The Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996, 720-723 [05-173]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 70, Number 3 (Wednesday, January 5, 2005)]
[Rules and Regulations]
[Pages 720-723]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-173]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CC Docket No. 96-128; FCC 04-251]


The Pay Telephone Reclassification and Compensation Provisions of 
the Telecommunications Act of 1996

AGENCY: Federal Communications Commission.

ACTION: Final rule; petitions for reconsideration.

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SUMMARY: By this document, we consider four petitions for 
reconsideration of our Report and Order which established detailed 
rules (the ``rules'' or ``Payphone Compensation Rules'') ensuring that 
payphone service providers (PSPs) are ``fairly compensated'' for each 
and every completed payphone-originated call. This Order on 
Reconsideration does not change the compensation framework adopted last 
year, but rather refines and builds upon its approach. The Commission 
provides guidance on the types of contracts that it would deem to be 
reasonable methods of compensating PSPs, extends the time period that 
carriers must retain certain payphone records, and clarifies the rules' 
reporting, certification, and audit requirements.

DATES: Effective January 5, 2005, except for Sec.  64.1310(g) which 
contains information collection requirements that are not effective 
until approved by the Office of Management and Budget. The Commission 
will publish a document in the Federal Register announcing the 
effective date of that section.

ADDRESSES: A copy of any comments on the Paperwork Reduction Act 
information collection requirements contained herein should be 
submitted to Judith B. Herman, Federal Communications Commission, Room 
1-C804, 445 12th Street, SW., Washington, DC 20554, or via the Internet 
to Judith-B.Herman@fcc.gov.

FOR FURTHER INFORMATION CONTACT: Darryl Cooper Attorney-Advisor, 
Competition Policy Division, Wireline Competition Bureau, at (202) 418-
7131, or via the Internet at darryl.cooper@fcc.gov or Denise A. Coca, 
Attorney-Advisor, Competition Policy Division, Wireline Competition 
Bureau, at (202) 418-0574, or via the Internet at denise.coca@fcc.gov. 
For additional information concerning the Paperwork Reduction Act 
information collection requirements contained in this document, contact 
Judith B. Herman at 202-418-0214, or via the Internet to Judith-
B.Herman@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Order 
on Reconsideration, CC Docket No. 96-128, FCC 04-251, adopted October 
20, 2004, and released October 22, 2004. Filings and comments are also 
available for public inspection and copying during regular business 
hours at the FCC Reference Information Center, Portals II, 445 12th 
Street, SW., Room CY-A257, Washington, DC, 20554. They may also be 
purchased from the Commission's copy contractor, Best Copy and 
Printing, Inc., 445 12th Street, SW., Room CY-B402, Washington, DC 
20554, telephone 1 (800) 378-3160 or (202) 4880-5300, facsimile (202) 
488-5563, or via e-mail at https://www.bcpiweb.com.

Synopsis of the Order on Reconsideration and the Report and Order

I. Introduction

    1. In this Order on Reconsideration, we consider four petitions for 
reconsideration of our Report and Order adopted on September 30, 2003, 
which established detailed rules ensuring that PSPs are ``fairly 
compensated'' for each and every completed payphone-originated call 
(Implementation of the Pay Telephone Reclassification and Compensation 
Provisions of the Telecommunications Act of 1996, CC Docket No. 96-128, 
Report and Order, 68 FR 62751-01, (November 6, 2003)). This Order on 
Reconsideration, released on October 22, 2004, does not change this 
compensation framework, but rather refines and builds upon its 
approach. In the Order on Reconsideration, the Commission provides 
guidance on the types of contracts that it would deem to be reasonable 
methods of compensating PSPs, extends the time period that carriers 
must retain certain payphone records, and clarifies the rules' 
reporting, certification, and audit requirements.

II. Background

    2. The Report and Order held that the last facilities-based long 
distance carrier in a call path--either an interexchange carrier (IXC) 
or a switched-based reseller (SBR)--is responsible for compensating 
PSPs. For local calls, where a local exchange carrier (LEC) completes a 
call, that LEC is responsible for compensation. The Payphone 
Compensation Rules define these responsible carriers as ``Completing 
Carriers'' and require them to develop their own system of tracking 
calls to completion, the accuracy of which must be confirmed and 
attested to by a third party auditor. Completing Carriers are required 
to compensate the PSPs on a quarterly basis for calls that are 
completed on the Competing Carriers' platforms; to provide quarterly 
reports to the PSPs; and their chief financial officers (CFOs) must 
attest to the accuracy of the quarterly payment amount. The Payphone 
Compensation Rules also imposed reporting requirements on an 
``Intermediate Carrier,'' defined in the rules as ``a facilities-based 
long distance carrier that switches payphone calls to other facilities-
based long distance carriers.'' Additionally, the Payphone Compensation 
Rules also give parties flexibility to agree to alternative 
compensation arrangements (ACA) so that small Completing Carriers may 
avoid the expense of instituting a tracking system and undergoing an 
audit.

III. Discussion

    3. In the Order on Reconsideration, the Commission considers four 
petitions for reconsideration filed in response to the Report and Order 
in this docket. The Order on Reconsideration clarifies and modifies the 
Report and Order by adopting the following changes: (1) Clarifying that 
a Completing Carrier must give a PSP adequate notice of an ACA prior to 
its effective date, with sufficient time for the PSP to object to an 
ACA, and prior to the termination of an ACA; (2) clarifying that, in a 
complaint proceeding under the Payphone Compensation Rules, a 
Completing Carrier may assert as an affirmative defense that the PSP's 
objection to an ACA was unreasonable; (3) clarifying that Completing 
Carriers are required to report only completed calls in their quarterly 
reports; (4) extending the time period that carriers must retain 
certain payphone records, for dispute resolution purposes, from 18 to 
27 months; (5) clarifying that quarterly reports should use industry 
standard formats; (6) clarifying the responsibilities of LECs under the 
Payphone Compensation Rules; (7) clarifying that a Completing Carrier 
may post its System Audit Report and Sec.  64.1320(e) statement on its 
website or on a clearinghouse's website, instead of transmitting these 
documents to every PSP; (8) clarifying that a Completing Carrier's CFO 
may issue a single blanket

[[Page 721]]

certification addressed to all PSPs to which the carrier owes 
compensation, and such certification may be transmitted electronically 
or posted on the web; and (9) clarifying that where a clearinghouse is 
performing some of a Completing Carrier's compensation obligations, the 
Completing Carrier's auditor may rely upon, under certain 
circumstances, a third party's audit of the clearinghouse.

IV. Procedural Matters

    4. Final Paperwork Reduction Act Analysis. This document contains 
modified information collection requirements subject to the Paperwork 
Reduction Act of 1995 (PRA), Public Law 104-13. It will be submitted to 
the Office of Management and Budget (OMB) for review under section 
3507(d) of the PRA. OMB, the general public, and other Federal agencies 
are invited to comment on the new or modified information collection 
requirements contained in this proceeding. In addition, we note that 
pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 
107-198, see 44 U.S.C. 3506(c)(4), we previously sought specific 
comment on how the Commission might ``further reduce the information 
collection burden for small business concerns with fewer than 25 
employees.''
    5. In this present document, we have assessed the effects of 
extending the time period that carriers must maintain verification 
data. The amendment to Sec.  64.1310(g), which extends the time 
carriers must maintain verification data from 18 to 27 months, will not 
adversely affect businesses with fewer than 25 employees. This 
amendment only requires carriers to maintain the data an additional 9 
months and the cost and paperwork burden on carriers should be minimal. 
Furthermore, the amendment to Sec.  64.1310(g) is in the public 
interest because it will help to ensure that the data is available 
throughout the statute of limitations period. We seek comment on this 
amendment.
    6. The Commission will send a copy of the Order on Reconsideration, 
including a copy of this Final Regulatory Flexibility Certification, in 
a report to Congress pursuant to the Congressional Review Act. In 
addition, the Order on Reconsideration and this final certification 
will be sent to the Chief Counsel for Advocacy of the SBA, and will be 
published in the Federal Register.
    7. Final Regulatory Flexibility Certification. The Regulatory 
Flexibility Act of 1980, as amended (RFA), requires that a regulatory 
flexibility analysis be prepared for notice-and-comment rulemaking 
proceedings, unless the agency certifies that ``the rule will not, if 
promulgated, have a significant economic impact on a substantial number 
of small entities.'' The RFA generally defines the term ``small 
entity'' as having the same meaning as the terms ``small business,'' 
``small organization,'' and ``small governmental jurisdiction.'' In 
addition, the term ``small business'' has the same meaning as the term 
``small business concern'' under the Small Business Act. A ``small 
business concern'' is one which: (1) Is independently owned and 
operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (SBA).
    8. As required by the RFA, an Initial Regulatory Flexibility 
Analysis (IRFA) was incorporated in the Federal Register summary of the 
Further Notice of Proposed Rulemaking (Implementation of the Pay 
Telephone Reclassification and Compensation Provisions of the 
Telecommunications Act of 1996, CC Docket No. 96-128, Further Notice of 
Proposed Rulemaking, 68 FR 32720, (June 2, 2003)). The Commission 
sought written public comments on the proposals in the FNPRM, including 
comments on the IRFA. On September 30, 2003, the Commission adopted a 
Report and Order that included a Final Regulatory Flexibility Analysis 
(FRFA) that conformed to the RFA. In response to four petitions for 
reconsideration of the Report and Order, the Commission adopted this 
Order on Reconsideration.
    9. In this Order on Reconsideration, the Commission clarifies its 
payphone compensation rules in ways that will not have a significant 
economic impact on a substantial number of small entities. As described 
below, the Order on Reconsideration essentially refines and builds upon 
the payphone compensation rules by clarifying certain ambiguities in 
the rules and by decreasing certain administrative burdens on carriers.
    10. Specifically, we clarify the conditions that a payphone service 
provider (PSP) may impose on an alternative compensation arrangement 
(ACA) between an interexchange carrier (IXC) and a switch-based 
reseller (SBR). In the preceding Report and Order, the rules give 
parties flexibility to agree to ACAs to avoid compliance with any or 
all of the payphone compensation rules. However, in this Order on 
Reconsideration, we clarify that an ACA may be posted on the web to 
give PSPs adequate notice and time to object to the ACA. We also 
clarify that notice of termination may be placed on the web. This way, 
Completing Carriers will not be required to send a copy of the ACA and 
seek affirmative consent from as many as 5500 PSPs. We believe that 
these clarifications are merely administrative, and therefore the 
result of the use of the web will be to confer benefits rather than 
impose burdens on small SBRs. Therefore, these clarifications will not 
have a significant economic impact on small entities.
    11. Additionally, the record in this proceeding demonstrates that 
PSPs might use their veto power over ACAs in a manner that would 
unreasonably interfere with an SBR's ability to enter into ACAs. For 
instance, demands by PSPs that an ACA contain a provision that forces 
IXCs to assume ultimate responsibility for the payphone compensation 
obligations of SBRs would undermine the Commission's determination in 
the Report and Order that IXCs are not liable for such payphone 
compensation. Such behavior would have the effect of deterring IXCs and 
SBRs from entering into ACAs. Accordingly, to ensure a level playing 
field for IXCs, SBRs, and PSPs, we clarify our rules to make clear that 
PSPs do not hold unlimited veto power over an ACA. This Order on 
Reconsideration therefore clarifies that, in a complaint proceeding 
under the rules, a Completing Carrier may assert as an affirmative 
defense that the PSP's objection to an ACA was unreasonable. We believe 
this clarification confers a benefit on small SBRs by allowing them to 
freely enter into ACAs, thereby avoiding the costs of maintaining a 
tracking system as well as the costs of a large audit liability. Small 
PSPs will not be burdened by this ACA procedure because they will 
likely receive compensation for 100% of all payphone-originated calls, 
regardless of whether they are completed. For these reasons, we believe 
this clarification will not impose a significant economic impact on 
small entities.
    12. We also clarify that Completing Carriers are only required to 
report completed payphone calls and not uncompleted calls or the 
duration that a circuit is kept open for such calls. In the preceding 
Report and Order, the Commission had already placed extensive 
requirements on carriers to ensure that payment is based on accurate 
data: they were obliged to create tracking systems, file System Audit 
Reports, create a dispute resolution process, provide Completing and 
Intermediate Carrier Reports, and have their chief financial officer 
(CFO) certify their quarterly payments. With respect to uncompleted and 
call duration, we find that the burden and

[[Page 722]]

cost to carriers to report this information outweigh any marginal, 
additional benefit to PSPs. By not adding additional costly reporting 
requirements on carriers, this clarification instead confers a benefit 
on small SBRs. Since no additional costs are being incurred or 
additional duties imposed on carriers, this clarification adopted in 
this Order on Reconsideration will not have a significant economic 
impact on small entities.
    13. The rules also extend the data retention requirement for 
completed call data from 18 months to 27 months, because the statute of 
limitations for bringing lawsuits for payphone compensation is 24 
months after the close of a calendar quarter, and because the PSPs need 
access to this data. Although a number of small SBRs will have to 
retain records for an additional 9 months, we believe the effect of 
this revision will not be economically significant. Carriers were 
already required to retain this data for 18 months under the rules we 
adopted last year and therefore the effect of this change will be 
minimal. As we explain in the Order on Reconsideration, no commenter 
provided any data to support its position that it would unacceptably 
increase the cost for small entities. Should there be a minor increase 
in costs, that burden is outweighed by having the benefit of a more 
efficient record-keeping system.
    14. To encourage consistency between the various reports required 
by the payphone compensation rules, we also clarify that carriers 
should follow one of the standard industry formats established by 
national clearinghouses. In this Order on Reconsideration, we do not 
require carriers to follow a particular format because we believe that 
it is neither appropriate nor necessary for the Commission to make up a 
format. Furthermore, parties did not quantify the cost to update the 
reports. In the event a small SBR decides to update the reports to meet 
industry standards, we believe the cost to do so will be minimal and 
therefore this clarification will not have a significant economic 
impact on small entities.
    15. Similarly, the Commission's clarification concerning the 
responsibilities of local exchange carriers (LECs) as Completing 
Carriers does not significantly impact small entities. This 
clarification addresses a concern that some LECs who pay PSPs through 
bill credits are not compensating PSPs when a PSP is not served by the 
LEC or when the LEC acts as an IXC. In this Order on Reconsideration, 
we simply clarify that a LEC is responsible for compensation for calls 
made to access code numbers or subscriber toll-free numbers that a LEC 
maintains. We do not impose any additional responsibilities on LECs and 
therefore the clarification will not have a significant economic impact 
on small entities.
    16. This Order on Reconsideration further clarifies and removes 
potentially burdensome paperwork requirements allowing the use of 
electronic methods to comply with our audit and CFO reporting 
requirements. First, we clarify that system audit reports may be posted 
on a website instead of requiring them to be sent to as many as 5500 
PSPs. Second, these rules also clarify that a Completing Carrier CFO 
may certify the carrier's quarterly payments to all PSPs in a single 
document and may post this certification on the web, instead of sending 
individualized certifications to PSPs. The Commission believes that 
complying with the rules electronically is no more burdensome than 
submitting copies. It will also be less expensive for carriers to post 
the reports and certifications on the web rather than to send paper 
copies to PSPs. Therefore, these clarifications will not have a 
significant economic impact on small entities.
    17. We also clarify that SBRs and other Completing Carriers may 
rely on a system audit of a payphone clearinghouse (instead of re-
auditing the clearinghouse themselves). We expect that this 
clarification will benefit small SBRs economically because they will 
not have to pay for a separate audit of the clearinghouse.
    18. Therefore, we certify that the requirements of the Order on 
Reconsideration will not have a significant economic impact on a 
substantial number of small entities.

Ordering Clauses

    19. Accordingly, pursuant to authority contained in sections 1, 4, 
and 276 of the Communications Act of 1934, as amended, 47 U.S.C. 151, 
154, and 276, it is ordered that the policies, rules, and requirements 
set forth herein are adopted.
    20. It is further ordered that part 64 of the Commission's rules, 
47 CFR part 64, is amended by revising Sec.  64.1310(a) and (g), and 
Sec.  64.1320(a), (b), and (e) as set forth in Appendix B to this Order 
on Reconsideration.
    21. It is further ordered that the Petition for Clarification or 
Partial Reconsideration filed by APCC is granted in part and denied in 
part, to the extent discussed herein.
    22. It is further ordered that the petition for Clarification or, 
in the Alternative, Reconsideration filed by AT&T is granted, to the 
extent discussed herein.
    23. It is further ordered that the Petition for Reconsideration and 
Clarification filed by the RBOC Coalition is denied.
    24. It is further ordered that the Petition for Reconsideration 
filed by Sprint is denied.
    25. It is further ordered that the Request for Stay filed by APCC 
is denied as moot.
    26. It is further ordered that for good cause found, the rules set 
forth in Appendix B are effective January 5, 2005, except for Sec.  
64.1310(g) which contains information collection requirements that are 
not effective until approved by the Office of Management and Budget. 
The Commission will publish a document in the Federal Register 
announcing the effective date of that section.
    27. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Order on Reconsideration, including the Final Regulatory 
Flexibility Certification, to the Chief Counsel for Advocacy of the 
Small Business Administration.

List of Subjects in 47 CFR Part 64

    Telephone, Telecommunications.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

0
For the reasons discussed in the preamble, the Federal Communications 
Commission amends 47 CFR part 64 as follows:

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

0
1. The authority citation for part 64 continues to read as follows:

    Authority: 47 U.S.C. 154, 254(k); secs. 403(b)(2)(B), (c), 
Public Law 104-104, 110 Stat. 56. Interpret or apply 47 U.S.C. 201, 
218, 225, 226, 228, and 254(k) unless otherwise noted.

0
2. Section 64.1310 is amended by revising paragraphs (a) introductory 
text, (a)(3), (a)(4)(i) and paragraph (g) to read as follows:


Sec.  64.1310  Payphone compensation procedures.

    (a) Unless the payphone service provider consents to an alternative 
compensation arrangement, each Completing Carrier identified in Sec.  
64.1300(a) shall compensate the payphone service provider in

[[Page 723]]

accordance with paragraphs (a)(1) through (a)(4) of this section. A 
payphone service provider may not unreasonably withhold its consent to 
an alternative compensation arrangement.
* * * * *
    (3) When payphone compensation is tendered for a quarter, the chief 
financial officer of the Completing Carrier shall submit to each 
payphone service provider to which compensation is tendered a sworn 
statement that the payment amount for that quarter is accurate and is 
based on 100% of all completed calls that originated from that payphone 
service provider's payphones. Instead of transmitting individualized 
statements to each payphone service provider, a Completing Carrier may 
provide a single, blanket sworn statement addressed to all payphone 
service providers to which compensation is tendered for that quarter 
and may notify the payphone service providers of the sworn statement 
through any electronic method, including transmitting the sworn 
statement with the Sec.  64.1310(a)(4) quarterly report, or posting the 
sworn statement on the Completing Carrier or clearinghouse website. If 
a Completing Carrier chooses to post the sworn statement on its 
website, the Completing Carrier shall state in its Sec.  64.1310(a)(4) 
quarterly report the web address of the sworn statement.
    (4) * * *
    (i) A list of the toll-free and access numbers dialed and completed 
by the Completing Carrier from each of that payphone service provider's 
payphones and the ANI for each payphone;
* * * * *
    (g) Each Completing Carrier and each Intermediate Carrier must 
maintain verification data to support the quarterly reports submitted 
pursuant to paragraphs (a)(4) and (c) of this section for 27 months 
after the close of that quarter. This data must include the time and 
date that each call identified in paragraphs (a)(4) and (c) of this 
section was made. This data must be provided to the payphone service 
provider upon request.

0
3. Section 64.1320 is amended by revising paragraphs (a), (b), and (e) 
to read as follows:


Sec.  64.1320  Payphone call tracking system audits.

    (a) Unless it has entered into an alternative compensation 
arrangement pursuant to Sec.  64.1310(a) that relieves it of its Sec.  
64.1310(a)(1) tracking system obligation, each Completing Carrier must 
undergo an audit of its Sec.  64.1310(a)(1) tracking system by an 
independent third party auditor whose responsibility shall be, using 
audit methods approved by the American Institute for Certified Public 
Accountants, to determine whether the call tracking system accurately 
tracks payphone calls to completion.
    (b) By the effective date of these rules, each Completing Carrier 
in paragraph (a) of this section must file an audit report from the 
auditor (the ``System Audit Report'') regarding the Completing 
Carrier's compliance with Sec.  64.1310(a)(1) as of the date of the 
audit:
    (1) With the Commission's Secretary in CC Docket No. 96-128;
    (2) With each payphone service provider for which it completes 
calls and a Completing Carrier may comply with this paragraph's 
requirement to file copies of the System Audit Report with each 
payphone service provider by posting the System Audit Report on its 
website or a clearinghouse website; and
    (3) With each facilities-based long distance carrier from which it 
receives payphone calls.
* * * * *
    (e) At the time of filing of a System Audit Report with the 
Commission, the Completing Carrier shall file with the Commission's 
Secretary, the payphone service providers and the facilities-based long 
distance carriers identified in paragraph (b) of this section, a 
statement that includes the name of the Completing Carrier, and the 
name, address and phone number for the person or persons responsible 
for handling the Completing Carrier's payphone compensation and for 
resolving disputes with payphone service providers over compensation, 
and this statement shall be updated within 60 days of any changes of 
such persons. If a Completing Carrier chooses to notify payphone 
service providers of this statement and its System Audit Report by 
posting these two documents on its website or a clearinghouse website, 
then this statement shall include the web address for these two 
documents.
* * * * *
[FR Doc. 05-173 Filed 1-4-05; 8:45 am]
BILLING CODE 6712-01-P