should be prohibited until
the competitive concerns they raise are addressed by the implementation
of number portability.594 Similarly, PageNet asserts that number
portability may render the concept of an area code meaningless; once
location portability is feasible, numbers will be ported from one area
code to another.595 When this happens, it says, public preference
for a particular area code will disappear.596
---------------------------------------------------------------------------
\594\ Cox comments at 3-4.
\595\ The term ``port'' means the transfer of a telephone number
from one carrier's switch to another carrier's switch, which enables
a customer to retain his or her number when transferring from one
carrier to another. See Number Portability Order at n.32.
\596\ PageNet reply at 4.
---------------------------------------------------------------------------
278. In the view of some, the Ameritech Order does not prohibit all
area code overlays and they request clarification that overlays are an
appropriate response to area code exhaust.597 In Bell Atlantic/
NYNEX Mobile's view, for example, the Commission should not prohibit
overlays when they may be the best solution to area code
exhaust.598 PacTel agrees that overlays are valuable and, in some
metropolitan areas, are preferable to geographic splits because: (1)
Overlays do not require existing customers to change their numbers; (2)
overlays maintain existing communities of interest in their existing
geographical area code boundaries; (3) overlays do not change the
boundaries of existing area codes; and (4) overlays take less time to
implement than a split.599 These are significant considerations
for states facing number exhaust at an accelerated pace, it
says.600
---------------------------------------------------------------------------
\597\ See, e.g., Bell Atlantic/NYNEX Mobile reply at 4-6;
BellSouth comments at 20.
\598\ Bell Atlantic/NYNEX Mobile reply at 4-6.
\599\ PacTel reply at 31-32.
\600\ Id.
---------------------------------------------------------------------------
279. According to some commenters, issues pertaining to area code
relief plans should be addressed in the first instance by state
commissions, with the understanding that the Commission can intervene
if necessary.601 Similarly, the Texas Commission argues that the
Ameritech Order can and should be interpreted to allow for
``innovative'' means of area code relief crafted to balance the
interests, benefits, and burdens for all interested parties. Should the
Commission determine that the Ameritech Order does not permit such an
interpretation, the Texas Commission requests that the Ameritech Order
be overruled.602 By contrast, Vanguard warns against allowing
states too much latitude in interpreting the Ameritech Order. It argues
that, if the Commission does not set boundaries for state action, the
Commission's procompetitive objectives will remain unrealized as state
regulators deprive Commission initiatives of their effect.603
---------------------------------------------------------------------------
\601\ See, e.g., NYNEX reply at 12; GTE reply at 34.
\602\ Texas Commission comments at 5. See our discussion below
at paras. 294-295 for the Texas Commission's proposed means of area
code relief.
\603\ Vanguard comments at 3-4.
---------------------------------------------------------------------------
280. Bell Atlantic/NYNEX Mobile states that, if states act
inconsistently with Commission guidance on numbering policies, the
Commission should intervene promptly.604 The District of Columbia
Commission urges that ``on a showing that a particular state is acting
in violation of FCC guidelines, the FCC may revoke its delegation of
jurisdiction to that state.'' 605 PageNet says the Commission
should impose a strict time limit on state commission review of relief
plans.606 Sprint advises that any party ``retains the right to
appeal any detrimental state commission mandate to the FCC, and * * *
the FCC will act promptly on such appeals.'' 607
---------------------------------------------------------------------------
\604\ Bell Atlantic/NYNEX Mobile reply at 2.
\605\ District of Columbia Commission comments at 2.
\606\ PageNet comments at 7-8.
\607\ Sprint comments at 15.
---------------------------------------------------------------------------
c. Discussion
281. In this Order, we are authorizing the states to continue the
task of overseeing the introduction of new area codes subject to the
Commission's numbering administration guidelines.608 We are
reiterating the guidelines enumerated in the Ameritech Order and
clarifying the Ameritech Order to prohibit all service-specific or
technology-specific overlays, and to impose conditions on the adoption
of an all-services overlay. Existing Commission guidelines, which were
originally enumerated in the Ameritech Order, state that numbering
administration should: (1) Seek to facilitate entry into the
communications marketplace by making numbering resources available on
an efficient and timely basis; (2) not unduly favor or disadvantage any
particular industry segment or group of consumers; and (3)
[[Page 47330]]
not unduly favor one technology over another.609 The Commission's
conclusion in the Ameritech Order that Ameritech's proposed wireless-
only overlay plan would be unreasonably discriminatory and
anticompetitive in violation of sections 201(b) and 202(a) of the
Communications Act of 1934 has also provided guidance to local central
office code administrators and state commissions implementing area code
relief.610 We find that the guidelines and the reasoning
enumerated in that decision should continue to guide the states and
other entities participating in the administration of numbers because
these guidelines are consistent with Congress' intent to encourage
vigorous competition in the telecommunications marketplace. In
addition, we codify in this Order the directives of the NANP Order that
ensure fair and impartial numbering administration.611
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\608\ See para. 272, supra.
\609\ Ameritech Order, 10 FCC Rcd at 4604.
\610\ Id. at 4608, 4610-12.
\611\ See generally NANP Order. Although we resolve specific
issues relating to area code implementation in this Order, many
other important numbering administration issues will be addressed in
other proceedings. For example, the use of N11 codes, (e.g., 211,
311, 411, 511, 611, 711, 811, 911) will be addressed in The Use of
N11 Codes and Other Abbreviated Dialing Arrangements, CC Docket No.
92-105.
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282. We disagree with the suggestion of some parties that we
prohibit or severely restrict the states' right to choose overlay
plans. For example, PageNet urges the Commission to impose specific
time constraints on states and to require default area code plans if
states do not take action within those time constraints. Such
restrictions would not be consistent with our dual objectives of
encouraging competition through fair numbering administration while at
the same time delegating to the states the right to implement area
codes.
283. As we note above, states are uniquely situated to determine
what type of area code relief is best suited to local circumstances.
Certain localities may have circumstances that would support the use of
area code overlays. Most significantly, area code overlays do not
require any existing customers to change their telephone number, in
contrast to geographic splits. Additionally, in some metropolitan areas
continuously splitting area codes will result in area codes not
covering even single neighborhoods, a situation that can only be
avoided by implementing overlays. Finally, area code overlays can be
implemented quickly. States may make decisions regarding the relative
merits of area code splits and overlays so long as they act
consistently with the Commission's guidelines. We emphasize that the
burdens created by area code overlays will be greatest during the
transition to a competitive marketplace. As competition in
telecommunications services takes root, consumers will become more
accustomed to ten-digit dialing and to area code overlays and the
states will face less resistance in their efforts to implement new area
codes than they will in the near term.
284. Nevertheless, we find that it is necessary to clarify the
Commission's numbering administration guidelines as they apply to area
code relief. Recent action taken by the Texas Commission has
demonstrated that state commissions might interpret our existing
guidelines in a manner that is inconsistent with those
guidelines.612 Thus, while we conclude that geographic area code
splits and boundary realignments are presumptively consistent with the
Commission's numbering administration guidelines, we clarify our
guidelines with respect to how area code overlays can be lawfully
implemented.
---------------------------------------------------------------------------
\612\ As discussed at paras. 304-308 infra, we find that the
Texas Commission's Order addressing area code relief in Dallas and
Houston is inconsistent with the Ameritech Order.
---------------------------------------------------------------------------
285. First, we conclude that any overlay that would segregate only
particular types of telecommunications services or particular types of
telecommunications technologies in discrete area codes would be
unreasonably discriminatory and would unduly inhibit competition. We
therefore clarify the Ameritech Order by explicitly prohibiting all
service-specific or technology-specific area code overlays because
every service-specific or technology-specific overlay plan would
exclude certain carriers or services from the existing area code and
segregate them in a new area code. Among other things, the
implementation of a service or technology-specific overlay requires
that only existing customers of, or customers changing to, that service
or technology change their numbers. Exclusion and segregation were
specific elements of Ameritech's proposed plan, each of which the
Commission held violated the Communications Act of 1934.
286. To ensure that competitors, including small entities, do not
suffer competitive disadvantages, we also conclude that, if a state
commission chooses to implement an all-services area code overlay, it
may do so subject to two conditions. Specifically, we will permit all-
services overlay plans only when they include: (1) Mandatory 10-digit
local dialing by all customers between and within area codes in the
area covered by the new code; and (2) availability to every existing
telecommunications carrier, including CMRS providers, authorized to
provide telephone exchange service, exchange access, or paging service
in the affected area code 90 days before the introduction of a new
overlay area code, of at least one NXX in the existing area code, to be
assigned during the 90-day period preceding the introduction of the
overlay.613 Clarifying the conditions that must exist in order to
implement an area code overlay will reduce the likelihood that states
will act inconsistently with the Commission's guidelines and the
consequent need for the Commission to review area code relief plans.
---------------------------------------------------------------------------
\613\ One NXX will give each carrier the ability to give at
least some of its customers numbers in a familiar area code.
Guaranteeing more than one NXX in this situation is difficult
because by the time the need for the overlay becomes imminent, few
NXX codes remain unassigned in the familiar area code.
---------------------------------------------------------------------------
287. We are requiring mandatory 10-digit dialing for all local
calls in areas served by overlays to ensure that competition will not
be deterred in overlay area codes as a result of dialing disparity.
Local dialing disparity would occur absent mandatory 10-digit dialing,
because all existing telephone users would remain in the old area code
and dial 7 digits to call others with numbers in that area code, while
new users with the overlay code would have to dial 10 digits to reach
any customers in the old code. When a new overlay code is first
assigned, there could be nearly 8 million numbers assigned in the old
code, with just a few thousand customers using the new overlay code. If
most telephone calls would be to customers in the original area code,
but only those in the new code must dial ten-digits, there would exist
a dialing disparity, which would increase customer confusion. Customers
would find it less attractive to switch carriers because competing
exchange service providers, most of which will be new entrants to the
market, would have to assign their customers numbers in the new overlay
area code, which would require those customers to dial 10 digits much
more often than the incumbent's customers, and would require people
calling the competing exchange service provider's customer to dial 10
digits when they would only have to dial 7 digits for most of their
other calls. Requiring 10 digit dialing for all local calls avoids the
potentially anti-competitive effect of all-services area code overlays.
288. Allowing every telecommunications carrier authorized
[[Page 47331]]
to provide telephone exchange service, exchange access, or paging
service in an area code to have at least one NXX in the existing NPA
will also reduce the potential anti-competitive effect of an area code
overlay. This requirement would reduce the problems competitors face in
giving their customers numbers drawn from only the new ``undesirable''
area codes while the incumbent carriers continue to assign numbers in
the ``desirable'' old area code to their own customers.614
---------------------------------------------------------------------------
\614\ The new overlay area code may be considered less desirable
by customers during the beginning of its life because it is less
recognizable. For example, business users that have a telephone
number in the overlay area code because they have switched carriers
or obtained new telephone lines might be thought to be in a distant
location due to the ``unrecognized'' area code. Thus, incumbent
carriers would have a competitive advantage because most of their
customers would remain in the old, more recognizable code. This
effect would persist until customers become accustomed to the new
overlay code.
---------------------------------------------------------------------------
289. Incumbent LECs have an advantage over new entrants when a new
code is about to be introduced, because they can warehouse NXXs in the
old NPA.615 Incumbents also have an advantage when telephone
numbers within NXXs in the existing area code are returned to them as
their customers move or change carriers. Thus, to advance competition,
we require that, when an area code overlay is implemented, each
provider of telephone exchange service, exchange access, and paging
service must be assigned at least one NXX in the old NPA.
---------------------------------------------------------------------------
\615\ See supra n.573.
---------------------------------------------------------------------------
290. A number of commenters suggested that the Commission permit
area code overlays only if permanent number portability has been
implemented in the applicable NPA.616 We decline to do so. We
recognize that the implementation of permanent service provider number
portability will reduce the anticompetitive impact of overlays by
allowing end users to keep their telephone numbers when they change
carriers. Requiring the existence of permanent service provider number
portability in an area before an overlay area code may be implemented,
however, would effectively deny state commissions the option of
implementing any all-services overlays while many area codes are facing
exhaust. While permanent number portability is being implemented, end
users will be allowed to keep their telephone numbers when they change
carriers, under the Commission's mandate of interim number
portability.617
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\616\ Teleport Communications Group, Inc. (TCG) has raised this
issue in a petition for declaratory ruling filed with the Commission
on July 12, 1996. TCG's petition for declaratory ruling asks the
Commission to: (1) Require that overlay area code plans may not be
implemented unless permanent number portability and mandatory 10-
digit dialing exist, and that geographic area code splits must be
used absent these conditions; (2) require the implementation of
TCG's ``Number Crunch'' proposal, which would permit NXX assignments
across multiple rate centers in blocks of one thousand numbers; and
(3) require as part of a BOC's application to provide in-region
interLATA services pursuant to section 271 of the 1996 Act a
demonstration that numbering resources are available to competing
local carriers. We will address TCG's petition in a separate
proceeding. See Petition for Declaratory Ruling to Impose
Competitively Neutral Guidelines for Numbering Plan Administration,
filed by Teleport Communications Group, Inc. (July 12, 1996).
\617\ See Number Portability Order.
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291. If a state acts inconsistently with federal numbering
guidelines designed to ensure the fair and timely availability of
numbering resources to all telecommunications carriers, parties wishing
to dispute a proposed area code plan may file a petition for
declaratory ruling, rulemaking, or other appropriate action with the
Commission. Pursuant to section 5(c)(1) of the Communications Act of
1934, as amended,618 authority is delegated to the Common Carrier
Bureau to act on such petitions. We expect that with the clarifications
we provide in this Order, there will be a reduced need for such
petitions. Unless it becomes necessary to do so, we decline to follow
the recommendations of parties urging that we enumerate more specific
procedures to be invoked if states fail to follow our numbering
guidelines. We expect that the need for our review of any state
commissions' actions with respect to area code relief should diminish
as states gain more experience with the area code relief process
generally and with area code overlays in particular, particularly as
states become more familiar with the Commission's guidelines in this
area.
---------------------------------------------------------------------------
\618\ 47 U.S.C. 155(c)(1).
---------------------------------------------------------------------------
292. Finally, we address petitions for clarification or
reconsideration that were filed in the Ameritech and NANP proceedings.
On February 22, 1995, Comcast Corporation filed a Petition for
Clarification or Reconsideration of the Ameritech Order regarding the
Commission's jurisdiction over numbering administration.619 In its
petition, Comcast seeks clarification of the Ameritech Order to the
extent that it implies the Commission does not have broad statutory
authority over the assignment of numbering resources, and seeks
reconsideration of any implication in the Ameritech Order that the
Commission's authority is limited by or subordinate to state
interests.620 Because section 251(e)(1) gives the Commission
exclusive jurisdiction over numbering matters in the United States, any
uncertainty about the Commission's and the states' jurisdiction over
numbering administration that may have existed prior to the 1996 Act
has now been eliminated. In light of the enactment of section
251(e)(1), Comcast's request that the Commission reconsider its
conclusion in the Ameritech Order that the Commission does not retain
plenary jurisdiction over numbering issues in the United States is
moot. Accordingly, we dismiss Comcast's petition.
---------------------------------------------------------------------------
\619\ See Petition for Clarification or Reconsideration, filed
by Comcast Corporation (February 22, 1995). PageNet and Nextel
Communications, Inc. (``Nextel'') filed Comments in support of
Comcast's petition.
\620\ Comcast Petition at 1. According to Comcast, footnote 18
of the Ameritech Order explicitly overruled dicta in a prior
Commission decision that stated that the Commission had plenary
jurisdiction over CO code allocation. Id. at 3.
---------------------------------------------------------------------------
293. In the NANP Order the Commission discussed the states'
authority over area code changes and central office code
administration. In response the National Association of Regulatory
Utility Commissioners filed a Request for Clarification and the
Pennsylvania Public Utility Commission filed a Petition for Limited
Clarification and/or Reconsideration.621 NARUC and the
Pennsylvania Commission have asked the Commission to clarify that,
while the Commission intended in the NANP Order to transfer the
incumbent LEC functions associated with CO code assignment and area
code exhaust to the new NANP Administrator, the Commission did not
intend to alter the role of the States in overseeing those
functions.622 Because section 251(e)(1) gives the Commission
exclusive jurisdiction over numbering matters in the United States, and
because we clarify the role of the states in numbering administration
in this Order,623 we dismiss the petitions of NARUC and the
Pennsylvania Commission as moot.
---------------------------------------------------------------------------
\621\ See Request for Clarification, filed by the National
Association of Regulatory Utility Commissioners (NARUC Petition)
(August 28,1995); Petition for Limited Clarification and/or
Reconsideration, filed by the Pennsylvania Commission (Pennsylvania
Commission Petition) (August 28, 1995). Nextel filed Comments in
response to the petitions.
\622\ See NARUC Petition at 5; Pennsylvania Commission Petition
at 3. The Pennsylvania Commission also seeks clarification or
reconsideration of the Commission's NANP Order to the extent that it
suggests the Commission would interfere with or preempt a state's
ability to address local number portability. Id. at 3-4. We do not
address the states' role with respect to number portability here
because this issue has already been addressed by the Commission. See
Number Portability Order at para. 5.
\623\ See supra paras. 281-291, and infra paras. 309-322.
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[[Page 47332]]
3. Texas Public Utility Commission's Area Code Relief Order for Dallas
and Houston
a. Background
294. On May 9, 1996, the Texas Commission filed two substantively
identical pleadings: (1) a petition for expedited declaratory ruling
pursuant to 47 CFR 1.2; and (2) an application for expedited review
pursuant to 47 CFR 1.115.624 The Texas Commission states that in
July 1995, MCI petitioned it for an investigation into numbering
practices of Southwestern Bell Telephone Company (SWB) 625 related
to exhaustion of telephone numbers in the 214 area code serving the
Dallas metropolitan area.626 SWB proposed to relieve numbering
exhaustion by implementing all-services overlays, which would require
ten-digit local dialing within Houston and Dallas metropolitan
areas.627 In October 1995, an administrative law judge heard
evidence regarding numbering relief plans and issued a written proposal
for decision in November 1995. In December 1995, the Texas Commission
determined that public comment on the matter was necessary; in January
1996 it conducted public forums in both Dallas and Houston.628 In
March 1996, the Texas Commission issued an Order setting out an area
code relief plan.629 On May 17, 1996, we released a public notice
establishing a pleading cycle for comments on the Texas Commission's
pleadings.630
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\624\ The Texas Commission explains that it is filing both
pleadings simultaneously, hoping that the Commission will find one
or the other an appropriate vehicle by which to determine
expeditiously whether a Texas Commission order (PUCT Order)
pertaining to a proposed area code relief plan is acceptable. For
ease of reference, all citations will be to the Texas Commission
petition (PUCT petition) unless citations to both pleadings are
needed for clarification. In this order, we are ruling on the PUCT
petition. Therefore, action on the Texas Commission's application, a
procedurally distinct but substantively identical pleading, is
unnecessary.
\625\ We note that, although SWB was the LEC proposing the
originally disputed area code relief plan, SBC filed comments on the
Texas Commission's proposed plan. SWB is a subsidiary of SBC.
\626\ PUCT petition at 2. The Texas Office of Public Utility
Council filed a similar petition in August 1995 regarding SWB's
numbering practices related to the exhaustion of telephone numbers
in the 713 area code in Houston. The Texas Commission consolidated
the petitions into Texas Public Utilities Commission Docket No.
14447 because similar issues were presented.
\627\ Id.
\628\ Id.
\629\ Id.
\630\ See Pleading Cycle Established for Comments on Public
Utility Commission of Texas' Petition for Expedited Declaratory
Ruling and Application for Expedited Review of Area Code Plan for
Dallas and Houston, Public Notice, DA 96-794 (released May 17,
1996). Comments were due June 6, 1996, and reply comments were due
June 21, 1996. Nineteen parties filed comments, and twelve parties
filed replies, in response to the Texas Commission's petitions.
---------------------------------------------------------------------------
b. Petition and Comments
295. The Texas Commission ordered a plan that combines an immediate
landline geographic split with a prospective wireless overlay in the
Dallas and Houston metropolitan areas.631 In its pleadings to the
FCC, the Texas Commission alleges that it specifically considered the
Ameritech Order in crafting its plan.632 The Texas Commission's
Order required SWB to request new area codes from the NANP
administrator (Bellcore) for the prospective wireless overlays.
Bellcore refused to supply the new area codes unless ordered to do so
by the FCC.633 According to the Texas Commission, Bellcore
incorrectly relied on the Ameritech Order to support a position that
wireless overlays are, per se, invalid and wasteful.634
---------------------------------------------------------------------------
\631\ PUCT petition at 2-3.
\632\ Id. at 3. In the Ameritech Order, the Commission held that
three elements of a proposed wireless-only overlay each violated the
prohibition in section 202(a) of the Communications Act of 1934
against unjust or unreasonable discrimination, and also represented
unjust and unreasonable practices under section 201(b). Those
objectionable elements were: (1) Ameritech's proposal to continue
assigning NPA 708 codes (the old codes) to wireline carriers, while
excluding paging and cellular carriers from such assignments (the
``exclusion'' proposal); (2) Ameritech's proposal to require only
paging and cellular carriers to take back from their subscribers and
return to Ameritech all 708 telephone numbers previously assigned to
them, while wireline carriers would not be required to do so (the
``take back'' proposal); and (3) Ameritech's proposal to assign all
numbers from the new NPA (630) to paging and cellular carriers
exclusively (the ``segregation'' proposal). See Ameritech Order, 10
FCC Rcd at 4608, 4611.
\633\ PUCT petition at 3.
\634\ Id.
---------------------------------------------------------------------------
296. On March 21, 1996, Bellcore sent a letter to the Network
Services Division of the Common Carrier Bureau, FCC, explaining its
view that the Texas Commission plan violated the Ameritech
Order.635 In that letter, Bellcore asserts that the Ameritech
Order is controlling precedent because section 251(e)(1) confers
exclusive jurisdiction over numbering administration on the Commission.
Bellcore further opposes use of NPAs for service-specific overlays,
because such assignments, it says, are inefficient, wasteful, and
potentially discriminatory.636 The Network Services Division
responded to the letter on April 11, 1996, agreeing that the Ameritech
Order forbids service-specific overlays such as those ordered by the
Texas Commission and supporting Bellcore's decision, as acting NANP
Administrator, not to make the requested NPA assignments for use in
Dallas and Houston as a wireless-specific overlay.637
---------------------------------------------------------------------------
\635\ PUCT petition, Attachment B.
\636\ Id.
\637\ PUCT petition at 3-4.
---------------------------------------------------------------------------
297. The Texas Commission acknowledges that the FCC has exclusive
jurisdiction over numbering pursuant to section 251(e)(1) of the 1996
Act.638 The Texas Commission states that the NPRM might provide
additional clarification on these issues, but that, currently, it is
uncertain whether the FCC intended to preempt the Texas Order, and asks
that the Commission consider the specific facts of this matter.639
It contends that it carefully deliberated the issues and made a
balanced and equitable decision that is consistent with the Ameritech
Order. Therefore, it insists, any preemption is unwarranted.640
---------------------------------------------------------------------------
\638\ Id. at 5.
\639\ The Texas Commission argues that the April 11, 1996,
letter did not rule directly on the validity of its Order. Moreover,
noting that, in the NPRM, the Commission references the April 11
Common Carrier Bureau letter, Texas says that the NPRM states that
the Commission (rather than the Network Services Division) agreed
with Bellcore's decision not to make the area code assignments
requested by SWB. NPRM at para. 257, n.358. Therefore, in Texas'
view, the Common Carrier Bureau letter is an action taken pursuant
to delegated authority that affirmatively adopts Bellcore's decision
and preempts its order. The Texas Commission argues that this action
should be reviewed by the Commission. PUCT petition at 4.
\640\ PUCT petition at 5. In its petition for declaratory
ruling, the Texas Commission requests that we declare: (1) That the
refusal of the Chief, Network Services Division, Common Carrier
Bureau, to direct the NANP administrator to assign area codes to SWB
for use as wireless overlays in Dallas and Houston was erroneous;
(2) that the NANP administrator is directed to assign such codes to
SWB; and (3) that the Texas Commission's March 13, 1996 Order
directing a combination wireline area code split and wireless
overlay in Dallas and Houston is lawful. Id. at 10. In its
application for expedited review, it requests that we: (1) Review
and reverse the Network Services Division's action in its letter to
the NANP administrator; (2) order the NANP administrator to assign
the requested area codes for use as wireless overlays in Dallas and
Houston; and (3) uphold the Texas Commission's Order pursuant to
analysis of Commission precedent. PUCT application at 10.
---------------------------------------------------------------------------
298. According to the Texas Commission, the Ameritech Order does
not, on its face, prohibit all service-specific overlays.641
Instead, it says, the Ameritech Order requires a fact-specific
examination of each situation to determine whether the proposed
numbering plan violates the statutory prohibition of unreasonable and
unjust discrimination.642 Further, in the Texas Commission's view,
its Order ``strikes the optimal balance'' and is ``evenhanded'' in its
effect on carriers
[[Page 47333]]
and customers.643 The Texas Commission alleges that it weighed
different proposals offered by several parties, and that, although a
geographic split was found superior to an all-services overlay, neither
plan alone was found to be the best solution.644 For this reason,
it chose a two-step, integrated relief plan involving a landline
geographic split and a prospective wireless overlay.645 The Texas
Commission argues that its plan permits intra-NPA seven-digit dialing,
unlike an all-services overlay, which would have required ten-digit
intra-NPA dialing. Also, it says that its plan will reduce customer
confusion and provide greater competitive fairness to service
providers.646
---------------------------------------------------------------------------
\641\ PUCT petition at 5-6.
\642\ Id. at 6.
\643\ Id. at 6-9. In the Ameritech Order, we stated that any
area code relief plan that becomes effective should strike an
optimal balance among three objectives Ameritech had identified: (1)
An optimal dialing plan for customers; (2) as minimal a burden as
feasible; and (3) an uninterrupted supply of codes and numbers. We
further found that the optimal balance must assure that any burden
associated with the introduction of the new numbering code falls in
as evenhanded a way as possible upon all carriers and customers
affected by its introduction. Ameritech Order, 10 FCC Rcd at 4611.
\644\ PUCT petition at 7.
\645\ Id.
\646\ Id.
---------------------------------------------------------------------------
299. Many parties contend that the Texas Commission's plan violates
Commission policy as outlined in the Ameritech Order and request its
clarification.647 Still others argue that the plan violates
section 201(b) or section 202(a),648 as well as section 251(e)(1),
which confers exclusive jurisdiction over numbering administration on
the Commission that we have not assigned to any other entity.649
Still others argue that the plan violates section 253, which provides
that no state requirement may prohibit or have the effect of
prohibiting the ability of any entity to provide any telecommunications
service.650
---------------------------------------------------------------------------
\647\ See, e.g., AT&T comments at 5; Century Cellunet comments
at 3-4; Cox comments at 3-4; GTE comments at 8-14; HCTC comments at
3-10; MCI comments at 3-4; Nextel comments at 3-6; PageNet comments
at 6-10; PCIA comments at 4-6; ProNet comments at 7-14; Sprint
comments at 4-5; Sprint Spectrum comments at 5-11; Teleport comments
at 4-12; US West comments at 9-10; Vanguard comments at 2-3; SBC
comments at 5-12.
\648\ See, e.g., AT&T comments at 5; HCTC comments at 3-10;
PageNet comments at 9; ProNet comments at 1; Sprint comments at 4-5;
Sprint Spectrum comments at 6-11.
\649\ See, e.g., Century Cellunet comments at 4; GTE comments at
7; PCIA comments at 6-7; U S WEST comments at 4-5. See also Teleport
comments at 13.
\650\ Sprint Spectrum comments at 4.
---------------------------------------------------------------------------
300. In Sprint Spectrum's view, for example, the proposed wireless
overlays will undermine the ability of telecommunications carriers to
provide service because they allow existing customers of wireless
incumbents to retain 7-digit dialing for most calls if they do not
switch to a new entrant. Similarly, it says, current customers of
wireline incumbents will retain 7-digit dialing to businesses and
residences in either the suburban or metropolitan area, unless they
switch to a new wireless provider.651 Sprint Spectrum maintains
that, by creating a distinction between services offered by incumbent
providers and those seeking entry into the market using wireless
technology, the Texas Commission has created a disincentive for new
wireless providers to seek entry into these telecommunications
markets.652 Similarly, PageNet argues that this interference with
customer choice, and the inhibition of wireline/wireless competition,
are contrary to the objectives stated in the Ameritech Order, and urges
the Commission to expressly declare the Texas Commission's plan
prohibited.653
---------------------------------------------------------------------------
\651\ Sprint Spectrum comments at 4-5 and 11-12.
\652\ Id. at 12.
\653\ PageNet comments at 6-10. See also SBC comments at 12-16.
---------------------------------------------------------------------------
301. Twelve reply comments were received. The Texas Commission
contends that it had jurisdiction to issue its order containing its
proposed area code relief plan, and the 1996 Act does not deprive the
Texas Commission of that jurisdiction.654 The Texas Commission
argues that the exclusion, segregation, and take-back facets of the
wireless-only overlay proposal should not be considered separate and
independent grounds for finding an NPA relief plan unlawful.655
The Texas Commission maintains that we should not order an alternative
form of relief such as an all-services overlay,656 and that we
should not find unlawful the Texas Commission's proposed consideration
of take-back of wireless numbers during the geographic split if the
wireless overlays are deemed unlawful.657
---------------------------------------------------------------------------
\654\ Texas Commission reply at 2-7.
\655\ Id. at 7-8.
\656\ Id. at 9-10.
\657\ Id. at 10-11.
---------------------------------------------------------------------------
302. The Texas Public Utility Counsel filed reply comments in
support of the Texas Commission's proposed area code relief plan. The
Texas Public Utility Counsel maintains that the proposed wireless-only
overlay is neither discriminatory nor unreasonable under sections
202(a) and 201(b) of the Communications Act of 1934.658 Further,
the Texas Public Utility Counsel claims that the wireless carriers'
interpretation of the Ameritech Order is unreasonably strict and would
preclude all forms of area code relief.659
---------------------------------------------------------------------------
\658\ Texas Public Utility Counsel reply at 9-11.
\659\ Id. at 12-15.
---------------------------------------------------------------------------
303. In reply, several parties continue to maintain that the Texas
Commission's proposed prospective wireless-only overlay is
unlawful.660 Most of these commenters contend that an all-services
overlay can be an appropriate method of area code relief.661
---------------------------------------------------------------------------
\660\ See, e.g., CTIA reply at 2-3; Vanguard reply at 1-4; MCI
reply at 3-5; ProNet reply at 1; Sprint reply at 1-2. SBC states
that the Texas Commission overlays are unlawful, and argues that we
should expressly state that service-specific overlays are per se
unlawful. SBC reply at 1.
\661\ ProNet reply at 2-4; BellSouth reply at 2-6; US WEST reply
at 1-6; SBC reply at 2-4.
---------------------------------------------------------------------------
c. Discussion
304. We conclude that the Texas Commission's wireless-only overlay
violates our Ameritech Order on its face. It is also inconsistent with
our clarification of the Ameritech Order contained in this Order,
wherein we specifically prohibit wireless-only overlays.
305. The Texas Commission itself admits to the presence of
exclusion and segregation in its plan.662 In the Ameritech Order,
we clearly indicated that the presence of any one of the following
elements including: (1) Exclusion; (2) segregation; or (3) take-back,
renders a service-specific overlay plan unacceptable and violative of
the Communications Act.663 Texas' plan features all these
elements. Like the plan proposed in the Ameritech Order, the Texas
Commission's plan would unreasonably discriminate against wireless
carriers. It is thus unreasonably
[[Page 47334]]
discriminatory under section 202(a) and would constitute an
unreasonable practice in violation of section 201(b) of the
Communications Act of 1934. Moreover, in this Order, we have clarified
the Ameritech Order by prohibiting all service-specific and technology-
specific area code overlays. Service-specific and technology-specific
overlays do not further the federal policy objectives of the NANP. They
hinder entry into the telecommunications marketplace by failing to make
numbering resources available on an efficient, timely basis to
telecommunications services providers. As we describe in detail above,
service-specific overlays would provide particular industry segments
and groups of consumers an unfair advantage. We have also stated that
administration of the NANP should be technology neutral; service-
specific overlays that deny particular carriers access to numbering
resources because of the technology they use to provide their services
are not technology neutral.
---------------------------------------------------------------------------
\662\ The record also indicates that the plan also calls for
some take-back of existing wireless numbers. The Texas Commission
states that two groups of wireless customers will experience take-
back due to the geographic split. Those with Type 1 cellular and
Type 1-like paging connections will experience take-back for
``technical and practical implementation-related reasons. PUCT Order
at 12 n.9. In addition, the Texas Commission envisions that after
the date on which NXX codes are activated for the prospective
wireless overlay, wireless carriers holding NXX codes from the prior
area codes will not be allowed to assign any additional numbers from
those prior area codes, regardless of the fill factor of the NXX
codes. Remaining unused numbers in those NXX codes will be returned
to the NPA administrator. PUCT Order at 6.
\663\ See Ameritech Order, 10 FCC Rcd at 4608. ``[W]e find as a
matter of law that each of these three Ameritech proposals violates
the prohibition in the Act against unjust or unreasonable
discrimination.'' (Emphasis added). See also id. at 4611. In
discussing whether Ameritech's plan constituted an unjust or
unreasonable practice and therefore violated section 201(b) of the
Act, we stated that three facets of Ameritech's plan--its exclusion,
segregation, and take-back proposals--would each impose significant
competitive disadvantages on the wireless carriers, while giving
certain advantages to wireline carriers.
---------------------------------------------------------------------------
306. We find the Texas Commission's arguments in support of its
proposed wireless-only overlay unpersuasive. It argues, for example,
that the wireless overlay will extend the life span for the area code
relief plan. What extends the life span of a relief plan, however, is
not so much the wireless overlay as the introduction of a new NPA with
its 792 additional NXXs. This being the case, the Texas Commission
provides no compelling reason for isolating a particular technology in
the new NPA. The Texas Commission also states that there will be less
confusion regarding NPA assignments, but a plan calling for overlay for
one service and a split for another is likely to lead to increased
customer confusion regarding NPA assignments, because parties making
calls would have to be aware of what type of service the party being
called has in order to know whether to dial the ten-digit number or
just the last seven digits. The Texas Commission also argues that its
plan allows for continued seven-digit dialing for intra-NPA calls, but
we note that the same would be true if a geographic split for all
services and technologies was imposed. Although an all-services overlay
would have required ten-digit intra-NPA dialing, there would not be
discrimination based on technology.
307. Several parties raise concerns about dialing disparity
resulting from the implementation of the Texas Commission's plan. It is
these concerns about dialing disparity in the context of an overlay
that have led us to require mandatory ten-digit dialing as part of any
all services overlay plan.
308. Some parties also advance concerns about the Texas
Commission's statements that, if the proposed wireless-only overlay
were found to be unlawful, it would consider a mandatory pro-rata take-
back of wireless numbers under the geographic split plan in order to
balance the remaining burdens of inconvenience and confusion caused by
the number changes necessitated by a split. We do not take action here
to prevent the Texas Commission from taking back some wireless numbers
in the course of introducing a geographic split plan. In a geographic
split, roughly half of the customers in the existing NPA, including
wireless customers, will have to change their telephone numbers. We
recognize that wireless customers may need to have their equipment
reprogrammed to change their telephone number, and that this will
inconvenience wireless customers to some extent. This illustrates the
fact that geographic splits also have burdensome aspects. Our goal is
to have technology-blind area code relief that does not burden or favor
a particular technology. Requiring approximately half of the wireless
customers and wireline customers to change telephone numbers in a
geographic split is an equitable distribution of burdens. This is the
kind of implementation detail that is best left to the states.
4. Delegation of Additional Numbering Administration Functions
a. Background
309. In the NANP Order, we transferred CO code administration to
the new NANP administrator. We stated that a ``requirement that CO code
administration be centralized in the NANP administrator simply
transfers the functions of developing and proposing NPA relief plans
from the various LEC administrators to the new NANP Administrator'' and
that ``[s]tate regulators will continue to hold hearings and adopt the
final NPA relief plans as they see fit.'' 664
---------------------------------------------------------------------------
\664\ NANP Order, 11 FCC Rcd at 2622.
---------------------------------------------------------------------------
310. In the NPRM, we tentatively concluded that, pursuant to
section 251(e)(1), the Commission should authorize states to address
matters related to implementation of new area codes, and we are doing
so in this Order. In the NPRM, we also sought comment on whether the
Commission should authorize states or other entities to address any
additional number administration functions. We address this issue here.
b. Comments
311. Some commenters raise issues about the proper role of the
states in number administration both before and after transfer of
number administration functions to the NANP. BellSouth, for example,
argues that we should authorize states to address additional number
administration functions until their transfer to the NANP.
Specifically, BellSouth recommends that states should take active
oversight in CO code implementation activities, including the power to
allow for cost recovery.\665\
---------------------------------------------------------------------------
\665\ BellSouth comments at 20.
---------------------------------------------------------------------------
312. SBC expresses concern regarding the expeditious transfer and
centralization of CO code administration into the new NANP. In SBC's
view, such transfer is appropriate, but before it can take place, all
relevant issues must first be fully addressed and resolved. SBC states
that code administrators need local knowledge of authorized carriers,
service areas, and toll and local calling areas for the transfer to be
effective. SBC asserts that, because CO code administration has
significant impacts on local areas in terms of relief plans and dialing
plans, state regulatory commissions should be included in any
decision.\666\ In reply, MFS, stating that the Commission should not
``be swayed'' by SBC's singular concerns about the complexity of CO
code assignments and the need for state involvement, argues against any
potential delay in the transfer of numbering responsibilities.\667\
Similarly, WinStar, stating that such delay would be contrary to the
letter and spirit of the 1996 Act, argues against any delay in
transferring numbering administration from the LECs to the NANP
administrator.\668\
---------------------------------------------------------------------------
\666\ SBC comments at 11-13.
\667\ MFS reply at 4.
\668\ WinStar reply at 15-16.
---------------------------------------------------------------------------
313. Some parties argue that, when the new NANP administrator is
established, the Commission should allow state commissions to handle
the current functions of the LEC, including development of area code
relief plans and assignment of CO codes.\669\ According to the Florida
Commission, if the state commissions do not decide to handle these
functions, the NANP administrator should be responsible for these
processes.\670\ Cox, however, does not support delegation of CO code
assignment responsibility to the states and contends that if the
Commission does authorize the states to perform this function, it
should adopt specific
[[Page 47335]]
policies for CO code assignment requiring that such assignments be made
on a non-discriminatory basis.\167\ The Pennsylvania Commission states
that, after the new NANP administrator assumes LEC administrative
responsibilities, the Commission should allow states to continue their
regulatory oversight role. Specifically, the Pennsylvania Commission
asserts that the Commission should delegate to state commissions
regulatory oversight of CO code assignment, including local number
portability and local dialing parity measures.\672\
---------------------------------------------------------------------------
\669\ See, e.g., Florida Commission comments at 6-7; Indiana
Commission Staff comments at 6.
\670\ Florida Commission comments at 6-7.
\671\ Cox states that the policies should state that carriers
and states currently administering CO codes are not permitted to
deny codes to new entrants, and are not permitted to levy ``code
opening'' charges to avoid imposing barriers on the entry and
expansion of new competitors. Cox comments 8-9. In its reply, Cox
notes that incumbent LECs have argued that there is no need for
Commission intervention in the assignment of CO codes. Cox argues
that, in practice, despite the existence of ``neutral'' CO code
assignment guidelines, significant potential for discriminating
against new entrants remains. Until an impartial entity is
responsible for assigning CO codes, Cox contends, there is a need
for specific Commission rules preventing discrimination. Cox would
prefer that CO codes be administered by a neutral administrator, and
believes that the possibility that a neutral administrator will lack
some local knowledge does not form an insurmountable barrier to a
swift transition from the current regime. Cox reply at 10-11.
\672\ Pennsylvania Commission comments at 7.
---------------------------------------------------------------------------
314. In the Indiana Commission Staff's view, we should authorize
state commissions to make decisions regarding the implementation or
changing of dialing patterns consistent with non-discriminatory and
competitive guidelines, and changes in dialing patterns should be
incorporated into the area code relief planning process. The Indiana
Commission Staff asserts that states are in a better position to
determine what impact changes in dialing will have on the local
area.\673\ Conversely, Vanguard argues the Commission should satisfy
its Congressional mandate by establishing national numbering and
dialing parity guidelines.\674\
---------------------------------------------------------------------------
\673\ Indiana Commission Staff comments at 7.
\674\ Vanguard reply at 2-3.
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c. Discussion
315. We conclude that the states may continue to implement or
change local dialing patterns subject to any future decision by the
Commission regarding whether to require uniform nationwide dialing
patterns.\675\ The Commission will retain broad policy-making
jurisdiction over numbering. We further conclude that states that wish
to be responsible for initiating area code relief planning, a function
currently performed by the LECs as CO code administrators, may do so
now and after transfer of CO code administration from the LECs to the
new NANP administrator. Again, because of the need to avoid disruption
in numbering administration, we find good cause to make this
authorization effective immediately pursuant to 5 U.S.C. 553(d)(3). We
decline, however, to delegate to the states on a permanent basis
oversight of CO code administration. Finally, we decline to authorize
states to handle CO code assignment functions.
---------------------------------------------------------------------------
\675\ Uniform nationwide dialing, which would require uniform
dialing patterns throughout the United States, was raised in the
NANP NPRM, Docket No. 92-237, 9 FCC Rcd 2068, 2075 (1994), 59 FR
24103 (April 4, 1994), but was not addressed in the NANP Order and
remains unaddressed by the Commission.
---------------------------------------------------------------------------
316. Currently, state commissions are responsible for determining
the number of digits that must be dialed for intra-NPA toll calls and
inter-NPA local calls.\676\ For example, while most states require 1
plus 10-digit dialing for all intra-NPA toll calls, California and New
Jersey permit such toll calls to be completed with 7-digit dialing.
Illinois requires 7-digit dialing for all intra-NPA calls, whether
local or toll. Similarly, a number of states, including the District of
Columbia, Maryland, and parts of Virginia require 10-digit dialing for
all inter-NPA local calls and permit 10-digit or 1 plus 10-digit
dialing for all intra-NPA local calls.
---------------------------------------------------------------------------
\676\ In every state, intra-NPA local calls can be dialed using
7-digits, while all inter-NPA calls require 1 plus 10-digit dialing.
For a list of standard and permissible dialing patterns in each
state, see North American Numbering Plan, Numbering Plan Area Codes
1996 Update, Bellcore (January 1996) at 11-16.
---------------------------------------------------------------------------
317. States are in the best position at this time to determine
dialing patterns because of their familiarity with local circumstances
and customs regarding telephone usage. For example, one state
commission might want to allow its residents to dial 7-digits for all
intra-NPA calls, whether toll or local, whereas another state
commission might wish to require 10-digit dialing for intra-NPA calls
to ensure that its residents recognize that they are making a toll call
rather than a local call. Therefore, states may continue to implement
appropriate local dialing patterns, subject to the Commission's
numbering administration guidelines, including the Commission's
requirement in this Order of 10-digit dialing for all calls within and
between NPAs in any area where an area code overlay has been
implemented.
318. Two state commissions specifically ask the Commission to
authorize states to perform functions associated with initiating and
planning area code relief, as distinct from adopting final area code
relief plans.\677\ We agree that states should be authorized to
initiate and plan area code relief. Currently, when an incumbent LEC in
its role as CO code administrator predicts that NPA exhaust is
imminent, it initiates the NPA relief planning process by holding
industry meetings, developing an appropriate area code relief plan or
plans, and proposing that plan or several alternative plans for the
state commission's consideration and adoption.\678\ Thus, state
commissions do not initiate and develop area code relief plans,\679\
but states adopt, codify or reject the final plan.\680\
---------------------------------------------------------------------------
\677\ Indiana Commission Staff comments at 6-7; Florida
Commission comments at 5.
\678\ See, e.g., Illinois Bell Telephone Company Petition for
Approval of NPA Relief Plan for 708 Area Code by Establishing a 630
Area Code, Order, No. 94-0315 (Ill. Comm. Comm'n March 20, 1995).
\679\ The process of area code relief initiation and development
varies by state. In most cases the incumbent LEC (as CO code
administrator) declares that the supply of CO codes in a particular
area code is about to exhaust, and invites all telecommunications
entities with interests in the area code at issue to meet and
attempt to reach consensus on a plan for area code relief. Issues
before the industry include whether to propose an area code overlay
or a geographic split. If the industry can agree on the proposal, it
is submitted to the state commission for adoption. If the industry
cannot agree, the incumbent LEC may submit a number of alternatives
to the state commission from which to choose.
\680\ State commissions have, however, recently begun to reject
or significantly alter LEC proposals as area code relief has become
more controversial. See, e.g., Illinois Bell Telephone Company
Petition for Approval of NPA Relief Plan for 708 Area Code by
Establishing a 630 Area Code, Order, No. 94-0315 (Ill. Comm. Comm'n
March 20, 1995); AirTouch V. Pacific Bell, Case 94-09-058, MCI V.
Pacific Bell, Case 95-01-001, Decision No. 95-08-052 (Cal. Pub.
Util. Comm'n August 11, 1995); Petition of MCI Telecommunications
Corp. for an Investigation of the Practices of Southwestern Bell
Telephon
FR Doc. 96-22045 Implementation of the Local Competition Provisions of the Telecommunications Act of 1996
e Co. Regarding the Exhaustion of Telephone Numbers in the
214 Numbering Plan Area and Request for a Cease and Desist Order
Against Southwestern Bell Telephone Co., Petition of the Office of
the Public Utility Counsel for an Investigation of the Practices of
Southwestern Bell Telephone Co. Regarding the Exhaustion of
Telephone Numbers in the 713 Numbering Plan Area and Request for a
Cease and Desist Order Against Southwestern Bell Telephone Co.,
Order on Rehearing, Docket No. 14447 (Tex. Pub. Util. Comm'n. April
29, 1996).
---------------------------------------------------------------------------
319. We conclude that states wishing to become responsible for
initiating area code relief planning, a function currently performed by
the LECs as CO code administrators, may do so, even after transfer of
CO code administration from the LECs to the new NANP administrator. We
find that enabling states to initiate and develop area code relief
plans is generally consistent with our previous delegation of new area
code implementation matters to the state commissions based on their
unique familiarity with local circumstances. We
[[Page 47336]]
make this delegation, however, only to those states wishing to perform
area code relief initiation and development. We recognize that many
state commissions may not wish to perform these functions because,
inter alia, the initiation and development of area code relief can
require specialized expertise and staff resources that some state
commissions may not have. Those states that seek to perform any or all
of these functions must notify the new NANP administrator within 120
days of the selection of the NANP administrator. Those states wishing
to perform functions relating to initiation and development of area
code relief prior to the transfer of such functions to the new NANP
administrator must notify promptly the entity currently performing CO
code administration. States should inform the entities of the specific
functions upon which the state wishes to take action. Area code relief
initiation and development functions will be transferred to and
performed by the new NANP administrator for those states that do not
seek to perform such functions. We emphasize that, pursuant to our
decision to authorize the states to address matters related to the
implementation of area code relief, all state commissions will continue
to be responsible for making the final decision on how new area codes
will be implemented, subject to this Commission's guidelines.
320. While we authorize states to resolve specific matters related
to initiation and development of area code relief plans, we do not
delegate the task of overall number allocation, whether for NPA codes
or CO codes. To do so would vest in fifty-one separate commissions
oversight of functions that we have already decided to centralize in
the new NANPA. A nationwide, uniform system of numbering, necessarily
including allocation of NPA and CO code resources, is essential to
efficient delivery of telecommunications services in the United
States.\681\
---------------------------------------------------------------------------
\681\ Ameritech Order, 10 FCC Rcd at 4602.
---------------------------------------------------------------------------
321. With specific regard to CO code allocation, two BOCs and one
state commission have asked us to delegate oversight of this function
to the states on a permanent basis. We decline. In addition to the
problems noted in the preceding paragraph, we are concerned that such
an arrangement could complicate and increase the NANP administrator's
workload, and could also lead to inconsistent application of CO code
assignment guidelines. The oversight and dispute resolution process
established in the NANP Order, whereby for the U.S. portions of NANP
administration the NANC will have initial oversight and dispute
resolution duties, with the Commission as the final arbiter, provides
an adequate process for overseeing CO code administration.682 This
process also guarantees state participation in the oversight process
through their representation on the NANC.
---------------------------------------------------------------------------
\682\ See NANP Order, 11 FCC Rcd at 2605-2610.
---------------------------------------------------------------------------
322. Finally, we decline to authorize states to perform CO code
assignment functions as suggested by the Florida Commission for two
reasons set forth in the NANP Order.683 First, centralizing CO
code assignment in one neutral entity will increase the efficiency of
CO code assignment because it will preclude varying interpretations of
CO code assignment guidelines. Consistent application of assignment
guidelines will also diminish the administrative burden, which can be a
potential barrier to entry, facing those carriers seeking codes in
various states that would otherwise have to associate with a number of
separate code assignment bodies rather than one. Second, a centralized
CO code administration mechanism would allow the Commission and
regulators from other NANP member countries to keep abreast of CO code
assignments and predict potential problem areas, such as exhaust,
sooner than is possible under the current system.
---------------------------------------------------------------------------
\683\ Id. at 2620-2623.
---------------------------------------------------------------------------
5. Delegation of Existing Numbering Administration Functions Prior to
Transfer
a. Background
323. Prior to the enactment of the 1996 Act, Bellcore, as the NANP
Administrator, the incumbent LECs, as central office code
administrators, and the states performed the majority of functions
related to the administration of numbers.684 In the NPRM, the
Commission tentatively concluded that it should authorize Bellcore, the
incumbent LECs and the states to continue performing each of their
functions related to the administration of numbers as they existed
prior to enactment of the 1996 Act until such functions are transferred
to the new NANP administrator pursuant to the NANP Order.685 We
address this issue here.
---------------------------------------------------------------------------
\684\ For a discussion of NANP administration functions, see
NANP Order, 11 FCC Rcd at 2595.
\685\ NPRM at para. 258.
---------------------------------------------------------------------------
b. Comments
324. Several commenters agree with our tentative conclusion to
authorize Bellcore, the LECs, and states to continue performing the
numbering administration functions they currently perform until such
functions are transferred to the new NANP administrator.686
Generally, these commenters contend that this is the most efficient and
least disruptive solution, and that it should be implemented in the
interest of numbering administration continuity. Using this approach,
NYNEX says, the Commission can intervene and exercise its authority as
specific future matters may warrant.687 AT&T states that current
functions should continue until transferred, provided that those
functions are not expanded and that the Commission ensures prompt
compliance with the NANP Order.688 MFS supports interim delegation
of current functions, but asserts that states should have the authority
to implement interim changes in number administration as long as their
actions are consistent with our numbering policy objectives.689
---------------------------------------------------------------------------
\686\ See, e.g., MFS comments at 9; ACSI comments at 13;
Ameritech comments at 24; AT&T comments at 12; Bell Atlantic
comments at 9; BellSouth comments at 20; District of Columbia
Commission comments at 3; Florida Commission comments at 6; GTE
comments at 30; NYNEX comments at 18-19; Pennsylvania Commission
comments 6-7; PacTel comments at 25; Texas Commission comments at 6;
SBC comments at 9.
\687\ NYNEX comments at 18-19. NYNEX asserts that we should
reject arguments in favor of implementation of an interim
arrangement so that incumbent LECs no longer have responsibility for
NXX code administration. Incumbent LECs currently assign the NXXs
according to industry standards, and under Commission oversight,
NYNEX notes. Therefore, there is no need for a short-lived transfer
of the responsibilities to another party.
\688\ AT&T comments at 12.
\689\ By way of example, MFS notes that California is
considering sharing CO code assignment with LECs until that function
is transferred to the NANP administrator. MFS comments at 9.
---------------------------------------------------------------------------
325. The California Commission states that it is considering
serving as CO code administrator until the NANC has developed its
policy on numbering administration. It urges the Commission to allow
states with unique number administration problems to resolve these
issues in the interim.690 PacTel states that it has proposed a
partial transfer of CO code administration to the California Commission
or a third party. In the alternative, it says, the California
Commission could serve as an interim CO code administrator until the
NANC completes its work, or until the California Commission selects a
permanent administrator. In PacTel's view, these options are consistent
with our proposal to permit the LECs, Bellcore, and the states to
continue performing each of their respective
[[Page 47337]]
functions related to number administration until those functions are
transferred to the new entity.691 PacTel asserts that California's
plan to share code assignment functions between PacTel and the
California Commission until the transfer to the new NANP administrator
should be identified as a ``safe harbor'' under the Act.692
---------------------------------------------------------------------------
\690\ California Commission comments at 7-8.
\691\ PacTel comments at 25.
\692\ PacTel reply at 28.
---------------------------------------------------------------------------
326. Other commenters oppose the Commission's proposal to authorize
Bellcore, the incumbent LECs, and the states to continue performing
those numbering administration functions they performed prior to
enactment of section 251(e)(1) on an interim basis until such functions
are transferred to the new NANP administrator.693 They express
concern about the appearance of incumbent LEC dominance and
discrimination in the assignment and administration of scarce numbering
resources. The Indiana Commission Staff recommends that area code
planning and implementation be removed from the responsibility of the
LECs in favor of state commissions. In its view, delegating the
planning and implementation process to state commissions will foster a
``more competitive spirit'' among the industry. The Indiana Commission
Staff envisions that state commissions could obtain periodic reports
from the present incumbent LEC administrator as well as Bellcore on
projected exhaust dates for area codes.694 Sprint states that, as
long as Bellcore and the LECs serve as NANP and CO code administrators,
they should be required to apply identical standards and procedures for
processing all numbering requests, irrespective of the identity of the
party submitting the request.695
---------------------------------------------------------------------------
\693\ See, e.g., CTIA comments at 5; Indiana Commission Staff
comments at 6; NCTA reply at 10; Teleport comments at 4.
\694\ Indiana Commission Staff comments at 6.
\695\ Sprint comments at 14.
---------------------------------------------------------------------------
327. Cox recommends that, in the event the Commission authorizes
the state commissions to handle CO assignment, such assignment must be
made on a nondiscriminatory basis, and states or the carriers currently
administering the CO codes should not be permitted to deny codes to new
entrants or to levy ``code opening'' charges. In Cox's view, the
Commission should adopt specific CO code guidelines because: (a) There
is evidence of continued discrimination in CO code assignment; and (b)
without Commission guidance, states will develop inconsistent regimes.
Cox notes that Commission action is especially important here because
CO code assignments have not been transferred to a neutral
party.696 Similarly, several commenters argue in CC Docket No. 95-
185 that many incumbent LECs are charging paging carriers and other
CMRS providers discriminatory fees for activating CO codes, as well as
unreasonable and discriminatory recurring monthly charges for blocks of
numbers.697
---------------------------------------------------------------------------
\696\ Cox comments at 7-9.
\697\ With regard to the specific issue of paging carriers being
charged recurring monthly fees for blocks of numbers, it is
necessary to incorporate the record from CC Docket No. 95-185, In
the Matter of Interconnection Between Local Exchange Carriers and
Commercial Mobile Radio Service Providers. See, e.g., AirTouch
Communications comments, CC Docket No. 95-185, at 22 n.22; Arch
Communications Group comments, CC Docket No. 95-185, at 7-8, 15, 23-
24; PageNet comments, CC Docket No. 95-185, at 22 and App. C.
---------------------------------------------------------------------------
c. Discussion
328. Until such functions are transferred to the new NANP
administrator, we authorize Bellcore and the incumbent LECs to continue
performing the number administration functions they performed prior to
the enactment of the 1996 Act. Again, because of the need to avoid
disruption in numbering administration, we find that there is good
cause to make these authorizations effective immediately pursuant to 5
U.S.C. 553(d)(3). We also conclude that any incumbent LEC charging
competing carriers fees for assignment of CO codes may do so only if it
charges the same fee to all carriers, including itself and its
affiliates.
329. Numbering administration is a complex task that Bellcore, the
incumbent LECs, and, to some extent, the states have been performing
for over a decade. It is crucial that efficient and effective
administration of numbers continues as the local market opens to
competition. This delegation is the most practicable way that numbering
administration can continue without disruption. During the transition
period, those parties with experience should continue to perform the
administrative functions that they have become uniquely equipped to
handle. Thus, we authorize Bellcore to continue to perform its
functions as the North American Numbering Plan Administrator in the
same manner it did at the time of enactment of the 1996 Act. We also
allow the incumbent LECs to continue to perform the CO code
administration functions that they performed at the time of enactment
of the 1996 Act. Finally, we allow the states, if they performed any
number administration functions prior to enactment of the 1996 Act, to
continue to do so until such functions are transferred to the new NANP
administrator.
330. Some commenters argue that we should not authorize Bellcore
and the incumbent LECs to perform numbering administration functions on
a transitional basis because continued administration of numbers by
these entities, which are not neutral administrators, will permit
discriminatory treatment of the incumbents' competitors with respect to
access to number resources. While we recognize these concerns, we see
no alternative to the action we take here. Transfer of numbering
administration functions will be a complex task, one that cannot be
accomplished immediately even on transitional basis. The Commission,
for example, does not have the resources to administer numbers on a
day-to-day basis.
331. In this regard, we note that a proposal has been made to the
California Commission to transfer CO code administration to the
California Commission or a third party or, in the alternative, to have
the California Commission serve as the interim CO code administrator
until the NANC completes its work or until the California Commission
selects a permanent administrator.698 We conclude that the record
does not support allowing states to change the way CO code
administration is performed during the transition to the new NANP
administrator. Uniform CO code administration is critical to efficient
operation of the public switched network for proper delivery of
telecommunications services. The transfer of CO code administration to
the states pending the transition to the new NANP administrator would
not foster that consistency because states wishing to assume such
responsibilities would lack the necessary experience to perform them
with speed and accuracy. The California Commission does not refute this
persuasively. We therefore urge parties wishing to alter the
administration of certain numbers or to change the assignment of
responsibilities for administering numbers pending transfer of these
functions to the new NANP administrator to raise these issues with the
Commission on a case-by-case basis in separate proceedings. In their
filings, these parties should state who would bear the cost of a
temporary delegation and how such a delegation could be implemented
without confusion to carriers and customers.
---------------------------------------------------------------------------
\698\ California Commission comments at 7-8.
---------------------------------------------------------------------------
332. Some commenters have expressed concern that numbering
[[Page 47338]]
administration will be performed in a discriminatory and
anticompetitive manner as long as interested parties exercise these
functions. For this reason, some commenters urge the Commission to
adopt guidelines for CO code administration with which the incumbent
LECs must comply prior to transfer of CO code administration to a new
NANP administrator. Specifically, they ask the Commission to prohibit
incumbent LECs from levying disparate ``code opening'' fees on
different carriers. We conclude that charging different ``code
opening'' fees for different providers or categories of providers of
telephone exchange service constitutes discriminatory access to
telephone numbers and therefore violates section 251(b)(3)'s
requirement of nondiscrimination. Charging different ``code opening''
fees for different providers or categories of providers of any
telecommunications service (not just telephone exchange service) also
violates section 202(a)'s prohibition of unreasonable discrimination
and also constitutes an ``unjust practice'' and ``unjust charge'' under
section 201(b).699 Further, it is inconsistent with the principle
stated in section 251(e)(1), which states that numbers are to be
available on an equitable basis. Incumbent LECs have control over CO
codes, a crucial resource for any competitor attempting to enter the
telecommunications market; incumbent LECs must therefore treat other
carriers as the incumbent LECs would treat themselves. To ensure that
numbering administration does not become a barrier to competition in
the telecommunications marketplace prior to the transfer of NANP
administration functions to a neutral number administrator, we conclude
that any incumbent LEC charging competing carriers fees for assignment
of CO codes may only do so if the incumbent LEC charges one uniform fee
for all carriers, including itself or its affiliates.
---------------------------------------------------------------------------
\699\ 47 U.S.C. 251(b)(3); 47 U.S.C. 202(a).
---------------------------------------------------------------------------
333. We are explicitly extending this protection, pursuant to
section 202, from discriminatory ``code opening'' fees to
telecommunications carriers, such as paging carriers, that are not
providers of telephone exchange service or telephone toll service, and
therefore are not covered by Section 251(b)(3).700 Paging carriers
are increasingly competing with other CMRS providers, and they would be
at an unfair competitive disadvantage if they alone could be charged
discriminatory code activation fees. For the reasons stated above, we
explicitly forbid incumbent LECs from assessing unjust, discriminatory,
or unreasonable charges for activating CO codes on any carrier or group
of carriers. To the extent that recurring per-number charges represent
charges for interconnection, they are governed by the principles set
out in the First Report and Order in this proceeding. Moreover, the
Commission has already stated that telephone companies may not impose
recurring charges solely for the use of numbers.701
---------------------------------------------------------------------------
\700\ Paging is not ``telephone exchange service'' within the
meaning of the Act because it is neither ``intercommunicating
service of the character ordinarily furnished by a single exchange''
nor ``comparable'' to such service. See 47 U.S.C. 153(47).
\701\ See The Need to Promote Competition and Efficient Use of
Spectrum for Radio Common Carrier Services, Memorandum Opinion and
Order, 59 R.R.2d 1275, 1284 (1986).
---------------------------------------------------------------------------
334. We emphasize that incumbent LEC attempts to delay or deny CO
code assignments for competing providers of telephone exchange service
would violate section 251(b)(3), where applicable, section 202(a), and
the Commission's numbering administration guidelines found, inter alia,
in the Ameritech Order, the NANP Order, and this Order. The Commission
expects the incumbent LECs to comply strictly with those guidelines and
act in an evenhanded manner as long as they retain their number
administration functions. Specifically, incumbent LECs should apply
identical standards and procedures for processing all numbering
requests, regardless of the identity of the party making the request.
335. Indeed, our delegation of matters related to numbering
administration during the transition to a new NANP administrator is
generally governed by the Commission's existing objectives and
guidelines related to number administration as well as those enumerated
in this proceeding. We will monitor closely the actions of Bellcore and
the LECs with respect to numbering administration to ensure that they
perform their tasks impartially and expeditiously until such tasks are
transferred.
C. Cost Recovery for Numbering Administration
1. Background
336. In section 251(e)(2), Congress mandates that ``[t]he cost of
establishing telecommunications numbering administration arrangements
and number portability shall be borne by all telecommunications
carriers on a competitively neutral basis as determined by the
Commission.'' 702 In the NANP Order, the Commission: (1) Directed
that the costs of the new impartial numbering administrator be
recovered through contributions by all communications providers; (2)
concluded that the gross revenues of each communications provider will
be used to compute each provider's contribution to the new numbering
administrator; and (3) concluded that the NANC will address the details
concerning recovery of the NANP administration costs.703 In the
NPRM, we found that we did not need to take further action because the
Commission had already determined that cost recovery for numbering
administration arrangements must be borne by all telecommunications
carriers on a competitively neutral basis.704
---------------------------------------------------------------------------
\702\ 47 U.S.C. 251(e)(2).
\703\ NANP Order, 11 FCC Rcd at 2627-2629.
\704\ NPRM at para. 259.
---------------------------------------------------------------------------
2. Comments
337. Several parties believe that the Commission should take
further action with regard to cost recovery for numbering
administration.705 BellSouth states that, states should have the
power to authorize cost recovery in conjunction with oversight of
central office code implementation activities, until transfer of
numbering administration to the NANP.706
---------------------------------------------------------------------------
\705\ See, e.g., BellSouth comments 20; Telecommunications
Resellers Association comments at 10; NCTA comments at 11.
\706\ BellSouth comments at 20.
---------------------------------------------------------------------------
338. Telecommunications Resellers Association urges us to
reconsider the assessment that the costs associated with the
administration of telecommunications numbering should be borne by
telecommunications carriers on a competitively neutral basis. It
asserts that reliance upon gross revenues would result in a double or
greater recovery from resale carriers and their customers.707
---------------------------------------------------------------------------
\707\ Telecommunications Resellers Association comments at 10.
---------------------------------------------------------------------------
339. Similarly, NCTA urges us to require that companies providing
telecommunications services in addition to other services fund NANP
administration based on a percentage of their gross telecommunications
revenues, and not their revenues from other services. Otherwise, NCTA
argues, diversified companies that have relatively little need for NXXs
but large gross revenues from other sources may have to fund a
disproportionately large share of NANP administration expenses. Also,
NCTA notes that the 1996 Act requires ``telecommunications carriers''
to contribute to cost recovery for number administration, but that the
NANP Order requires recovery from all ``communications providers.''
NCTA requests clarification that only
[[Page 47339]]
``telecommunications carriers'' as defined by the 1996 Act must
contribute to cost recovery for number administration.708
---------------------------------------------------------------------------
\708\ NCTA comments at 11.
---------------------------------------------------------------------------
340. Other commenters do not believe that it is necessary for the
Commission to take additional action with regard to cost recovery for
numbering administration.709 These parties generally agree that
the cost recovery approach taken in the NANP Order satisfies the 1996
Act's requirements with respect to ensuring nondiscriminatory access to
telephone numbers. Several reiterate that the costs of number
administration must be borne by all carriers on a competitively neutral
basis. GTE states that the NANP Order conclusions satisfy the cost
recovery requirement of the 1996 Act, if we ensure that those
conclusions are implemented in a manner that does not unduly favor or
disadvantage any particular industry segment or technology.710
---------------------------------------------------------------------------
\709\ See, e.g., ACSI comments at 13; ALTS comments at 8; CTIA
comments at 8; Frontier comments at 5 n.14; GCI comments at 6; GTE
comments at 31; Ohio Consumers' Council comments at 5; PacTel
comments at 26.
\710\ GTE comments at 31. See also PacTel comments at 26.
---------------------------------------------------------------------------
341. In its reply comments, PacTel rejects MCI's suggestion that
costs of implementing number portability should be reduced or
eliminated. In PacTel's view, interim number portability is an
essential element of achieving equitable number administration and all
parties that benefit from this process should contribute to full cost
recovery.711
---------------------------------------------------------------------------
\711\ PacTel reply at 33.
---------------------------------------------------------------------------
3. Discussion
342. Because of ambiguity between the language of the 1996 Act and
language in the NANP Order, we are persuaded that further action is
necessary to meet the 1996 Act's requirement that cost recovery for
number administration be borne by all telecommunications carriers on a
competitively neutral basis, and to conform the cost recovery
requirements specified in the NANP Order to the 1996 Act. First, we
require that: (1) Only ``telecommunications carriers,'' as defined in
section 3(44), be ordered to contribute to the costs of establishing
numbering administration; and (2) such contributions shall be based
only on each contributor's gross revenues from its provision of
telecommunications services.712 We note that we have considered
the economic impact of our rules in this section on small incumbent
LECs and other small entities. We conclude that by basing contributions
only on each contributor's gross revenues from its provision of
telecommunications services (instead of, for example, imposing a flat
fee contribution on all telecommunications carriers), we more equitably
apportion the burden of cost recovery for numbering administration.
---------------------------------------------------------------------------
\712\ 47 U.S.C. 251(e)(2) also requires that the cost of
establishing telecommunications number portability shall be borne by
all telecommunications carriers on a competitively neutral basis. We
note that cost recovery for number portability was addressed in the
Number Portability Order.
---------------------------------------------------------------------------
343. Section 251(e)(2) requires that the costs of
telecommunications numbering administration be borne by all
telecommunications carriers on a competitively neutral basis.
Contributions based on gross revenues would not be competitively
neutral for those carriers that purchase telecommunications facilities
and services from other telecommunications carriers because the
carriers from whom they purchase services or facilities will have
included in their gross revenues, and thus in their contributions to
number administration, those revenues earned from services and
facilities sold to other carriers. Therefore, to avoid such an outcome,
we require all telecommunications carriers to subtract from their gross
telecommunications services revenues expenditures for all
telecommunications services and facilities that have been paid to other
telecommunications carriers.713 It should be noted that this
requirement is solely for the purpose of determining a carrier's
contribution to numbering administration costs and not for any other
purpose, interpretation, or meaning of any other Commission rule such
as those contained in parts 32, 36, 51, 64, 65, or 69 of the
Commission's rules.
---------------------------------------------------------------------------
\713\ See Assessment and Collection of Regulatory Fees for
Fiscal Year 1995, Report and Order, 10 FCC Rcd 13512, at 13558-59
(1995) (Regulatory Fees Order). 61 FR 40155 (August 1, 1996). In the
Regulatory Fees Order, we stated that, in order to avoid imposing a
double payment burden on resellers, we would permit interexchange
carriers to subtract from their reported gross interstate revenues
any payments made to underlying carriers for telecommunications
facilities or services. Id. Our action here is consistent with that
taken in the Regulatory Fees Order. We note that the gross
telecommunications services revenues referenced in this discussion
are not limited to gross interstate revenues.
---------------------------------------------------------------------------
D. Section 271 Competitive Checklist Requirement That the BOCs Provide
Non-Discriminatory Access to Numbers for Entry Into In-region InterLATA
Services
1. Background and Comments
344. Section 271(c)(2)(B) contains a competitive checklist of
requirements governing the access to functions, facilities and services
or interconnection that BOCs must provide or generally offer to other
competing telecommunications carriers if the BOC wants authority to
provide in-region interLATA service. Pursuant to the competitive
checklist, BOCs desiring to provide in-region interLATA
telecommunications services must afford, ``(u)ntil the date by which
telecommunications numbering administration guidelines, plans or rules
are established, non-discriminatory access to telephone numbers for
assignment to the other carrier's telephone exchange service customers
* * * (and) (a)fter that date, (must) compl(y) with such guidelines,
plan or rules.'' 714 In the NPRM, we stated that these measures
foster competition by ensuring telecommunications numbering resources
are administered in a fair, efficient, and orderly manner.715
Ameritech asks us to clarify that, by complying with the NANP Order, a
BOC satisfies the competitive checklist requirement of
nondiscriminatory access to numbers.716 MCI argues that we must
ensure that the BOCs comply with section 271(c)(2)(B) and assign NXX
codes in a competitively neutral manner.717
---------------------------------------------------------------------------
\714\ 47 U.S.C. 271(c)(2)(B)(ix).
\715\ NPRM at para. 251.
\716\ Ameritech comments at 23. See also NYNEX comments at 18.
\717\ MCI comments at 10. We also note that in its petition for
declaratory ruling filed July 12, 1996, TCG has asked the Commission
to require, as part of a BOC's application to provide in-region
interLATA services pursuant to section 271, a demonstration that
numbering resources are available to competing local carriers. See
supra n.616.
---------------------------------------------------------------------------
2. Discussion
345. We decline to address section 271(c)(2)(B) issues in this
Order. We will consider each BOC's application to enter in-region
interLATA services pursuant to section 271(c)(2)(B) on a case by case
basis, and will look specifically at the circumstances and business
practices governing CO code administration in each applicant's state to
determine whether the BOC has complied with section 271(c)(2)(B)(ix).
VI. Final Regulatory Flexibility Analysis
346. As required by Section 603 of the Regulatory Flexibility Act
(RFA), 5 U.S.C. 603, an Initial Regulatory Flexibility Analysis (IRFA)
was incorporated in the Notice of Proposed Rulemaking (NPRM) in this
proceeding. The Commission sought written public comments on the
proposals in the NPRM, including the IRFA. The
[[Page 47340]]
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), Public Law No. 104-121, 110 Stat. 847
(1996).718
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\718\ Subtitle II of the CWAAA is ``The Small Business
Regulatory Enforcement Fairness Act of 1996'' (SBREFA), codified at
5 U.S.C. 601 et. seq.
---------------------------------------------------------------------------
A. Need for and Purpose of This Action
347. The Commission, in compliance with section 251(d)(1),
promulgates the rules in this Order to ensure the prompt implementation
of section 251, which is the local competition provision. Congress
sought to establish through the 1996 Act ``a pro-competitive, de-
regulatory national policy framework'' for the United States
telecommunications industry.719 Three principal goals of the
telecommunications provisions of the 1996 Act are: (1) Opening the
local exchange and exchange access markets to competition; (2)
promoting increased competition in telecommunications markets that
already are open to competition, including, particularly, 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.
---------------------------------------------------------------------------
\719\ S. Conf. Rep. No. 104-230, 104th Cong., 2d Sess. 1 (1996).
---------------------------------------------------------------------------
348. The rules adopted in this Order implement the first of these
goals--opening the local exchange and exchange access markets to
competition by eliminating certain operational barriers 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 pro-competitive,
deregulatory markets envisioned by Congress.720 We are mindful of
the balance that Congress struck between this goal and its concern for
the impact of the 1996 Act on small local exchange carriers,
particularly rural carriers. This balance is evidenced in section
251(f).
---------------------------------------------------------------------------
\720\ Id.
---------------------------------------------------------------------------
B. Summary of Issues Raised by Public Comments Made in Response to the
Initial Regulatory Flexibility Analysis
349. Summary of Initial Regulatory Flexibility Analysis (IRFA). In
the NPRM, the Commission performed an IRFA.721 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
businesses 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 special circumstances of smaller
incumbent LECs are carefully considered in our rulemaking. 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.
---------------------------------------------------------------------------
\721\ NPRM at paras. 274-287.
---------------------------------------------------------------------------
1. Treatment of Small LECs
350. Comments. The Small Business Administration (SBA), Rural Tel.
Coalition, and CompTel maintain that the Commission violated the RFA
when it sought to exclude incumbent LECs from regulatory flexibility
consideration without first consulting the SBA to establish a
definition of ``small business.'' 722 Rural Tel. Coalition and
CompTel also argue that the Commission failed to explain its statement
that ``incumbent LECs are dominant in their field'' or how that finding
was reached.723 Rural Tel. Coalition states that the lack of such
analysis is inappropriate because incumbent LECs are now facing
competition from a variety of sources, including wireline and wireless
carriers. Rural Tel. Coalition recommends that the Commission abandon
its determination that incumbent LECs are dominant, and perform the
regulatory flexibility analysis for incumbent LECs having fewer than
1500 employees.724
---------------------------------------------------------------------------
\722\ SBA RFA comments at 3-5; Rural Tel. Coalition reply at 38-
39; CompTel reply at 46.
\723\ Rural Tel. Coalition reply at 39.
\724\ Rural Tel. Coalition reply at 40.
---------------------------------------------------------------------------
351. Discussion. In essence, the SBA and the Rural Tel. Coalition
argue that we exceeded our authority under the RFA by certifying all
incumbent LECs as dominant in their field of operations, and therefore
concluding on that basis that they are not small businesses under the
RFA. They contend that the authority to make a size determination rests
solely with the SBA, and that by excluding a group from the scope of
regulatory flexibility analysis the Commission makes an unauthorized
size determination.725 Neither the SBA nor the Rural Tel.
Coalition cite any specific authority for this latter proposition.
---------------------------------------------------------------------------
\725\ SBA RFA comments at 4-5 (citing 15 U.S.C. 632(a)(2));
Rural Tel. Coalition reply at 38.
---------------------------------------------------------------------------
2. Other Issues
352. We have found incumbent LECs to be ``dominant in their field
of operations'' since the early 1980's and consequently have
consistently since that time certified under the RFA 726 that
incumbent LECs are not subject to regulatory flexibility analyses
because they are not small businesses.727 We have made similar
determinations in other areas.728 We recognize the SBA's special
role and expertise with regard to the RFA, and intend to continue to
consult with the SBA 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 the SBA, the Rural Tel. Coalition, and
CompTel 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 directly the Rural Tel.
Coalition's arguments that incumbent LECs are not dominant.729
---------------------------------------------------------------------------
\726\ See 5 U.S.C. 605(b).
\727\ See, e.g., Expanded Interconnection with Local Telephone
Company Facilities, 6 FCC Rcd 5809 (1991); MTS and WATS Market
Structure, 2 FCC Rcd 2953, 2959 (1987) (citing MTS and WATS Market
Structure, 93 F.C.C.2d 241, 338-39 (1983)).
\728\ See, e.g., Implementation of Sections of the Cable
Television Consumer Protection Act of 1992: Rate Regulation, 10 FCC
Rcd 7393, 7418 (1995). 60 FR 63492 (December 11, 1995).
\729\ Rural Tel. Coalition reply at 39-40.
---------------------------------------------------------------------------
353. Comments. Parties raised several other issues in response to
the Commission's IRFA in the NPRM. The SBA and CompTel contend that
commenters should not be required to separate their comments on the
IRFA from their comments on the other issues raised in the
NPRM.730 SBA maintains that separating RFA comments and discussion
from the rest of the comments ``isolates'' the regulatory flexibility
analysis from the remainder of the discussion, thereby handicapping the
Commission's analysis of the impact of the proposed rules on small
businesses.731 The SBA further suggests that our IRFA failed to:
(1) Give an adequate description of the projected reporting,
recordkeeping, and other compliance requirements of the proposed rules,
including an estimate of the classes of small entities which will be
subject to the requirement and the professional skills necessary to
prepare such reports or records;732 and (2) describe significant
alternatives that
[[Page 47341]]
minimize the significant economic impact of the proposal on small
entities, including exemption from coverage of the rule.733 SBA
also asserts that none of the alternatives in the NPRM are designed to
minimize the impact of the proposed rules on small businesses.
---------------------------------------------------------------------------
\730\ SBA RFA comments at 2-3; CompTel reply at 46.
\731\ Id.
\732\ SBA RFA comments at 5-6, citing 5 U.S.C. 603(b)(4).
\733\ SBA RFA comments at 7-8, citing 5 U.S.C. 603(c).
---------------------------------------------------------------------------
354. The Idaho Public Utilities Commission argues that the
Commission's rules will be devised for large carriers and therefore
will be ``de facto'' burdensome to Idaho's incumbent LECs and probably
to potential new entrants, which may be small companies.734
Therefore, Idaho requests that state commissions retain flexibility to
address the impact of our rules on smaller incumbent LECs.
---------------------------------------------------------------------------
\734\ Idaho Commission comments at 15.
---------------------------------------------------------------------------
355. The Small Cable Business Association (SCBA) contends that the
Commission's IRFA is inadequate because it does not state that small
cable companies are among the small entities affected by the proposed
rules.735 In its comments on the IRFA, SCBA refers to its proposal
that the Commission establish the following national standards for
small cable companies: (1) The definition of ``good faith''
negotiation; (2) the development of less burdensome arbitration
procedures for interconnection and resale; and (3) the designation of a
small company contact person at incumbent LECs and state commissions.
The SCBA also asserts that the Commission must adopt national standards
to guide state commissions in their implementation of section
251(f),736 the rural telephone company exemption. The First Report
and Order and its FRFA discusses issues raised by the SCBA regarding
its proposal that the Commission establish national standards for
certain provisions of the rules that affect small cable companies.
Accordingly, we do not repeat those analyses in this FRFA.
---------------------------------------------------------------------------
\735\ SCBA RFA comments at 1.
\736\ Id. at 1-2.
---------------------------------------------------------------------------
356. Discussion. We disagree with the 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.737 The IRFA also sought comments on the many
alternatives discussed in the body of the NPRM, including the statutory
exemption for certain rural telephone companies.738 The numerous
general public comments concerning the impact of our proposal on small
entities in response to our notice, including comments filed directly
in response to the IRFA,739 have enabled us 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 the SBA, to ensure that both our IRFAs and FRFAs fully meet
the requirements of the RFA.
---------------------------------------------------------------------------
\737\ NPRM, summarized at 61 FR 18311, 18312 (April 25, 1996).
\738\ 47 U.S.C. 251(f).
\739\ See SBA RFA comments; Rural Tel. Coalition reply at 38-41;
Idaho Public Utilities Commission comments at 15; SCBA RFA comments;
CompTel reply at 45-46.
---------------------------------------------------------------------------
357. The 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.740 Almost since the adoption of the RFA, we
have requested that IRFA comments be submitted under a separate and
distinct heading.741 Neither the RFA nor the SBA's rules prescribe
the manner in which comments may be submitted in response to an IRFA
742 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.743
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.
---------------------------------------------------------------------------
\740\ SBA RFA comments at 2.
\741\ See, e.g., Inquiry into the Development of Regulatory
Policy in Regard to Direct Broadcast Satellites, 86 F.C.C.2d 719,
755 (1981).
\742\ See 5 U.S.C. 603 (IRFA requirements).
\743\ See Vermont Yankee Nuclear Power Corp. v. Natural
Resources Defense Council, Inc., 435 U.S. 519, 524-25 (1978) (citing
FCC v. Schreiber, 381 U.S. 279, 290 (1965) and FCC v. Pottsville
Broadcasting Co., 309 U.S. 134, 138 (1940)).
---------------------------------------------------------------------------
358. We also reject SBA's assertion that none of the alternatives
in the NPRM were designed to minimize the impact of the proposed rules
on small businesses and the Idaho Public Utilities Commission's
assertion that our rules will be burdensome on new entrants. For
example, we proposed that incumbent LECs be required to disclose all
information relating to network design and technical standards and
information concerning changes to the network that affect
interconnection facilities.744 This proposal allows a potential
competitor, that may be a small entity, to collect the information
necessary to achieve and maintain efficient interconnection. Thus, the
competitor can enter the market by relying, in part or entirely, on the
incumbent LEC's facilities. Reduced operational 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.
---------------------------------------------------------------------------
\744\ NPRM paras. 189-190.
---------------------------------------------------------------------------
359. In addition, we disagree with the Idaho Public Utilities
Commission's contention that the rules devised by the Commission will
be burdensome to the majority of Idaho's incumbent LECs. We believe
section 251(f) and the rules we have crafted 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. We note that, pursuant to section 251(f), smaller
LECs may petition their state commissioners for suspension or
modification of the implementation schedule for toll dialing parity
established under section 251(b)(3). Although we have required
incumbent LECs to continue performing their current functions related
to the administration of numbers, this requirement will expire when
numbering administration is transferred to the new North American
Number Plan (NANP) Administrator, pursuant to Section 251(e). As
incumbent LECs are currently performing these functions and we have
received no comments from incumbent LECs objecting to this requirement,
we do not consider it burdensome for them to continue to perform these
tasks during the transition period.
360. In addition, we 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.''
745 The phrase ``new LEC entrants'' clearly encompasses small
cable operators that become providers of
[[Page 47342]]
local exchange service. The NPRM even identifies cable operators as
potential new entrants.746 Thus, the record shows that we have
identified small cable operators as entities that would be affected by
the proposed rules.
---------------------------------------------------------------------------
\745\ NPRM para. 277.
\746\ NPRM para. 6.
---------------------------------------------------------------------------
C. Description and Estimate of the Small Entities Subject to the Rules
361. The RFA defines ``small entity'' to include the definition of
``small business concern'' under the Small Business Act, 15 U.S.C.
632.747 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.748 The
SBA has defined companies listed under Standard Industrial
Classification (SIC) categories 4812 (Radiotelephone Communications)
749 and 4813 (Telephone Communications, Except Radiotelephone) to
be small entities when they have fewer than 1,500 employees.750
The SBA has defined companies listed under the SIC category 7379
(Business Services, not otherwise classified) to be small entities when
they have annual receipts of less than five million dollars.751
These standards also apply in determining whether an entity is a small
business for purposes of the RFA.
---------------------------------------------------------------------------
\747\ See 5 U.S.C. 601(6) (incorporating by reference the
definition of ``small business concern'' in 5 U.S.C. 632).
\748\ See 15 U.S.C. 632(1)(a).
\749\ 13 CFR 121.201, Standard Industrial Classification (SIC)
Code 4812.
\750\ 13 CFR 121.201, Standard Industrial Classification (SIC)
Code 4813.
\751\ 13 CFR 121.201, Standard Industrial Classification (SIC)
Code 7379.
---------------------------------------------------------------------------
362. The rules we adopt today regarding dialing parity and
nondiscriminatory access apply to all LECs. The rules regarding public
disclosure of changes to local networks apply to all incumbent LECs.
Finally, the rules regarding numbering administration impose financial
obligations on all telecommunications carriers. These rules also affect
IXCs, providers of cellular, broadband PCS, and geographic area 800 MHz
and 900 MHz specialized mobile radio services, including licensees who
have obtained extended implementation authorizations in the 800 MHz or
900 MHz SMR services, either by waiver or under Sec. 90.629 of the
Commission's rules,752 which may be small business concerns.
However, these rules will apply to SMR licensees only if they offer
real-time, two-way voice service that is interconnected with the public
switched network. Additional business entities affected by this
rulemaking include providers of telephone toll service, providers of
telephone exchange service, independent operator service providers,
independent directory assistance providers, independent directory
listing providers, independent directory database managers, and
resellers of these services. These entities could be small business
concerns.
---------------------------------------------------------------------------
\752\ 47 CFR 90.629.
---------------------------------------------------------------------------
363. 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.'' 753
---------------------------------------------------------------------------
\753\ See 13 CFR Sec. 121.210 (SIC 4813).
---------------------------------------------------------------------------
364. Local Exchange Carriers. Neither the Commission nor SBA has
developed a definition of small providers of local exchange services.
The closest applicable definition under SBA rules is for telephone
communications companies other than radiotelephone (wireless)
companies, SIC category 4813. For the purposes of revenue reporting,
1,347 companies reported doing business as LECs at the end of
1994.754 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 any more
particularity the number of LECs that would qualify as small business
concerns. 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.
---------------------------------------------------------------------------
\754\ Federal Communications Commission, CCB, Industry Analysis
Division, Telecommunications Industry Revenue: TRS Fund Worksheet
Data, Tbl. 21 (Average Total Telecommunications Revenue Reported by
Class of Carrier) (February 1996).
---------------------------------------------------------------------------
365. Interexchange Carriers. Neither the Commission nor SBA has
developed a definition of small entities that would apply specifically
to providers of interexchange services (IXCs). The closest applicable
definition under SBA rules is for telephone communications companies
other than radiotelephone (wireless) companies, SIC category 4813. 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 Telecommunications Relay Service (TRS).
According to our most recent data, 97 companies reported that they were
engaged in the provision of interexchange services.755 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.
---------------------------------------------------------------------------
\755\ Id.
---------------------------------------------------------------------------
366. Cellular Service Providers. 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 TRS. According to our most recent data 789
companies reported that they were engaged in the provision of cellular
services.756 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 decision and rules adopted in this
Order.
---------------------------------------------------------------------------
\756\ 13 CFR 121.201, Standard Industrial Classification (SIC)
Code 4812.
---------------------------------------------------------------------------
367. Broadband PCS Licensees. The broadband PCS spectrum is divided
into six frequency blocks designated A through F. Pursuant to 47 CFR
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. This regulation
defining ``small entity'' in the context of broadband PCS auctions has
been approved by the SBA.757 The
[[Page 47343]]
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.
---------------------------------------------------------------------------
\757\ See Implementation of Section 309(j) of the Communications
Act--Competitive Bidding, PP Docket No. 93-253, Fifth Report and
Order, 9 FCC Rcd 5532, 5581-84 (1994) 59 FR 37566 (July 22, 1994).
---------------------------------------------------------------------------
368. 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. A total of 1,479 licenses will be
awarded, however, 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 the number of
these licenses that will be won by small entities, nor how many small
entities will win D or E Block licenses. Given the facts that nearly
all radiotelephone companies have fewer than 1,000 employees 758
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 conclusions in this FRFA, that all of the licenses will be awarded
to small entities, as that term is defined by the SBA. Broadband PCS
licensees are affected by the decisions and rules adopted in this Order
to the extent that they provide telephone exchange service.
---------------------------------------------------------------------------
\758\ See United States Department of Commerce, Bureau of the
Census, Standard Industrial Classification Manual (1992) (1992
Census) SIC Code 4812.
---------------------------------------------------------------------------
369. SMR Licensees. Pursuant to 47 CFR 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 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.759
---------------------------------------------------------------------------
\759\ See Amendment of Parts 2 and 90 of the Commission's Rules
to Provide for the Use of 200 Channels Outside the Designated Filing
Areas in the 896-901 MHz and the 935-940 MHz Bands Allotted to the
Specialized Mobile Radio Pool, PR Docket No. 89-583, Second Order on
Reconsideration and Seventh Report and Order, 11 FCC Rcd 2639, 2693-
702 (1995) 60 FR 48913 (September 21, 1995); Amendment of Part 90 of
the Commission's Rules to Facilitate Future Development of SMR
Systems in the 800 MHz Frequency Band, PR Docket No. 93-144, First
Report and Order, Eighth Report and Order, and Second Further Notice
of Proposed Rulemaking, 11 FCC Rcd 1463 (1995) 61 FR 6212 (February
16, 1996).
---------------------------------------------------------------------------
370. The rule adopted in this Order applies 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. Since
the RFA amendments were not in effect until the record in this
proceeding was closed, the Commission was unable to request information
regarding the number of small businesses in this category. We do know
that one of these firms has over $15 million in revenues. We assume,
for purposes of our evaluations and conclusions in this FRFA, that all
of the remaining extended implementation authorizations may be held by
small entities, which may be affected by the decisions and rules
adopted in this Order.
371. 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. The Commission,
however, 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 to estimate, moreover, how many small entities within
the SBA definition will win these licenses. Because nearly all
radiotelephone companies have fewer than 1,000 employees and 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 FRFA, that all of the licenses will be awarded to small entities,
as defined by the SBA. Those SMR licensees that provide telephone
exchange service will be affected by the decisions in this Order.
372. Providers of Telephone Toll Service, Providers of Telephone
Exchange Service. Neither the Commission nor the SBA has developed a
definition of small entities applicable to providers of telephone toll
service and telephone exchange service. According to the 1992 Census,
there were approximately 3,497 firms engaged in providing telephone
services, as defined therein, for at least a year.760 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, providers of telephone toll service, providers of telephone
exchange service, and resellers. It seems certain that some of those
3,497 telephone service firms may not qualify as small businesses
because they are not ``independently owned and operated.'' 761 It
seems reasonable to conclude, therefore, that fewer than 3,497
telephone service firms are providers of telephone toll service or
providers of telephone exchange service and are small entities that may
be affected by this Order.
---------------------------------------------------------------------------
\760\ See United States Department of Commerce, Bureau of the
Census, 1992 Census of Transportation, Communications, and
Utilities; Establishment and Firm Size, at Firm Size 1-123 (1995)
(1992 Census).
\761\ 15 U.S.C. 632(a)(1).
---------------------------------------------------------------------------
373. Independent Operator Service Providers, Independent Directory
Assistance Providers, Independent Directory Listing Providers, and
Independent Directory Database Managers. We were unable to obtain
reliable data regarding the number of entities that provide these
telecommunications services or how many of these are small entities.
The Commission has not developed a definition of small entities
applicable to telecommunications service providers. Therefore, the
closest applicable definition of a small entity providing
telecommunications services is the definition under SBA rules
applicable to business services companies, SIC 7389, which defines a
small entity to be a business services company with annual receipts of
less than five million dollars. U.S. Census data provides that 46,289
firms providing business services had annual receipts of 5 million
dollars or less.762 Because it seems unlikely that all of the
business services firms would meet the other criteria, it seems
reasonable to conclude that fewer than 46,289 firms may be small
entities that might be affected by our Order.
---------------------------------------------------------------------------
\762\ 1992 Census, Table 2D, SIC Code 7389.
---------------------------------------------------------------------------
374. Resellers. Neither the Commission nor SBA has developed a
definition of small entities specifically applicable to resellers. The
closest
[[Page 47344]]
applicable SBA definition for a reseller is a telephone communications
company, SIC category 4813. However, the most reliable source of
information regarding the number of resellers nationwide of which we
are aware appears to be the data that the Commission collects annually
in connection with TRS. For the purposes of revenue reporting, 206
companies reported doing business as resellers at the end of
1994.763 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 resellers that would qualify as small entities
or small incumbent LEC 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.
---------------------------------------------------------------------------
\763\ Federal Communications Commission, CCB, Industry Analysis
Division, Telecommunications Industry Revenue: TRS Fund Worksheet
Data, Tbl. 21 (Average Total Telecommunications Revenue Reported by
Class of Carrier) (February 1996).
---------------------------------------------------------------------------
375. Telephone Companies. U.S. Census data provides that, at the
end of 1992, there were 3,497 firms engaged in providing telephone
services, as defined therein, for at least a year.764 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, providers of telephone toll service, providers of telephone
exchange service, and resellers. It seems certain that some of those
3,497 telephone service firms may not qualify as small businesses
because they are not ``independently owned and operated.'' 765 It
seems reasonable to conclude, therefore, that fewer than 3,497
telephone service firms are telephone companies and small entities that
may be affected by this Order.
---------------------------------------------------------------------------
\764\ See United States Department of Commerce, Bureau of the
Census, 1992 Census of Transportation, Communications, and
Utilities; Establishment and Firm Size, at Firm Size 1-123 (1995)
(1992 Census).
\765\ 15 U.S.C. 632(a)(1).
---------------------------------------------------------------------------
376. Cable System Operators. SBA has developed a definition of
small entities for cable and other pay television services, which
includes all such companies generating less than $11 million in
revenues 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 1992.766 The Commission has
developed its own definition of a small cable system operator for the
purposes of rate regulation, which has been approved by SBA.767
Under the Commission's rules, a ``small cable company is one serving
fewer than 400,000 subscribers nationwide.'' 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 the other cable operators.
Consequently, we estimate that there are fewer than 1,439 small entity
cable companies that may be affected by the decisions and rules adopted
in this Order.
---------------------------------------------------------------------------
\766\ 1992 Census, supra, at Firm Size 1-123.
\767\ Small Bus. Admin., 13 CFR part 121--Small Business Size
Regulations, Proposed Rules, 60 FR 57982, 57988 (November 24, 1995).
---------------------------------------------------------------------------
377. The Communications Act of 1934 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.'' 768 There were 63,196,310 basic cable subscribers
at the end of 1995, and 1,450 cable system operators serving fewer than
1 percent (631,960) of subscribers.769 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 systems
operators that would qualify as small cable operators under the
definition in the Communications Act of 1934.
---------------------------------------------------------------------------
\768\ 47 U.S.C. Sec. 543(m)(2).
\769\ Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29,
1996 (based on figures for December 30, 1995).
-------------------
FR Doc. 96-22045 Implementation of the Local Competition Provisions of the Telecommunications Act of 1996
--------------------------------------------------------
D. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements and Their Effect on Small Businesses and Steps Taken to
Minimize the Significant Economic Impact on Small Entities and
Alternatives Considered
378. 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 as a result of this
Order.770 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, including the significant alternatives
considered and rejected.771 Due to the size of this Order, we set
forth our analysis separately for individual sections of the Order,
using the same headings as were used above in the corresponding
sections of the Order.
---------------------------------------------------------------------------
\770\ See 5 U.S.C. 604(a)(4).
\771\ See 5 U.S.C. 604(a)(5).
---------------------------------------------------------------------------
379. 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.
380. Dialing Parity Requirements. The dialing parity provisions of
section 251(b)(3) entitle customers to choose different carriers for
their local exchange, intraLATA toll, and interLATA toll services
without the burden of dialing access codes. Each LEC is required to
provide dialing parity to providers of telephone exchange and telephone
toll service with respect to all telecommunications services that
require dialing to route a call. This obligation encompasses
international, interstate, intrastate, local and toll services.
381. Summary of Projected Reporting, Recordkeeping and Other
Compliance Requirements. In order to comply with the guidelines and
minimum federal standards established in this Order, each LEC must
implement toll dialing parity utilizing the ``full 2-PIC''
presubscription method and following the mandated timetable for
implementation of toll dialing parity. Although no timetable was
adopted for implementing local dialing parity it is expected that it
will be achieved through LECs' compliance with other section 251
requirements. LECs may recover the incremental costs of implementing
local and toll dialing parity such as the costs of dialing parity-
specific switch software, hardware, signalling system upgrades and
necessary consumer education. These costs will be recovered from all
providers of telephone exchange service and telephone toll service in
the area served by the LEC, including the LEC, through the use of a
competitively-neutral allocator established by each state. Compliance
with these
[[Page 47345]]
requirements may entail the use of engineering, technical, operational,
and accounting skills.
382. Steps Taken to Minimize the Significant Economic Impact on
Small Entities and Small Incumbent LECs, and Alternatives Considered.
This Order adopts broad guidelines and minimum federal standards for
toll dialing parity so that LECs and competing providers of telephone
toll service, many of whom will be small business entities, will not be
subject to an array of differing state standards and timetables
requiring them to research and tailor their operations to the unique
requirements of each state.
383. First, we required all LECs to implement toll dialing parity
based on LATA boundaries.772 Non-BOC LECs, including many smaller
LECs, that implement intraLATA and interLATA toll dialing parity may
choose whichever LATA within their state that they deem to be most
appropriate to define the area within which they will offer intraLATA
toll dialing parity. State commissions, in ruling upon such a choice of
LATA association, shall determine whether the proposed LATA association
is in the public interest. Because many smaller LECs have not been
subject to LATA boundary distinctions, we also gave states the
flexibility to take such factors into account and to require that toll
dialing parity be based on state rather than LATA boundaries in their
jurisdictions. Insofar as a state determines that presubscription
should occur along state, rather than LATA, boundaries, we anticipate
that such a determination will assist smaller LECs, in particular, by
permitting those LECs to define their service markets based on a
geographic distinction that is familiar to consumers.
---------------------------------------------------------------------------
\772\ See supra para. 37.
---------------------------------------------------------------------------
384. In addition, we adopted the ``full 2-PIC'' nationwide
presubscription method for implementing the toll dialing parity
requirements.773 In making this decision we considered a number of
methodologies, including the ``modified 2-PIC,'' ``the multi-PIC'' and
the ``smart-PIC'' methods. We concluded that the ``modified 2-PIC''
would limit the number of competitive service providers that could
participate in the market and that the ``multi-PIC'' method had not yet
proven to be technically and economically feasible. As the ``full 2-
PIC'' method is widely available and well defined, we noted that LECs,
many of which are small entities, would not be forced to purchase and
maintain an expensive, untested, and new technology. The Order provides
that, until the Commission considers the use of the ``multi-PIC'' or
``smart-PIC methods,'' states may impose such additional requirements
only after evaluating the technical feasibility and economic impact of
those requirements on smaller LECs in their jurisdictions.
---------------------------------------------------------------------------
\773\ See supra paras. 49-50.
---------------------------------------------------------------------------
385. We instituted a federal toll dialing parity implementation
schedule rather than allowing states to implement their own
schedules.774 This federally-mandated plan will provide certainty
for competitors, some of which may be small business entities, seeking
to become telephone toll service providers. Both LECs and competing
providers of telephone toll service will be able to develop business
plans and advertising strategies based upon specific timelines. This
ability to plan ahead is cost-efficient and levels the playing field
for all seeking to participate in the marketplace.
---------------------------------------------------------------------------
\774\ See supra para. 62.
---------------------------------------------------------------------------
386. We also concluded that a LEC may not accomplish toll dialing
parity by automatically assigning toll customers to itself, to a
customer's currently presubscribed interLATA or interstate toll
carrier, or to any other carrier except when, in a state that already
has implemented intrastate, intraLATA toll dialing parity, the
subscriber has selected the same interLATA and intraLATA, or interstate
and intrastate, presubscribed carrier.775 This requirement
prevents a carrier from automatically designating itself as a toll
carrier without notifying the customer of the opportunity to choose an
alternative carrier, one or more of which may be a small business.
---------------------------------------------------------------------------
\775\ See supra para. 81.
---------------------------------------------------------------------------
387. Lastly, we implemented national rules for the recovery of
dialing parity costs.776 Although it was suggested that these
costs be borne only by new entrants, and not incumbent LECs, we
determined that the network upgrades necessary to achieve dialing
parity should be recovered on a competitively-neutral basis. A
competitively neutral cost recovery mechanism prevents incumbent LECs
from imposing excessive fees upon competing entrants, some of which may
be small businesses. The imposition of excessive fees could constitute
an impediment to entry into the intraLATA toll market by small entities
that lack extensive financial resources and could reinforce the
marketplace dominance of established LECs. A competitively-neutral cost
recovery mechanism also benefits small LECs that might otherwise have
been unduly burdened by a cost allocation plan requiring an equal
payment from each entity.
---------------------------------------------------------------------------
\776\ See supra para. 92.
---------------------------------------------------------------------------
388. Nondiscriminatory Access Provisions. Under section 251(b)(3),
all LECs are required to allow competing providers of telephone
exchange service and telephone toll service access to telephone
numbers, operator services, directory assistance, and directory
listings that is at least equal in quality to the access the LEC itself
receives, without unreasonable dialing delays. LECs are required to
make available to competing providers operator services and directory
assistance and all adjunct features necessary for the use of these
services.
389. Summary of Projected Reporting, Recordkeeping, and Other
Compliance Requirements. In order to comply with the nondiscriminatory
access provisions all LECs must share subscriber listing information
with their competitors in ``readily accessible'' tape or electronic
formats. This information must be provided upon request and in a timely
manner.777 In addition, each LEC must process all calls from
competing providers, including calls to the LEC's operator services and
directory assistance, on an equal basis as calls originating from the
providing LEC.778 LECs that refuse to comply with reasonable,
technically feasible requests from competing providers for
``rebranding'' of resold operator services or directory assistance are
presumed to be unlawfully restricting access to these services.779
Compliance with these requests may require the use of engineering,
computer, accounting, and legal skills.
---------------------------------------------------------------------------
\777\ See supra para. 141.
\778\ See supra para. 159.
\779\ See supra paras. 128, 148.
---------------------------------------------------------------------------
390. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. The
entitlement to access, on a nondiscriminatory basis, to telephone
numbers, operator services, directory assistance and directory listings
will benefit providers competing with incumbent LECs. Many of these
competitors will be small business entities. The requirement that LECs
make their operator assistance and directory listing services available
to competitors may allow those competitors to save the time and money
it would take to build similar information resources. Additionally,
these competing providers will benefit because they will be able to
offer consumers at least the same quality of operator service and
directory assistance that is provided by the established LEC.
[[Page 47346]]
Small entities will be able to compete with established LECs more
quickly and with less initial investment. Their services will have an
opportunity to become equally valuable and equally marketable to
consumers. We have declined to support alternatives that would have
allowed LECs to degrade or limit access to these services, because such
behavior would bar competitive entry into the telecommunications
services market.
391. Network Disclosure. Pursuant to section 251(c)(5) incumbent
LECs are required to provide ``reasonable public notice'' of changes in
their network which would affect a competing service provider's
performance or ability to provide service or otherwise affect carriers'
interoperability. The types of changes that incumbent LECs must
disclose include, but are not limited to, changes that affect
transmission, signalling standards, call routing, network
configuration, electronic interfaces or data elements.
392. Summary of Projected Reporting, Recordkeeping, and Other
Compliance Requirements. To implement this disclosure requirement, this
Order imposes a new filing requirement on incumbent LECs that plan to
make changes to their networks. An incumbent LEC has a choice of filing
certain information with the Commission or of filing a short
certification with the Commission that the equivalent information has
been disclosed elsewhere. In either case, the incumbent LEC is also
responsible for maintaining the accuracy of the information. Compliance
with this requirement may require the use of engineering, technical,
computer, and legal skills.
393. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. This
recordkeeping submission requirement should, in fact, ease the burden
on smaller entities in their endeavor to remain abreast of changes to
the incumbent LEC network with which they interconnect. In our Order,
we authorize the use of industry forums, industry publications, and the
Internet, to make public disclosure of network changes and required
technical information by incumbent LECs. We believe that ``this
approach would build on a voluntary practice that now exists in the
industry and would result in broad availability of the information.''
780 By making information broadly available, we hope to facilitate
the participation of entities, such as small businesses, that lack the
resources to participate in industry forums. We originally postulated
that public notice should be provided exclusively through industry fora
or industry publications.781 Upon further consideration, however,
we broadened the means by which an incumbent LEC could satisfy our
public notice requirement to include two alternative low-cost
mechanisms--use of the Internet or filing with the Commission.782
These additional options will be beneficial to small incumbent LECs
because they will allow those small LECs to meet their network
disclosure obligations without incurring the costs associated with
attending industry conferences or publishing the information in an
industry magazine or journal.
---------------------------------------------------------------------------
\780\ NPRM at para. 191.
\781\ See supra para. 192.
\782\ See supra para. 198.
---------------------------------------------------------------------------
394. Numbering Administration. Section 251(e) confers upon the
Commission exclusive authority over all matters relating to the
administration of numbering resources that pertain to the United
States. To implement section 251(e)(1) the Commission plans to
designate a North American Numbering Plan (NANP) Administrator that
will administer telecommunications numbering in the United States
equitably and impartially. Pursuant to 251(e)(2) the cost of
establishing and maintaining the NANP Administrator will be borne by
all telecommunications carriers on a competitively neutral basis.
395. Summary of Projected Reporting, Recordkeeping, and Other
Compliance Requirements. The Commission has authorized state public
utility commissions to perform the task of implementing new area codes
subject to Commission guidelines. If a state commission chooses to
initiate and plan area code relief, it must inform the NANP
Administrator of the functions the commission will perform. All
telecommunications carriers will be required to contribute to the costs
of establishing numbering administration. Compliance with this
requirement will require engineering, technical, operational, and
accounting skills.
396. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered.
Although the Commission has authorized states to implement new area
codes, it has stipulated that states may not implement them in a manner
that will unduly favor or disadvantage any particular industry segment
or group of consumers.783 Accordingly, the Commission has
prohibited service-specific or technology specific area code overlays,
because they would exclude certain services or carriers, that may be
small business entities, from the existing area code and would
segregate their operations in a new area code.784 If states choose
to implement all-service overlays, the Commission has required that
there be 10-digit dialing for all local calls in areas served by such
overlays to ensure that competition will not be deterred as a result of
dialing disparity.785 Without mandatory 10-digit dialing,
customers might find it less attractive to switch carriers because
competing LECs, many of which may be new entrants to the market and may
include small businesses, would have to assign their customers numbers
in the new overlay area code. This would require those customers to
dial 10 digits much more often than the incumbents' customers.
Requiring 10-digit dialing for all local calls avoids the potentially
anti-competitive effect of all-service area code overlays. In addition,
to advance competition, the Commission has required that where an area
code overlay is implemented, every entity authorized to provide local
exchange service in the old area code, which may include small
businesses, must be assigned at least one NXX in that area code.
---------------------------------------------------------------------------
\783\ See supra para. 281.
\784\ See supra para. 285.
\785\ See supra para. 286.
---------------------------------------------------------------------------
397. Under the 1996 Act each telecommunications carrier must
contribute to cover the cost of numbering administration. Many
alternatives for allocating these costs were considered to ensure that
each carrier would contribute to a fund to cover the cost of numbering
administration on a competitively neutral basis. The contributions will
be based on the carrier's gross revenues from its provision of
telecommunications services reduced by all payments for
telecommunications services or facilities that are paid to other
telecommunications carriers. Such a competitively neutral cost
allocation plan benefits small incumbent LECs that might have been
unduly burdened by a cost apportionment plan requiring an equal payment
from each entity.786
---------------------------------------------------------------------------
\786\ See supra para. 343.
---------------------------------------------------------------------------
E. Report to Congress
398. The Commission shall send a copy of this Final Regulatory
Flexibility Analysis, along with this Order, in a report to Congress
pursuant to the Small Business Regulatory Enforcement Fairness Act of
1996, 5 U.S.C. 801(a)(1)(A). A copy of this FRFA will
[[Page 47347]]
also be published in the Federal Register.
VII. Ordering Clauses
Pursuant to sections 1-4, 201-209, 214, 218, 224, 251, 252, 303(r)
and 332 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), and 332, parts 51 and 52 of the
Commission's rules, 47 CFR parts 51, 52 are amended as set forth below.
400. It is further ordered that the policies, rules, and
requirements set forth herein are adopted as set forth below.
401. It is further ordered, pursuant to sections 416(a) and 413 of
the Communications Act of 1934, as amended, 47 U.S.C. 416(a) and 413,
that the Secretary shall serve this Second Report and Order and
Memorandum Opinion and Order on all local exchange carriers, as defined
in section 3(26) of the Communications Act of 1934, as amended, 47
U.S.C. 153(26), that have designated in writing an agent in the
District of Columbia, upon whom service of all notices and process and
all orders, decisions, and requirements of the Commission may be made
for and on behalf of the local exchange carrier, as required by section
413 of the Communications Act of 1934, as amended, 47 U.S.C. 413.
402. It is further ordered that, pursuant to the authority
contained in section 408 of the Communications Act, as amended, 47
U.S.C. 408, all authorizations for state commissions, Bellcore, and
local administrators, including LECs, to perform certain numbering
administration functions, consistent with the terms as defined in this
Order, are effective August 8, 1996. Because of the need to avoid
disruption in numbering administration, we find that there is good
cause for this action pursuant to 5 U.S.C. 553(d)(3). All other
policies, rules, and requirements set forth herein are effective
October 7, 1996, except for collections of information subject to
approval by the Office of Management and Budget (``OMB''), which are
effective November 15, 1996.
403. It is further ordered that, pursuant to sections 4, 5, and 405
of the Communications Act of 1934, as amended, 47 U.S.C. 154, 155, and
405, In the Matter of Proposed 708 Relief Plan and 630 Numbering Plan
Area Code by Ameritech--Illinois, IAD File no. 94-102, Declaratory
Ruling and Order, 10 FCC Rcd. 4596 (1995) IS CLARIFIED to the extent
indicated herein at paragraph numbers 281-293.
404. It is further ordered that, pursuant to the authority
contained in sections 4(i), 251(e)(1), and 405 of the Communications
Act of 1934, as amended, 47 U.S.C. 154(i), 251(e)(1) and 405, Comcast
Corporation's Petition for Clarification or Reconsideration of In the
Matter of Proposed 708 Relief Plan and 630 Numbering Plan Area Code by
Ameritech--Illinois, IAD File no. 94-102, Declaratory Ruling and Order,
10 FCC Rcd. 4596 (1995), IS DISMISSED as moot.
405. It is further ordered that, pursuant to the authority
contained in sections 4(i), 251(e)(1), and 405 of the Communications
Act, as amended, 47 U.S.C. 154(i), 251(e)(1), and 405, the Petition for
Limited Clarification and/or Reconsideration filed by the Pennsylvania
Public Utilities Commission and the Request for Clarification filed by
the National Association of Regulatory Utility Commissioners of In the
Matter of Administration of the North American Numbering Plan, CC
Docket No. 92-237, Report and Order, 11 FCC Rcd 2588 (1995) are hereby
dismissed.
406. It is further ordered that the relief requested in the
petition for declaratory ruling filed by the Texas Public Utilities
Commission is denied.
407. It is further ordered that, pursuant to section 5(c)(1) of the
Communications Act of 1934, as amended, 47 U.S.C. 155(c)(1), authority
is delegated to the Chief, Common Carrier Bureau, to act on petitions
filed by parties wishing to dispute proposed area code plans, to act on
toll dialing parity implementation plans filed by LECs seeking to
implement toll dialing parity, and to issue orders fixing reasonable
public notice periods in the case of contested short term disclosure by
incumbent local exchange carriers of network changes under 251(c)(5).
408. It is further ordered that, to the extent that 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
pertaining to paging carriers being charged fees for the opening of
central office codes and for blocks of numbers.
List of Subjects
47 CFR Part 51
Collocation, Interconnection, Network elements, Pricing standard,
Proxies, Reciprocal compensation, Resale, Transport and termination.
47 CFR Part 52
Area codes, Cost recovery, Database architecture and
administration, Local exchange carrier, Local number portability, Long-
term database methods, Numbering, Telecommunications, Transitional
methods.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Note: This attachment will not be published in the Code of
Federal Regulations.
Attachment--List of Parties
Comments: (Filed on or Before May 20, 1996)
American Communications Services, Inc. (ACSI)
Ameritech
Association for Local Telecommunications Services (ALTS)
AT&T Corporation (AT&T)
Beehive Telephone Company, Inc. (Beehive)
Bell Atlantic Telephone Companies (Bell Atlantic)
BellSouth Corporation (BellSouth)
Cellular Telecommunications Industry Association (CTIA)
Cincinnati Bell Telephone Company (CBT)
Citizens Utilities Company (Citizens Utilities)
Cox Communications, Inc. (Cox)
District of Columbia Public Service Commission (District of Columbia
Commission)
Excel Telecommunications (Excel)
Florida Public Service Commission (Florida Commission)
Frontier Corporation (Frontier)
General Communication, Inc. (GCI)
General Services Administration/Department of Defense (GSA/DOD)
GTE Service Corporation (GTE)
GVNW Inc./Management (GVNW)
Illinois Commerce Commission (Illinois Commission)
Indiana Utility Regulatory Commission (Indiana Commission Staff)
Lincoln Telephone and Telegraph Company (Lincoln Telephone)
Louisiana Public Service Commission (LPSC)
MCI Telecommunications Corporation (MCI)
MFS Communications Company, Inc. (MFS)
Michigan Public Service Commission (Michigan Commission Staff)
National Cable Television Association, Inc. (NCTA)
New Jersey, Staff of Board of Public Utilities (New Jersey
Commission)
NEXTLINK Communications, L.L.C. (NEXTLINK)
Northern Telecom inc. (Nortel)
NYNEX Telephone Companies (NYNEX)
Office of the Ohio Consumers' Counsel (Ohio Consumers' Counsel)
Omnipoint Communications, Inc. (Omnipoint)
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)
[[Page 47348]]
Public Utilities Commission of Ohio (Ohio Commission)
Rural Telephone Coalition (Rural Tel. Coalition)
SBC Communications Inc. (SBC)
Small Cable Business Association (SCBA)
Sprint Corporation (Sprint)
Telecommunications Resellers Association
Telecommunications Carriers for Competition (TCC)
Teleport Communications Group Inc. (Teleport)
Texas Public Utilities Commission (Texas Commission)
The Western Alliance (Western Alliance)
Time Warner Communications Holdings, Inc. (Time Warner)
U S WEST, Inc. (U S WEST)
United States Telephone Association (USTA)
Vanguard Cellular Systems, Inc. (Vanguard)
WinStar Communications, Inc. (WinStar)
Replies: (Filed on or Before June 3, 1996)
A-Plus Network, Inc. (A-Plus)
ACSI
American Electric Power Service Corp.
Ameritech
AT&T
Bell Atlantic
Bell Atlantic/NYNEX Mobile
BellSouth
California Commission
Carolina Power and Light Co.
CBT
Citizens Utilities
Consolidated Edison Company of New York (Con Ed)
Cox
Delmarva Power and Light (Delmarva)
District of Columbia Commission
General Communication, Inc. (GCI)
GSA/DOD
GTE Service Corporation (GTE)
Iowa Network Services, Inc., SDN Inc., and KIN Network, Inc. (Iowa
Network Services)
Joint Cable Companies
Koch
MCI
MFS
Minnesota Independant Equal Access Corporation (MIEAC)
Motorola, Inc.
Municipal Utilities
National Exchange Carriers Association (NECA)
NCTA
New England Electric Companies
New Mexico Public Service Corporation
NEXTLINK
NYNEX
Ohio Consumers' Counsel
Ohio Edison Company
PacTel
PageNet
Puerto Rico Telephone Company
Rural Tel. Coalition
SBC
Sprint
TCC
Telecommunications Resellers Association
Teleport
U S WEST
USTA
Vanguard
Western Alliance
WinStar
Parties Filing Comments in the Texas PUC Matter
Comments
AT&T
BellSouth
Century Cellunet, Inc. (Century Cellunet)
Competitive Telecommunications Association (CompTel)
Cox
GTE
Houston Cellular Telephone Company (HCTC)
Intelcom Group (U.S.A.), Inc. (Intelcom)
MCI
MFS
Nextel Communications, Inc. (Nextel)
PageNet
Personal Communications Industry Association (PCIA)
ProNet, Inc. (ProNet)
SBC
Sprint Spectrum
Sprint
Teleport
US West
Vanguard
Reply Comments
BellSouth
CTIA
MCI
Omnipoint Communications, Inc. (Omnipoint)
ProNet
SBC
Sprint
Teleport
Texas Commission
Texas Office of Public Utility Counsel (Texas Public Utility
Counsel)
U S WEST
Vanguard
Parties Filing Comments in CC Docket No. 95-185
Arch Communications Group, Inc.
AirTouch Communications
PageNet
Rule Changes
Parts 51 and 52 of Title 47 of the Code of Federal Regulations are
amended as follows:
PART 51--INTERCONNECTION
1. The authority citation for part 51 is revised to read as
follows:
Authority: Sections 1-5, 7, 201-05, 207-09, 218, 225-27, 251-54,
271, 332, 48 Stat. 1070, as amended, 1077; 47 U.S.C. Secs. 151-55,
157, 201-05, 207-09, 218, 225-27, 251-54, 271, 332, unless otherwise
noted.
2. Section 51.5 is amended by adding the following definitions in
alphabetical order to read as follows:
Sec. 51.5 Terms and definitions.
* * * * *
Dialing Parity. The term ``dialing parity'' means that a person
that is not an affiliate of a local exchange carrier is able to provide
telecommunications services in such a manner that customers have the
ability to route automatically, without the use of any access code,
their telecommunications to the telecommunications service provider of
the customer's designation from among 2 or more telecommunications
service providers (including such local exchange carrier).
* * * * *
Information services. The term ``information services'' means the
offering of a capability for generating, acquiring, storing,
transforming, processing, retrieving, utilizing, or making available
information via telecommunications, and includes electronic publishing,
but does not include any use of any such capability for the management,
control, or operation of a telecommunications system or the management
of a telecommunications service.
* * * * *
Local Access and Transport Area (LATA). A ``Local Access and
Transport Area'' is a contiguous geographic area--
(1) Established before February 8, 1996 by a Bell operating company
such that no exchange area includes points within more than 1
metropolitan statistical area, consolidated metropolitan statistical
area, or State, except as expressly permitted under the AT&T Consent
Decree; or
(2) Established or modified by a Bell operating company after
February 8, 1996 and approved by the Commission.
* * * * *
Service provider. A ``service provider'' is a provider of
telecommunications services or a provider of information services.
* * * * *
State. The term ``state'' includes the District of Columbia and the
Territories and possessions.
* * * * *
Telecommunications service. The term ``telecommunications service''
refers to 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.
Telephone exchange service. A ``telephone exchange service'' is:
(1) A service within a telephone exchange, or within a connected
system of telephone exchanges within the same exchange area operated to
furnish to subscribers intercommunicating service of the character
ordinarily furnished by a single exchange, and which is covered by the
exchange service charge, or
(2) A comparable service provided through a system of switches,
transmission equipment, or other facilities (or combination thereof) by
[[Page 47349]]
which a subscriber can originate and terminate a telecommunications
service.
Telephone toll service. The term ``telephone toll service'' refers
to telephone service between stations in different exchange areas for
which there is made a separate charge not included in contracts with
subscribers for exchange service.
Unreasonable dialing delay. For the same type of calls, dialing
delay is ``unreasonable'' when the dialing delay experienced by the
customer of a competing provider is greater than that experienced by a
customer of the LEC providing dialing parity, or nondiscriminatory
access to operator services or directory assistance.
* * * * *
3. A new Sec. 51.205 is added to subpart C to read as follows:
Sec. 51.205 Dialing parity: general.
A local exchange carrier (LEC) shall provide local and toll dialing
parity to competing providers of telephone exchange service or
telephone toll service, with no unreasonable dialing delays. Dialing
parity shall be provided for all originating telecommunications
services that require dialing to route a call.
4. A new Sec. 51.207 is added to subpart C to read as follows:
Sec. 51.207 Local dialing parity.
A LEC shall permit telephone exchange service customers within a
local calling area to dial the same number of digits to make a local
telephone call notwithstanding the identity of the customer's or the
called party's telecommunications service provider.
5. A new Sec. 51.209 is added to subpart C read as follows:
Sec. 51.209 Toll dialing parity.
(a) A LEC shall implement throughout each state in which it offers
telephone exchange service intraLATA and interLATA toll dialing parity
based on LATA boundaries. When a single LATA covers more than one
state, the LEC shall use the implementation procedures that each state
has approved for the LEC within that state's borders.
(b) A LEC shall implement toll dialing parity through a
presubscription process that permits a customer to select a carrier to
which all designated calls on a customer's line will be routed
automatically. LECs shall allow a customer to presubscribe, at a
minimum, to one telecommunications carrier for all interLATA toll calls
and to presubscribe to the same or to another telecommunications
carrier for all intraLATA toll calls.
(c) A LEC may not assign automatically a customer's intraLATA toll
traffic to itself, to its subsidiaries or affiliates, to the customer's
presubscribed interLATA or interstate toll carrier, or to any other
carrier, except when, in a state that already has implemented
intrastate, intraLATA toll dialing parity, the subscriber has selected
the same presubscribed carrier for both intraLATA and interLATA toll
calls.
(d) Notwithstanding the requirements of paragraphs (a) and (b) of
this section, states may require that toll dialing parity be based on
state boundaries if it deems that the provision of intrastate and
interstate toll dialing parity is procompetitive and otherwise in the
public interest.
6. A new Sec. 51.211 is added to subpart C to read as follows:
Sec. 51.211 Toll dialing parity implementation schedule.
(a) A LEC that does not begin providing in-region, interLATA or in-
region, interstate toll services in a state before February 8, 1999,
must implement intraLATA and interLATA toll dialing parity throughout
that state on February 8, 1999 or an earlier date as the state may
determine, consistent with section 271(e)(2)(B) of the Communications
Act of 1934, as amended, to be in the public interest.
(b) A Bell Operating Company (BOC) that provides in-region,
interLATA toll services in a state before February 8, 1999 shall
provide intraLATA toll dialing parity throughout that state coincident
with its provision of in-region, interLATA toll services.
(c) A LEC that is not a BOC that begins providing in-region,
interLATA or in-region, interstate toll services in a state before
August 8, 1997, shall implement intraLATA and interLATA toll dialing
parity throughout that state by August 8, 1997. If the LEC is unable to
comply with the August 8, 1997 implementation deadline, the LEC must
notify the Commission's Common Carrier Bureau by May 8, 1997. In the
notification, the LEC must state its justification for noncompliance
and must set forth the date by which it proposes to implement intraLATA
and interLATA toll dialing parity.
(d) A LEC that is not a BOC that begins providing in-region,
interLATA or in-region, interstate toll services in a state on or after
August 8, 1997, but before February 8, 1999 shall implement intraLATA
and interLATA toll dialing parity throughout that state no later than
the date on which it begins providing in-region, interLATA or in-
region, interstate toll services.
(e) Notwithstanding the requirements of paragraphs (a) through (d)
of this section, a LEC shall implement toll dialing parity under a
state order as described below:
(1) If the state issued a dialing parity order by December 19, 1995
requiring a BOC to implement toll dialing parity in advance of the
dates established by these rules, the BOC must implement toll dialing
parity in accordance with the implementation dates established by the
state order.
(2) If the state issued a dialing parity order by August 8, 1996
requiring a LEC that is not a BOC to implement toll dialing parity in
advance of the dates established by these rules, the LEC must implement
toll dialing parity in accordance with the implementation dates
established by the state order.
(f) For LECs that are not Bell Operating Companies, the term in-
region, interLATA toll service, as used in this section and
Sec. 51.213, includes the provision of toll services outside of the
LEC's study area.
7. A new Sec. 51.213 is added to subpart C to read as follows:
Sec. 51.213 Toll dialing parity implementation plans.
(a) A LEC must file a plan for providing intraLATA toll dialing
parity throughout each state in which it offers telephone exchange
service. A LEC cannot offer intraLATA toll dialing parity within a
state until the implementation plan has been approved by the
appropriate state commission or the Commission.
(b) A LEC's implementation plan must include:
(1) A proposal that explains how the LEC will offer intraLATA toll
dialing parity for each exchange that the LEC operates in the state, in
accordance with the provisions of this section, and a proposed time
schedule for implementation; and
(2) A proposal for timely notification of its subscribers and the
methods it proposes to use to enable subscribers to affirmatively
select an intraLATA toll service provider.
(3) A LEC that is not a BOC also shall identify the LATA with which
it will associate for the purposes of providing intraLATA and interLATA
toll dialing parity under this subpart.
(c) A LEC must file its implementation plan with the state
commission for each state in which the LEC provides telephone exchange
service, except that if a LEC determines that a state commission has
elected not to review the plan or will not complete its review in
sufficient time for the LEC to meet the toll dialing parity
[[Page 47350]]
implementation deadlines in Sec. 51.211, the LEC must file its plan
with the Commission:
(1) No later than 180 days before the date on which the LEC will
begin providing toll dialing parity in the state, or no later than 180
days before February 8, 1999, whichever occurs first; or
(2) For LECs that begin providing in-region, interLATA or in-
region, interstate toll service (see Sec. 51.211(f)) before August 8,
1997, no later than December 5, 1996.
(d) The Commission will release a public notice of any LEC
implementation plan that is filed with the Commission under paragraph
(c) of this section.
(1) The LEC's plan will be deemed approved on the fifteenth day
following release of the Commission's public notice unless, no later
than the fourteenth day following the release of the Commission's
public notice; either
(i) The Common Carrier Bureau notifies the LEC that its plan will
not be deemed approved on the fifteenth day; or
(ii) An opposition to the plan is filed with the Commission and
served on the LEC that filed the plan. Such an opposition must state
specific reasons why the LEC's plan does not serve the public interest.
(2) If one or more oppositions are filed, the LEC that filed the
plan will have seven additional days (i.e., until no later than the
twenty-first day following the release of the Commission's public
notice) within which to file a reply to the opposition(s) and serve it
on all parties that filed an opposition. The response shall:
(i) Include information responsive to the allegations and concerns
identified by the opposing party; and
(ii) Identify possible revisions to the plan that will address the
opposing party's concerns.
(3) If a LEC's plan is opposed under paragraph (d)(1)(ii) of this
section, the Common Carrier Bureau will act on the plan within ninety
days of the date on which the Commission released its public notice. In
the event the Bureau fails to act within ninety days, the plan will not
go into effect pending Bureau action. If the plan is not opposed, but
it did not go into effect on the fifteenth day following the release of
the Commission's public notice (see paragraph (d)(1)(i) of this
section), and the Common Carrier Bureau fails to act on the plan within
ninety days of the date on which the Commission released its public
notice, the plan will be deemed approved without further Commission
action on the ninety-first day after the date on which the Commission
released its public notice of the plan's filing.
8. A new Sec. 51.215 is added to subpart C to read as follows:
Sec. 51.215 Dialing parity: cost recovery.
(a) A LEC may recover the incremental costs necessary for the
implementation of toll dialing parity. The LEC must recover such costs
from all providers of telephone exchange service and telephone toll
service in the area served by the LEC, including that LEC. The LEC
shall use a cost recovery mechanism established by the state.
(b) Any cost recovery mechanism for the provision of toll dialing
parity pursuant to this section that a state adopts must not:
(1) Give one service provider an appreciable cost advantage over
another service provider, when competing for a specific subscriber
(i.e., the recovery mechanism may not have a disparate effect on the
incremental costs of competing service providers seeking to serve the
same customer); or
(2) Have a disparate effect on the ability of competing service
providers to earn a normal return on their investment.
9. A new Sec. 51.217 is added to subpart C to read as follows:
Sec. 51.217 Nondiscriminatory access: Telephone numbers, operator
services, directory assistance services, and directory listings.
(a) Definitions. As used in this section, the following definitions
apply:
(1) Competing provider. A ``competing provider'' is a provider of
telephone exchange or telephone toll services that seeks
nondiscriminatory access from a local exchange carrier (LEC) in that
LEC's service area.
(2) Nondiscriminatory access. ``Nondiscriminatory access'' refers
to access to telephone numbers, operator services, directory assistance
and directory listings that is at least equal to the access that the
providing local exchange carrier (LEC) itself receives.
Nondiscriminatory access includes, but is not limited to:
(i) Nondiscrimination between and among carriers in the rates,
terms, and conditions of the access provided; and
(ii) The ability of the competing provider to obtain access that is
at least equal in quality to that of the providing LEC.
(3) Providing local exchange carrier (LEC). A ``providing local
exchange carrier'' is a local exchange carrier (LEC) that is required
to permit nondiscriminatory access to a competing provider.
(b) General rule. A local exchange carrier (LEC) that provides
operator services, directory assistance services or directory listings
to its customers, or provides telephone numbers, shall permit competing
providers of telephone exchange service or telephone toll service to
have nondiscriminatory access to that service or feature, with no
unreasonable dialing delays.
(c) Specific requirements. A LEC subject to paragraph (b) of this
section must also comply with the following requirements:
(1) Telephone numbers. A LEC shall permit competing providers to
have access to telephone numbers that is identical to the access that
the LEC provides to itself.
(2) Operator services. A LEC must permit telephone service
customers to connect to the operator services offered by that
customer's chosen local service provider by dialing ``0,'' or ``0''
plus the desired telephone number, regardless of the identity of the
customer's local telephone service provider.
(3) Directory assistance services and directory listings.--(i)
Access to directory assistance. A LEC shall permit competing providers
to have access to its directory assistance services so that any
customer of a competing provider can obtain directory listings, except
as provided in paragraph (c)(3)(iii) of this section, on a
nondiscriminatory basis, notwithstanding the identity of the customer's
local service provider, or the identity of the provider for the
customer whose listing is requested.
(ii) Access to directory listings. A LEC shall provide directory
listings to competing providers in readily accessible magnetic tape or
electronic formats in a timely fashion upon request. A LEC also must
permit competing providers to have access to and read the information
in the LEC's directory assistance databases.
(iii) Unlisted numbers. A LEC shall not provide access to unlisted
telephone numbers, or other information that its customer has asked the
LEC not to make available. The LEC shall ensure that access is
permitted only to the same directory information that is available to
its own directory assistance customers.
(iv) Adjuncts to services. Operator services and directory
assistance services must be made available to competing providers in
their entirety, including access to any adjunct features (e.g., rating
tables or customer information databases) necessary to allow competing
providers full use of these services.
(d) Branding of operator services and directory assistance
services. The refusal of a providing local exchange
[[Page 47351]]
carrier (LEC) to comply with the reasonable request of a competing
provider that the providing LEC rebrand its operator services and
directory assistance, or remove its brand from such services, creates a
presumption that the providing LEC is unlawfully restricting access to
its operator services and directory assistance. The providing LEC can
rebut this presumption by demonstrating that it lacks the capability to
comply with the competing provider's request.
(e) Disputes.--(1) Disputes involving nondiscriminatory access. In
disputes involving nondiscriminatory access to operator services,
directory assistance services, or directory listings, a providing LEC
shall bear the burden of demonstrating with specificity:
(i) That it is permitting nondiscriminatory access, and
(ii) That any disparity in access is not caused by factors within
its control. ``Factors within its control'' include, but are not
limited to, physical facilities, staffing, the ordering of supplies or
equipment, and maintenance.
(2) Disputes involving unreasonable dialing delay. In disputes
between providing local exchange carriers (LECs) and competing
providers involving unreasonable dialing delay in the provision of
access to operator services and directory assistance, the burden of
proof is on the providing LEC to demonstrate with specificity that it
is processing the calls of the competing provider's customers on terms
equal to that of similar calls from the providing LEC's own customers.
10. Section 51.305 is amended by adding a new paragraph (g) to read
as follows:
Sec. 51.305 Interconnection.
* * * * *
(g) An incumbent LEC shall provide to a requesting
telecommunications carrier technical information about the incumbent
LEC's network facilities sufficient to allow the requesting carrier to
achieve interconnection consistent with the requirements of this
section.
11. Section 51.307 is amended by adding a new paragraph (e) to read
as follows:
Sec. 51.307 Duty to provide access on an unbundled basis to network
elements.
* * * * *
(e) An incumbent LEC shall provide to a requesting
telecommunications carrier technical information about the incumbent
LEC's network facilities sufficient to allow the requesting carrier to
achieve access to unbundled network elements consistent with the
requirements of this section.
12. A new Sec. 51.325 is added to subpart D to read as follows:
Sec. 51.325 Notice of network changes: Public notice requirement.
(a) An incumbent local exchange carrier (``LEC'') must provide
public notice regarding any network change that:
(1) Will affect a competing service provider's performance or
ability to provide service; or
(2) Will affect the incumbent LEC's interoperability with other
service providers.
(b) For purposes of this section, interoperability means the
ability of two or more facilities, or networks, to be connected, to
exchange information, and to use the information that has been
exchanged.
(c) Until public notice has been given in accordance with
Secs. 51.325 through 51.335, an incumbent LEC may not disclose to
separate affiliates, separated affiliates, or unaffiliated entities
(including actual or potential competing service providers or
competitors), information about planned network changes that are
subject to this section.
(d) For the purposes of Secs. 51.325 through 51.335, the term
services means telecommunications services or information services.
13. A new Sec. 51.327 is added to subpart D to read as follows:
Sec. 51.327 Notice of network changes: content of notice.
(a) Public notice of planned network changes must, at a minimum,
include:
(1) The carrier's name and address;
(2) The name and telephone number of a contact person who can
supply additional information regarding the planned changes;
(3) The implementation date of the planned changes;
(4) The location(s) at which the changes will occur;
(5) A description of the type of changes planned (Information
provided to satisfy this requirement must include, as applicable, but
is not limited to, references to technical specifications, protocols,
and standards regarding transmission, signaling, routing, and facility
assignment as well as references to technical standards that would be
applicable to any new technologies or equipment, or that may otherwise
affect interconnection); and
(6) A description of the reasonably foreseeable impact of the
planned changes.
(b) The incumbent LEC also shall follow, as necessary, procedures
relating to confidential or proprietary information contained in
Sec. 51.335.
14. A new Sec. 51.329 is added to subpart D read as follows:
Sec. 51.329 Notice of network changes: Methods for providing notice.
(a) In providing the required notice to the public of network
changes, an incumbent LEC may use one of the following methods:
(1) Filing a public notice with the Commission; or
(2) Providing public notice through industry fora, industry
publications, or the carrier's publicly accessible Internet site. If an
incumbent LEC uses any of the methods specified in paragraph (a)(2) of
this section, it also must file a certification with the Commission
that includes:
(i) A statement that identifies the proposed changes;
(ii) A statement that public notice has been given in compliance
with Secs. 51.325 through 51.335; and
(iii) A statement identifying the location of the change
information and describing how this information can be obtained.
(b) Until the planned change is implemented, an incumbent LEC must
keep the notice available for public inspection, and amend the notice
to keep the information complete, accurate and up-to-date.
(c) Specific filing requirements. Commission filings under this
section must be made as follows:
(1) The public notice or certification must be labeled with one of
the following titles, as appropriate: ``Public Notice of Network Change
Under Rule 51.329(a),'' ``Certification of Public Notice of Network
Change Under Rule 51.329(a),'' ``Short Term Public Notice Under Rule
51.333(a),'' or ``Certification of Short Term Public Notice Under Rule
51.333(a).''
(2) Two paper copies of the incumbent LEC's public notice or
certification, required under paragraph (a) of this section, must be
sent to ``Secretary, Federal Communications Commission, Washington, DC
20554.'' The date on which this filing is received by the Secretary is
considered the official filing date.
(3) In addition, one paper copy and one diskette copy must be sent
to the ``Chief, Network Services Division, Common Carrier Bureau,
Federal Communications Commission, Washington, DC 20554.'' The diskette
copy must be on a standard 3\1/2\ inch diskette, formatted in IBM-
compatible format to be readable by high-density floppy drives
operating under MS DOS 5.X or later compatible versions, and shall be
in a word-processing format designated, from time-to-time, in public
[[Page 47352]]
notices released by the Network Services Division. The diskette must be
submitted in ``read only'' mode, and must be clearly labeled with the
carrier's name, the filing date, and an identification of the
diskette's contents.
15. A new Sec. 51.331 is added to subpart D read as follows:
Sec. 51.331 Notice of network changes: timing of notice.
(a) An incumbent LEC shall give public notice of planned changes at
the make/buy point, as defined in paragraph (b) of this section, but at
least 12 months before implementation, except as provided below:
(1) If the changes can be implemented within twelve months of the
make/buy point, public notice must be given at the make/buy point, but
at least six months before implementation.
(2) If the changes can be implemented within six months of the
make/buy point, public notice may be given pursuant to the short term
notice procedures provided in Sec. 51.333.
(b) For purposes of this section, the make/buy point is the time at
which an incumbent LEC decides to make for itself, or to procure from
another entity, any product the design of which affects or relies on a
new or changed network interface. If an incumbent LEC's planned changes
do not require it to make or to procure a product, then the make/buy
point is the point at which the incumbent LEC makes a definite decision
to implement a network change.
(1) For purposes of this section, a product is any hardware or
software for use in an incumbent LEC's network or in conjunction with
its facilities that, when installed, could affect the compatibility of
an interconnected service provider's network, facilities or services
with an incumbent LEC's existing telephone network, facilities or
services, or with any of an incumbent carrier's services or
capabilities.
(2) For purposes of this section a definite decision is reached
when an incumbent LEC determines that the change is warranted,
establishes a timetable for anticipated implementation, and takes any
action toward implementation of the change within its network.
16. A new Sec. 51.333 is added to subpart D to read as follows:
Sec. 51.333 Notice of network changes: short term notice.
(a) Certificate of service. If an incumbent LEC wishes to provide
less than six months notice of planned network changes, the public
notice or certification that it files with the Commission must include
a certificate of service in addition to the information required by
Sec. 51.327(a) or Sec. 51.329(a)(2), as applicable. The certificate of
service shall include:
(1) A statement that, at least five business days in advance of its
filing with the Commission, the incumbent LEC served a copy of its
public notice upon each telephone exchange service provider that
directly interconnects with the incumbent LEC's network; and
(2) The name and address of each such telephone exchange service
provider upon which the notice was served.
(b) Implementation date. The Commission will release a public
notice of such short term notice filings. Short term notices shall be
deemed final on the tenth business day after the release of the
Commission's public notice, unless an objection is filed, pursuant to
paragraph (c) of this section.
(c) Objection procedures. An objection to an incumbent LEC's short
term notice may be filed by an information service provider or
telecommunication service provider that directly interconnects with the
incumbent LEC's network. Such objections must be filed with the
Commission, and served on the incumbent LEC, no later than the ninth
business day following the release of the Commission's public notice.
All objections to an incumbent LEC's short term notice must:
(1) State specific reasons why the objector cannot accommodate the
incumbent LEC's changes by the date stated in the incumbent LEC's
public notice and must indicate any specific technical information or
other assistance required that would enable the objector to accommodate
those changes;
(2) List steps the objector is taking to accommodate the incumbent
LEC's changes on an expedited basis;
(3) State the earliest possible date (not to exceed six months from
the date the incumbent LEC gave its original public notice under this
section) by which the objector anticipates that it can accommodate the
incumbent LEC's changes, assuming it receives the technical information
or other assistance requested under paragraph (c)(1) of this section;
(4) Provide any other information relevant to the objection; and
(5) Provide the following affidavit, executed by the objector's
president, chief executive officer, or other corporate officer or
official, who has appropriate authority to bind the corporation, and
knowledge of the details of the objector's inability to adjust its
network on a timely basis:
``I, (name and title), under oath and subject to penalty for
perjury, certify that I have read this objection, that the
statements contained in it are true, that there is good ground to
support the objection, and that it is not interposed for purposes of
delay. I have appropriate authority to make this certification on
behalf of (objector) and I agree to provide any information the
Commission may request to allow the Commission to evaluate the
truthfulness and validity of the statements contained in this
objection.''
(d) Response to objections. If an objection is filed, an incumbent
LEC shall have until no later than the fourteenth business day
following the release of the Commission's public notice to file with
the Commission a response to the objection and to serve the response on
all parties that filed objections. An incumbent LEC's response must:
(1) Provide information responsive to the allegations and concerns
identified by the objectors;
(2) State whether the implementation date(s) proposed by the
objector(s) are acceptable;
(3) Indicate any specific technical assistance that the incumbent
LEC is willing to give to the objectors; and
(4) Provide any other relevant information.
(e) Resolution. If an objection is filed pursuant to paragraph (c)
of this section, then the Chief, Network Services Division, Common
Carrier Bureau, will issue an order determining a reasonable public
notice period, provided however, that if an incumbent LEC does not file
a response within the time period allotted, or if the incumbent LEC's
response accepts the latest implementation date stated by an objector,
then the incumbent LEC's public notice shall be deemed amended to
specify the implementation date requested by the objector, without
further Commission action. An incumbent LEC must amend its public
notice to reflect any change in the applicable implementation date
pursuant to Sec. 51.329(b).
17. A new Sec. 51.335 is added to subpart D to read as follows:
Sec. 51.335 Notice of network changes: confidential or proprietary
information.
(a) If an incumbent LEC claims that information otherwise required
to be disclosed is confidential or proprietary, the incumbent LEC's
public notice must include, in addition to the information identified
in Sec. 51.327(a), a statement that the incumbent LEC will make further
information available to those signing a nondisclosure agreement.
[[Page 47353]]
(b) Tolling the public notice period. Upon receipt by an incumbent
LEC of a competing service provider's request for disclosure of
confidential or proprietary information, the applicable public notice
period will be tolled until the parties agree on the terms of a
nondisclosure agreement. An incumbent LEC receiving such a request must
amend its public notice as follows:
(1) On the date it receives a request from a competing service
provider for disclosure of confidential or proprietary information, to
state that the notice period is tolled; and
(2) On the date the nondisclosure agreement is finalized, to
specify a new implementation date.
PART 52--NUMBERING
18. The authority citation for part 52 is revised to read as
follows:
Authority: Sec. 1, 2, 4, 5, 48 Stat. 1066, as amended; 47 U.S.C.
Sec. 151, 152, 154, 155 unless otherwise noted. Interpret or apply
secs. 3, 4, 201-05, 207-09, 218, 225-7, 251-2, 271 and 332, 48 Stat.
1070, as amended, 1077; 47 U.S.C. 153, 154, 201-05, 207-09, 218,
225-7, 251-2, 271 and 332 unless otherwise noted.
19. Subpart B of part 52 is redesignated as subpart C and amended
by redesignating Secs. 52.1 through 52.99 as Secs. 52.21 through 52.99;
and a new subpart A and subpart B are added to part 52 to read as
follows:
Subpart A--Scope and Authority
Sec.
52.1 Basis and purpose.
52.3 General.
52.5 Definitions.
Subpart B--Administration
52.7 Definitions.
52.9 General requirements.
52.11 North American Numbering Council.
52.13 North American Numbering Plan Administrator.
52.15 Central office code administration.
52.17 Costs of number administration.
52.19 Area code relief.
Subpart C--Number Portability
52.21 Definitions.
52.23 Deployment of long-term database methods for number
portability by LECs.
52.25 Database architecture and administration.
52.27 Deployment of transitional measures for number portability.
52.29 Cost recovery for transitional measures for number
portability.
52.31 Deployment of long-term database methods for number
portability by CMRS providers.
52.32-52.99 [Reserved]
Subpart A--Scope and Authority
Sec. 52.1 Basis and purpose.
(a) Basis. These rules are issued pursuant to the Communications
Act of 1934, as amended, 47 U.S.C. 151 et. seq.
(b) Purpose. The purpose of these rules is to establish, for the
United States, requirements and conditions for the administration and
use of telecommunications numbers for provision of telecommunications
services.
Sec. 52.3 General.
The Commission shall have exclusive authority over those portions
of the North American Numbering Plan (NANP) that pertain to the United
States. The Commission may delegate to the States or other entities any
portion of such jurisdiction.
Sec. 52.5 Definitions.
As used in this part:
(a) Incumbent local exchange carrier. With respect to an area, an
``incumbent local exchange carrier'' is a local exchange carrier that:
(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
(47 CFR 69.601(b)); 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
(a)(2)(i) of this section.
(b) North American Numbering Council (NANC). The ``North American
Numbering Council'' is an advisory committee created under the Federal
Advisory Committee Act, 5 U.S.C., App (1988), to advise the Commission
and to make recommendations, reached through consensus, that foster
efficient and impartial number administration.
(c) North American Numbering Plan (NANP). The ``North American
Numbering Plan'' is the basic numbering scheme for the
telecommunications networks located in Anguilla, Antigua, Bahamas,
Barbados, Bermuda, British Virgin Islands, Canada, Cayman Islands,
Dominica, Dominican Republic, Grenada, Jamaica, Montserrat, St. Kitts &
Nevis, St. Lucia, St. Vincent, Turks & Caicos Islands, Trinidad &
Tobago, and the United States (including Puerto Rico, the U.S. Virgin
Islands, Guam and the Commonwealth of the Northern Mariana Islands).
(d) State. The term ``state'' includes the District of Columbia and
the Territories and possessions.
(e) State commission. The term ``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.
(f) Telecommunications. ``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.
(g) 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
47 U.S.C. 226(a)(2)).
(h) Telecommunications service. The term ``telecommunications
service'' refers to 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.
Subpart B--Administration
Sec. 52.7 Definitions.
As used in this subpart:
(a) Area code or numbering plan area (NPA). The term ``area code or
numbering plan area'' refers to the first three digits (NXX) of a ten-
digit telephone number in the form NXX-NXX-XXXX, where N represents any
one of the numbers 2 through 9 and X represents any one of the numbers
0 through 9.
(b) Area code relief. The term ``area code relief'' refers to the
process by which central office codes are made available when there are
few or no unassigned central office codes remaining in an existing area
code and a new area code is introduced.
(c) Central office (CO) code. The term ``central office code''
refers to the second three digits (NXX) of a ten-digit telephone number
in the form NXX-NXX-XXXX, where N represents any one of the numbers 2
through 9 and X represents any one of the numbers 0 through 9.
(d) Central office (CO) code administrator. The term ``central
office code administrator'' refers to the entity or entities
responsible for managing central office codes in each area code.
(e) North American Numbering Plan Administrator (NANPA). The term
``North American Numbering Plan Administrator'' refers to the entity or
entities responsible for managing the NANP.
[[Page 47354]]
Sec. 52.9 General requirements.
(a) To ensure that telecommunications numbers are made available on
an equitable basis, the administration of telecommunications numbers
shall, in addition to the specific requirements set forth in this
subpart:
(1) Facilitate entry into the telecommunications marketplace by
making telecommunications numbering resources available on an
efficient, timely basis to telecommunications carriers;
(2) Not unduly favor or disfavor any particular telecommunications
industry segment or group of telecommunications consumers; and
(3) Not unduly favor one telecommunications technology over
another.
(b) If the Commission delegates any telecommunications numbering
administration functions to any State or other entity pursuant to 47
U.S.C. 251(e)(1), such State or entity shall perform these functions in
a manner consistent with this part.
Sec. 52.11 North American Numbering Council.
The duties of the North American Numbering Council (NANC), may
include, but are not limited to:
(a) Advising the Commission on policy matters relating to the
administration of the NANP in the United States;
(b) Making recommendations, reached through consensus, that foster
efficient and impartial number administration;
(c) Initially resolving disputes, through consensus, pertaining to
number administration in the United States;
(d) Recommending to the Commission an appropriate entity to serve
as the NANPA;
(e) Recommending to the Commission an appropriate mechanism for
recovering the costs of NANP administration in the United States,
consistent with Sec. 52.17;
(f) Carrying out the duties described in Sec. 52.25; and
(g) Carrying out this part as directed by the Commission.
Sec. 52.13 North American Numbering Plan Administrator.
(a) The North American Numbering Plan Administrator (NANPA) shall
be an independent and impartial non-government entity.
(b) The duties of the NANPA shall include, but are not limited to:
(1) Ensuring that the interests of all NANP member countries are
considered;
(2) Processing number assignment applications associated with, but
not limited to: area codes, N11 codes, carrier identification codes
(CICs), ``500'' central office codes, ``900''central office codes,
``456'' central office codes, Signalling System 7 network codes, and
Automatic Number Identification Integration Integers (ANI II);
(3) Assigning the numbers and codes described in paragraph (b)(2)
of this section;
(4) Maintaining and monitoring administrative number databases;
(5) Assuming additional telecommunications number administration
activities, as assigned; and
(6) Ensuring that any action taken with respect to number
administration is consistent with this part.
Sec. 52.15 Central office code administration.
(a) Central Office Code Administration shall be performed by the
NANPA, or another entity or entities, as designated by the Commission.
(b) Duties of the entity or entities performing central office code
administration may include, but are not limited to:
(1) Processing central office code assignment applications and
assigning such codes in a manner that is consistent with this part;
(2) Accessing and maintaining central office code assignment
databases;
(3) Contributing to the CO Code Use Survey (COCUS), an annual
survey that describes the present and projected use of CO codes for
each NPA in the NANP;
(4) Monitoring the use of central office codes within each area
code and forecasting the date by which all central office codes within
that area code will be assigned; and
(5) Planning for and initiating area code relief, consistent with
Sec. 52.19.
(c) Any telecommunications carrier performing central office code
administration:
(1) Shall not charge fees for the assignment or use of central
office codes to other telecommunications carriers, including paging and
CMRS providers, unless the telecommunications carrier assigning the
central office code charges one uniform fee for all carriers, including
itself and its affiliates; and
(2) Shall, consistent with this subpart, apply identical standards
and procedures for processing all central office code assignment
requests, and for assigning such codes, regardless of the identity of
the telecommunications carrier making the request.
Sec. 52.17 Costs of number administration.
All telecommunications carriers in the United States shall
contribute on a competitively neutral basis to meet the costs of
establishing numbering administration.
(a) For each telecommunications carrier, such contributions shall
be based on the gross revenues from the provision of its
telecommunications services.
(b) The contributions in paragraph (a) of this section shall be
based on each contributor's gross revenues from its provision of
telecommunications services reduced by all payments for
telecommunications services and facilities that have been paid to other
telecommunications carriers.
Sec. 52.19 Area code relief.
(a) State commissions may resolve matters involving the
introduction of new area codes within their states. Such matters may
include, but are not limited to: Directing whether area code relief
will take the form of a geographic split, an overlay area code, or a
boundary realignment; establishing new area code boundaries;
establishing necessary dates for the implementation of area code relief
plans; and directing public education and notification efforts
regarding area code changes.
(b) State commissions may perform any or all functions related to
initiation and development of area code relief plans, so long as they
act consistently with the guidelines enumerated in this part, and
subject to paragraph (b)(2) of this section. For the purposes of this
paragraph, initiation and development of area code relief planning
encompasses all functions related to the implementation of new area
codes that were performed by central office code administrators prior
to February 8, 1996. Such functions may include: declaring that the
area code relief planning process should begin; convening and
conducting meetings to which the telecommunications industry and the
public are invited on area code relief for a particular area code; and
developing the details of a proposed area code relief plan or plans.
(1) The entity or entities designated by the Commission to serve as
central office code administrator(s) shall initiate and develop area
code relief plans for each area code in each state that has not
notified such entity or entities, pursuant to paragraph (b)(2) of this
section, that the state will handle such functions.
(2) Pursuant to paragraph (b)(1) of this section, a state
commission must notify the entity or entities designated by the
Commission to serve as central office code administrator(s) for its
state that such state commission intends to perform matters related to
initiation and development of area code relief
[[Page 47355]]
planning efforts in its state. Notification shall be written and shall
include a description of the specific functions the state commission
intends to perform. Where the NANP Administrator serves as the central
office code administrator, such notification must be made within 120
days of the selection of the NANP Administrator.
(c) New area codes may be introduced through the use of:
(1) A geographic area code split, which occurs when the geographic
area served by an area code in which there are few or no central office
codes left for assignment is split into two or more geographic parts;
(2) An area code boundary realignment, which occurs when the
boundary lines between two adjacent area codes are shifted to allow the
transfer of some central office codes from an area code for which
central office codes remain unassigned to an area code for which few or
no central office codes are left for assignment; or
(3) An area code overlay, which occurs when a new area code is
introduced to serve the same geographic area as an existing area code,
subject to the following conditions:
(i) No area code overlay may be implemented unless all central
office codes in the new overlay area code are assigned to those
entities requesting assignment on a first-come, first-serve basis,
regardless of the identity of, technology used by, or type of service
provided by that entity. No group of telecommunications carriers shall
be excluded from assignment of central office codes in the existing
area code, or be assigned such codes only from the overlay area code,
based solely on that group's provision of a specific type of
telecommunications service or use of a particular technology;
(ii) No area code overlay may be implemented unless there exists,
at the time of implementation, mandatory ten-digit dialing for every
telephone call within and between all area codes in the geographic area
covered by the overlay area code; and
(iii) No area code overlay may be implemented unless every
telecommunications carrier, including CMRS providers, authorized to
provide telephone exchange service, exchange access, or paging service
in that NPA 90 days before introduction of the new overlay area code,
is assigned during that 90 day period at least one central office code
in the existing area code.
Sec. 52.21 [Amended]
20. Newly redesignated section 52.21 is amended by removing
paragraph (f) and redesignating paragraphs (g) through (k) as
paragraphs (f) through (j); removing (l) and redesignating paragraphs
(m) through (r) as paragraphs (k) through (p); and removing paragraphs
(s), (t), and (u) and redesignating paragraph (v) as paragraph (q).
[FR Doc. 96-22045 Filed 9-5-96; 8:45 am]
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