Telecom/1996-04-telecom-walnutcreek.iso/legal-fcc/fcc-isdn.regulations

Internet Message Format | 1995-06-07 | 31KB

Date: Wed, 31 May 1995 20:02:02 -0500
From: TELECOM Digest (Patrick Townson) <[e-mail]>
Subject: FCC ISDN Regulations For Discussion


   From: [e-mail]
   Date: Wed, 31 May 1995 20:12:10 -0400
   Subject: ISDN FCC Material

Patrick:  Here is the FULL text of the FCC ISDN material:

                                                    FCC 95-212
                                Before the
                     FEDERAL COMMUNICATIONS COMMISSION
                          Washington, D.C.  20554


In the Matter of             )
                             )   CC Docket No. 95-72
End User Common Line         )
Charges                      )

               NOTICE OF PROPOSED RULEMAKING


      Adopted: May 24, 1995       Released: May 30, 1995

Comment Date: June 29, 1995
Reply Date: July 14, 1995

By the Commission:

                             I.  Introduction

     1.  In this Notice of Proposed Rulemaking, we invite interested
parties to comment on a number of issues involving the recovery of
local loop costs from residential and business end user subscribers.
In particular, we seek comment on the application of End User Common
Line Charges, hereinafter referred to as Subscriber Line Charges
(SLCs), to local loops used with Integrated Services Digital Network
(ISDN) and other services that permit the provision of multiple
voice-grade-equivalent channels to a customer over a single facility.
We believe that the question of SLCs for ISDN and similar services
must be considered in the broader context of competitive developments
in the interstate access market, and the resulting pressure to reduce
unnecessary support flows in order to ensure fair competition and
preserve universal service.

                              II. Background

         A. ISDN and Other Derived Channel Technology and Services

     2. ISDN permits digital transmission over ordinary local loops
and T-1 facilities through the use of advanced central office
equipment and customer premises equipment (CPE).  In order for a Local
Exchange Carrier (LEC) to provide ISDN, it must have a digital switch
in the central office serving the customer, and substitute an ISDN
line or trunk card for the standard cards that would otherwise be used
in the central office with the loop facilities serving the customer.
The customer must also use special ISDN-capable CPE on its premises.

     3.  Currently, LECs' offer two basic types of ISDN service.
Basic Rate Interface (BRI) Service allows a subscriber to obtain two
voice-grade-equivalent channels and a signalling/data channel over an
ordinary local loop, which is generally provided over a single twisted
pair of copper wires.  Primary Rate Interface (PRI) Service allows
subscribers to obtain 23 voice-grade equivalent channels and one data
channel over a single T-1 facility with two pairs of twisted copper
wires.

     4.  A small business or residential customer with BRI can use
voice service, access a database service, and send a facsimile, all at
the same time, over a single local loop consisting of a twisted copper
pair.  Standard local exchange service permits only one of these
activities at a time.  BRI also permits customers to transmit and
retrieve data at higher speeds than are currently possible using a
standard analog local loop and a modem.  PRI and other derived channel
services afford larger business customers the advantages of digital
service, including higher speed data transmission and greater
accuracy.  In addition, the use of ISDN and other services providing
customers with multiple voice-grade-equivalent channels over a single
facility (derived channels) can avoid or reduce the need for new
cabling, and thus conserve space in existing conduit or intra-building
cable vaults.

     5.  There are services in addition to ISDN that use derived
channel technology to provide multiple channels over a single
facility.  For example, NYNEX provides FLEXPATH service, which
provides a customer with 24 digital voice-grade-equivalent trunk
channels over a T-1 facility between a suitably equipped central
office and a digital PBX.  PBX Conversion Service, another NYNEX
offering, provides digital trunking capability, with up to 24 trunk
access lines, between a customer's digital PBX and an analog-to-digital
interface located at the central office switch.  Other LECs also offer
digital T-1 service with 24 voice-grade equivalent channels.  NYNEX's
Data Over Voice service provides customers with a voice grade channel
and a data channel over a single copper pair.  The LECs also use
derived channel technologies within their networks to provide
customers with individual local loops, as opposed to BRI or PRI ISDN
for example.  In such situations, the end user would not be aware that
the LEC was using this technology to provide their local loop.

                        B. Subscriber Line Charges

     6.  In the Access Charge Order, the Commission adopted rules
prescribing a comprehensive system of tariffed access charges for the
recovery of LEC costs associated with the origination and termination
of interstate calls. The access charge rules called for recovery of a
major portion of the local loop costs assigned to the interstate
jurisdiction through SLCs.  The remainder of local loop costs are
recovered from interexchange carriers (IXCs) through the per minute
CCL charge.  The CCL charges paid by the IXCs are reflected in the
charges paid by interstate toll users.

     7.  Multiline business SLCs of up to $6.00 per line per month
became effective on May 24, 1984.  Residential and single line
business SLCs of up to $3.50 per line per month were implemented in
five steps, between June 1985 and April 1989.  In conjunction with the
implementation of SLCs, the Commission took steps to waive these
charges for low income subscribers.

     8.  The SLC rate structure is designed to recover a greater
proportion of local loop costs from multiline business customers than
from residential and single line business customers.  Multiline
business customers pay the full interstate assignment of local loop
costs up to $6.00 per month.  In contrast, residential and single line
business customers pay a SLC of no more than $3.50 per month, which
is, in most cases, significantly below the full interstate assignment
of local loop costs.

     9.  As the recovery of interstate loop costs through SLCs
increased, the interstate Common Line loop costs that remained to be
recovered through CCL rates paid by the IXCs decreased.  This resulted
in substantial reductions in CCL rates.  The Commission required AT&T
to flow the reductions in per minute interstate CCL charges through to
consumers in the form of reduced interstate toll rates.  Basic
interstate toll rates decreased approximately 34% between 1984 and the
end of 1992, much of this due to the shift in the recovery of common
line costs from CCL rates to SLCs and the resulting stimulation in
demand.

                   C.  Recent Decisions on SLCs for ISDN

     10.  The Commission did not address the application of SLCs to
ISDN and other technologies that permit the provision of multiple
voice grade channels over a two or four wire facility when it
initially adopted the access charge regime. That issue was presented
to the Commission for the first time by a 1992 NYNEX tariff filing.
In Transmittal No. 116, NYNEX proposed to apply a single multiline
business SLC to each T-1 facility used to provide a single customer
with certain services, even though the T-1 facility provided that
customer with up to 24 voice-grade-equivalent communications
channels.  In order to qualify for this treatment, all of the channels
derived from the T-1 facility had to be used to provide a single
customer with either FLEXPATH digital PBX (FLEXPATH) Service, Analog
to Digital Conversion PBX (Conversion PBX) Service, or ISDN Primary
Service.

 At the time of the tariff filing, NYNEX applied one SLC for each
derived channel used for local exchange service in the case of such
services.

     11.  The Common Carrier Bureau rejected the Transmittal based on
a finding that it did not comply with the rule governing assessment of
SLCs.  In doing so, the Bureau relied on the Part 36, Jurisdictional
Separations, definition of a subscriber line as a "communication
channel between a telephone station, PBX [Private Branch Exchange], or
TWX (Teletypewriter Exchange Service) station and the central office,"
and the Part 36 definition of a channel as an "electrical path
suitable for the transmission of communications between two or more
points."  In the provision of derived channel services, the Bureau
concluded that NYNEX was providing up to 24 electrical paths suitable
for the transmission of communications even though the channels were
provided over a single facility.

     12.  In a recent Order, the Commission affirmed the Bureau's
conclusion that Section 69.104 of the rules requires assessment of a
SLC for each derived channel.  At the same time, the Commission
recognized that many of the comments filed in that proceeding raised
policy issues best considered in the context of a rulemaking
proceeding.

                              D.  Competition

     13.  The interstate access market has changed since the
Commission adopted the access charge rules at issue here.  Alternative
service providers such as Teleport, which is owned by a group of large
cable companies, and MFS have deployed fiber optic networks in core
business areas of many large cities, providing interstate access
services, and, in some areas, local exchange service as well.  Cable
television companies, in addition to those with an ownership interest
in Teleport, have also entered the local telephone and/or interstate
access market in certain areas, and have expressed an intention to
enter the telephone market on a broader basis.  Interexchange
carriers, such as MCI and AT&T, have also entered the market or
announced an intention to do so.  In addition, the Commission has
required expanded interconnection for the provision of special access
service and switched transport.  New York State has also required LECs
to unbundle their local loops in order to permit the competitive
provision of local exchange service, and a number of other states are
considering similar measures.

     14.  These developments tend to bring pressure to bear on support
flows in the current access charge structure.  LEC rates that
significantly exceed cost will tend to attract new entrants who may be
able to offer service at lower rates.  As a result, it may be
necessary to reduce support flows that are not specifically tailored
to produce social benefits.

                             III.  Discussion

                                A. Overview

     15.  In this proceeding, we seek comment on the proper
application of SLCs to BRI and PRI ISDN service provided to
residential and business customers as well as to other services that
permit the provision of multiple derived channels over a single
facility.  We believe that consideration of this issue must take into
account competitive developments in the interstate access market, the
need to ensure fair competitive ground rules, and the need to preserve
universal service in a changing environment.

                          B. Analytical Framework

     16.  We believe that several basic principles should guide our
resolution of these issues.  While these considerations are sometimes
in potential conflict with one another, we believe that they all must
be considered to assure a sound, principled resolution of the issues
before us in this proceeding.

     17.  This rulemaking proceeding gives the Commission an
opportunity to reexamine existing rules, and make changes in light of
new technologies and services.  We must be careful to avoid erecting
regulatory barriers to the development of beneficial new technologies.
This is particularly important when these services and technologies
can facilitate access to the benefits of the National Information
Infrastructure.  At the same time, we should not amend our rules to
favor new technologies and services simply because they are new.  Any
difference in the regulatory treatment of new technologies and
services must have a sound basis in public policy.

     18.  We also believe that it is desirable to avoid measures that
could reduce the level of nontraffic sensitive (NTS) local loop costs
now recovered through flat charges.  We find that the implementation
of SLCs has produced significant benefits, leading to lower interstate
toll rates, and increased economic efficiency.  SLCs have also reduced
the untargeted support flows between high and low volume toll users.
Any reduction in SLC revenues will tend to increase interstate toll
rates because lower SLC revenues will cause LECs to seek to recover
additional revenues through the per minute CCL charge.  We also
believe that policies that would appear to reduce dramatically SLC
charges to large business customers, but not to residential customers,
must be carefully examined.

     19.  Resolution of the issues in this proceeding should also take
into account competitive developments in the interstate access market,
and the accompanying need to identify and reduce unnecessary support
flows, and reexamine rate structures predicated on an exclusively
monopoly market structure.  We believe that this is necessary in order
to ensure fair competition and preserve universal service.

     20.  In light of competitive developments in the interstate
access market, rule changes that could result in lower SLC revenues
and higher CCL rates, thus potentially increasing support flows, must
be carefully examined.  To the extent that the LECs do not recover
interstate NTS local loop costs through SLCs, they recover these costs
through the CCL charge.  The per minute CCL charge paid by IXCs and
reflected in their interstate toll rates forces high volume residential
and business toll users to pay charges that exceed the local loop
costs they impose on the network.  This creates incentives for high
volume toll customers to use competitors even when the LEC would be
the most efficient access provider.  Increasingly, IXCs and large
business customers have alternatives to use of LEC facilities for the
origination and termination of interstate traffic, particularly in
major urban business centers.  In such areas, they can avoid support
flows inherent in the current access charge rate structure, including
the CCL charge.  In the long run, inefficient bypass of the LEC
networks by high volume toll customers could threaten to undermine the
support flows that foster universal service.

                               C.  Options

                                1. Overview

     21.  There are potentially many ways that the number of SLCs for
ISDN and similar derived channel services could be computed.  At one
extreme, we might require customers to pay one SLC for each physical
facility serving a given customer, such as a standard local loop or
T-1 facility.  At the other extreme, we could maintain the current
rule under which a SLC is applied to each derived communications
channel.

     22.  There are also intermediate options.  For example, the
number of SLCs to be applied to ISDN facilities could be based on a
ratio of the average LEC cost of providing a derived channel service,
such as a BRI or PRI ISDN connection, to the average cost of providing
an ordinary local loop or T-1 connection, including the line or trunk
card costs in both cases.  Under this option, a PRI customer would,
for example, pay six SLCs if the average LEC cost of providing an ISDN
T-1 connection, including line cards, is six times the average cost of
providing an ordinary T-1 facility.  It would also be possible to
apply one SLC for every two derived channels, an option that would
reduce by 50 percent the SLC revenues that would be generated under
the current requirement that one SLC be assessed for each derived
channel.

     23.  Another set of options would focus on the increasingly
competitive interstate access market in determining how to compute the
SLC to be paid by customers of derived channel services. One
possibility is to combine a reduction in the currently required level
of SLC charges for derived channel services with a small increase in
the per-channel SLC for all local loops. Another option involves
giving the LECs some flexibility in setting SLC rates for derived
channel services, but modifying the price cap rules so that any
reduction in SLC flat rate recovery does not increase the CCL rate.

                       2.  The Per-Facility Approach

     24. Under this approach, customers pay a single SLC per derived
channel service connection.  Thus, under this option, both BRI and PRI
ISDN customers would pay a single SLC.  Under a variation on this
option, an ISDN BRI customer with one copper pair would pay a single
SLC, and a PRI customer with two copper pairs would pay two SLCs.
These approaches, which base the number of SLCs on the physical loop
facilities used by the customer, arguably reflect, in a general way,
the loop costs imposed on the network by the customer.  These options
also would encourage the use of derived channel technology, and permit
residential and business customers to take advantage of the substantial
benefits of such channels at lower charges than are required under the
current rules.  This is particularly important since these services
facilitate improved access to the National Information Infrastructure.

     25.  Widespread use of ISDN and other derived channel services
under these approaches, which apply far fewer SLCs to such services
than the current requirement, could reduce multiline business SLC
revenues over time.  This would tend to increase interstate toll rates
as a result of increases in LEC CCL rates.  This approach also appears
potentially inconsistent with the general objective of reducing the
untargeted support flows intrinsic to the existing per minute CCL
charge.  In addition, applying SLCs based on the number of copper
pairs used by a customer is not feasible if a customer's local loop is
provided over coaxial or fiber optic cable.  These options would also
result in inconsistent treatment when the same derived channel
technology is used to provide local loops in other service
configurations.

     26.  Moreover, these options lead to lower SLCs for large
business customers than for residential and single line business
customers.  At present, residential and single line business customers
generally pay monthly SLCs of $3.50 per line, while multiline business
customers pay monthly SLCs of up to $6.00 per line.  Under the
per-facility approach, large business customers taking a derived
channel service that provides 24 channels, such as ISDN PRI, would pay
a single SLC capped at $6.00 per month, which equates to $.25 per
month per voice grade equivalent channel.  Residential and single line
small business customers taking ISDN BRI would pay a single SLC capped
at $3.50 per month, which equates to $1.75 per month for each voice
grade equivalent channel.  In contrast, a residential subscriber with
a single standard local exchange line pays up to $3.50 per month in
SLCs.  Moreover, a household with a second standard local exchange or
"teen" line pays $7.00 per month in SLCs even though LECs typically
run two copper pairs to each residence, and thus the use of a second
line does not require additional plant investment.

                          3. Intermediate Options

     27.  An option that may represent a potential middle ground
between the per facility and the per derived channel approaches would
be to charge SLCs based on a ratio of the average LEC cost of
providing a derived channel service, including line or trunk cards, to
the average LEC cost of providing an ordinary local loop or T-1
facility.  Under this approach, a PRI customer, for example, would pay
six SLCs if the LEC cost of providing an ISDN T-1 connection,
including line or trunk cards, is six times the cost of providing an
ordinary T-1 facility.

     28.  While we do not have data on the relationship between the
cost of providing ISDN and non-ISDN local loops and T-1 facilities, we
anticipate that this approach would produce SLC revenues for ISDN and
other derived channel services that are higher than those produced by
applying a single SLC per facility, but well below those produced by
charging a SLC for each derived channel.  If this is correct, this
approach would affect demand for derived channel services less than a
SLC for each derived channel.  At the same time, it would not have the
same potential to reduce multiline business SLC revenues and to cause
increased interstate toll rates as the per facility approach has.  As
a result, this approach would also be more consistent with the
objective of reducing the untargeted support flows intrinsic to the
CCL charge in light of competitive developments in the interstate
access market.

     29.  This approach does appear to depart from the averaging
reflected in SLCs to date.  Subject to the $3.50 and $6.00 caps, SLCs
are based on averaged loop costs within each study area, and the
Commission has not previously established lower SLCs for a particular
service or group of customers based on the lower cost of serving them.
While the maximum SLCs for residential and single line business
customers are lower than the maximum SLCs for multiline business
customers, this difference in the rate cap is not based on cost
differences.  This approach also includes the cost of the line cards
in developing the cost relationship between ISDN connections and
non-ISDN connections even though line cards are treated as switching,
not local loop facilities for jurisdictional separations and Part 69
cost allocation purposes.  In light of the additional local switching
costs incurred to provide ISDN, however, additional cost recovery,
even if accomplished through a different rate element, may be
reasonable.

     30.  Reducing SLCs for derived channel connections to 50 percent
of the level required by the current rules is another intermediate
option between the per-facility and per-derived channel approaches.
Under this approach, the LECs would charge one SLC for every two
derived channels.  Like the previous option, this approach would
foster the growth of derived channel services to a greater extent than
applying a SLC to each derived channel.  This option would also raise
substantially less concern about increasing interstate toll rates than
the per-facility approach.  It is also more consistent with the long
term need to reduce the support flows intrinsic to the current CCL
charge in light of increasing competition.

                   4. The Per-Derived Channel Approach

     31.  The existing rules require that the LECs charge a SLC for
each derived channel in the case of ISDN and other similar services.
Absent other off-setting changes, this approach increases the
customer's total price for ISDN, and will tend to reduce demand for
such services.  On the other hand, this approach would not have the
potential to increase CCL charges and interstate toll rates since it
would not tend to reduce SLC revenues.  In fact, applying a SLC to
each derived channel could potentially increase current SLC revenues
and reduce support flows intrinsic to the CCL charge even as areas of
competition are developing in the interstate access market.

                          5. Additional Options

     32.  There are also several other options that focus on the issue
of SLCs for ISDN and other derived channel services in a changing
interstate access market.  As previously discussed, these developments
in the marketplace exert increasing pressure on existing support
flows, such as those intrinsic to the current per minute CCL charge
used to recover NTS local loop costs.  As a result, these options
would combine reductions in the number of SLCs that our current rules
would impose on derived channel services with measures to ensure that
this does not increase per minute CCL charges.

     33.  One such option would be to permit the LECs to impose a
reduced number of SLCs for derived channel services, accompanied by a
small increase in SLC rates.  For example, the current caps on SLCs
could be increased by $.25 per month for all subscribers.  This
approach would encourage the development of ISDN and other derived
channel services by reducing cost recovery from derived channel
services.  At the same time, it would lessen or prevent any potential
reduction in SLC revenues that could lead to higher interstate toll
rates.

     34.  A second approach that would prevent adverse consequences
from a potential reduction in multiline business SLC revenues would be
to permit, but not require, the LECs to apply fewer SLCs for derived
channel services than the current rules require, but to adjust the
price caps rules to prevent this from leading to an increase in CCL
rates.  This approach would permit the LECs to lower SLCs for derived
channel services in order to encourage their development, but would
prevent a reduction in SLC revenues from causing an increase in CCL
charges and putting upward pressure on interstate toll rates.

                         6.  Request for Comments

     35.  We ask interested parties to comment on the analytical
framework and options for defining the SLCs that subscribers to ISDN
and other derived channel services must pay.  We also seek comment on
our analysis of the various options described in this Notice.
Commenting parties are urged to suggest additional or different policy
goals as part of the analytical framework for evaluating options as
well as to present additional options for the Commission's
consideration.  We also seek comment on whether any new rules for the
application of SLCs for ISDN and similar derived channel services
should apply to all local loops provisioned by the telephone company
through the use of derived channel technology, regardless of whether
the use of derived channel technology in the provisioning of the loop
is apparent to the subscriber or not.

     36.  In addition, we note that it would be helpful if interested
parties provide us with specific information concerning the perceived
elasticity of demand for ISDN services, the various ISDN service
options available in the marketplace, the total intrastate charges for
each of these service options, as well as the advantages and
disadvantages of alternative service and equipment configurations that
offer communications capabilities comparable to those of ISDN.
Moreover, certain of the options for applying SLCs under our Part 69
access charge rules described above would use a definition of the term
"line" that differs from the current separations definition in Part
36.  We seek comment on whether we should initiate the process of
considering conforming separations changes through a referral to a
Joint Board in the event that we adopt such an approach.  In light of
competitive developments in the interstate access market, interested
parties may also wish to take this opportunity to comment more
generally on the need for additional changes to the way carriers can
recover the interstate assignment of local loop costs and local
switching or other other costs that the parties view as NTS.

                        IV.  Ex Parte Presentations

     37.  This proceeding is a non-restricted notice and comment
rulemaking.  Ex parte presentations are permitted, except during the
Sunshine Agenda period, provided that they are disclosed as provided
in the Commission's rules.

                    V. Regulatory Flexibility Analysis

     38.  We certify that the Regulatory Flexibility Act is not
applicable to the rule changes we are proposing in this proceeding.
If the proposed rule changes are promulgated, there will not be a
significant economic impact on a substantial number of small business
entities, as defined by Section 601(3) of the Regulatory Flexibility
Act.  The LECs are not small entities as defined by the Act because,
even with increased competition, they remain dominant in their service
areas.  Since only the LECs are directly subject to the proposals
herein, the Commission is not required to apply the formal procedures
set forth in the Regulatory Flexibility Act.  We are nevertheless
committed to reducing the regulatory burdens on small telephone
companies whenever possible consistent with our other public interest
responsibilities.  The Secretary shall send a copy of the Notice to
the Chief Counsel for Advocacy of the Small Business Administration in
accordance with Section 603(a) of the Regulatory Flexibility Act, 5
U.S.C. S 601, et seq.

                         V.  Comment Filing Dates

     39.  Pursuant to applicable procedures set forth in Sections
1.415 and 1.419 of the Commission's rules, 47 C.F.R. SS 1.415 & 1.419,
interested parties may file comments with the Office of the Secretary,
Federal Communications Commission, Washington, D.C. 20554 on or before
June 29, 1995, and reply comments on or before July 14, 1995.  To file
formally in this proceeding, participants must file an original and
four copies of all comments, replies, and supporting comments. If
participants want each Commissioner to receive a personal copy of
their comments, an original and nine copies must be filed.  In
addition, parties are to provide a copy of any filings in this
proceeding to Peggy Reitzel of the Policy and Program Planning
Division, Common Carrier Bureau, Room 544, 1919 M Street, N.W.,
Washington, D.C.  20554.  Parties are also to file one copy of any
documents in this docket with the Commission's copy contractor,
International Transcription Services, Inc., 2100 M Street, N.W., Suite
140, Washington, D.C. 20037.  Comments and Reply comments will be
available for public inspection during regular business hours in the
FCC Reference Room (Room 239), 1919 M Street, N.W. , Washington, D.C.

                           V.  Ordering Clauses

     40.  Accordingly, IT IS ORDERED that, pursuant to the authority
contained in Sections 1, 4, and 201-205 of the Communications Actof
1934, as amended, 47 U.S.C. SS 151, 154, & 201-205, a NOTICE OF
PROPOSED RULEMAKING IS HEREBY ADOPTED.


                FEDERAL COMMUNICATION COMMISSION


                       William F. Caton
                       Acting Secretary