II. Background

III. Issues
The Payphone Marketplace
Compensation for Each and Every Completed Intrastate and Interstate Call Originated by Payphones
1. Payphone Calls Subject to this Rulemaking and Compensation Amount
2. Entities Required to Pay Compensation
3. Ability of Carriers to Track Calls from Payphones
4. Administration of Per-Call Compensation
5. Interim Compensation Mechanism

Reclassification of LEC-Owned Payphones
1. Classification of LEC Payphones as CPE
2. Transfer of Payphone Equipment to Unregulated Status
3. Termination of Access Charge Compensation and Other Subsidies
4. Deregulation of AT&T Payphones

Nonstructural Safeguards for BOC Provision of Payphone Service

Ability of BOCs to Negotiate with Location Providers on the Presubscribed InterLATA Carrier

Ability of Payphone Service Providers to Negotiate with Location Providers on the Presubscribed IntraLATA Carrier

Establishment of Public Interest Payphones

Other Issues
1. Dialing Parity
2. Letterless Keypads on Payphones
3. Oncor Petition

IV. Procedural Matters
1. Petitions for Reconsideration
2. Paperwork Reduction Act Analysis
3. Regulatory Flexibility Act Analysis

Conclusion

Ordering Clauses

Appendix A
Text of Section 276
Appendix B
List of Parties Filing Comments
Appendix C
List of Parties Filing Replies
Appendix D
Immediate Rules Adopted by This Order
Appendix E
Rules Adopted by This Order
Appendix F
Interim Compensation Obligations

BACKGROUND

9. As the Commission discussed in the Notice, payphone services have historically been regulated by the states and the Commission. To date, the states have regulated payphones as part of the LEC's network-based service. Some states have also imposed regulation on the operator service rates charged at payphones maintained by non-LEC, independent payphone providers. The Commission has focused on payphones primarily in the context of our regulation of carriers that provide operator-assisted long-distance service, known as operator service providers ("OSPs"), and in particular, our implementation of the Telephone Operator Consumer Services Improvement Act ("TOCSIA"). Among other things, TOCSIA directed the Commission to determine whether independent payphone providers should receive compensation for originating interstate calls to non-presubscribed OSPs from their payphones. The Commission's consideration of compensation issues under TOCSIA led to the creation of a compensation mechanism that is an antecedent to the one adopted in the instant proceeding. Currently, there are approximately 1.5 million incumbent local exchange carrier ("LEC") payphones and approximately 350,000 competitively provided payphones.

    

10. As stated in the Notice, Section 276(b)(1)(A) directs the Commission to establish a compensation plan to ensure "that all payphone service providers are fairly compensated for each and every completed intrastate and interstate call" from their payphones. Section 276(b)(1)(B) mandates that the Commission "discontinue the intrastate and interstate carrier access charge payphone service elements and payments ... and all intrastate and interstate subsidies from basic exchange and exchange access revenues." In addition, Section 276(b)(1)(D) directs the Commission to consider whether BOCs should be granted certain rights already available to all other PSPs to participate in the location provider's selection of presubscribed interLATA carrier, while Section 276(b)(1)(E) grants certain rights to all PSPs to participate in the selection of presubscribed intraLATA carriers. Together with the other subsections of Section 276, these three provisions help to establish regulatory parity for all PSPs, whether independent payphone providers or incumbent LECs (both independents LECs and BOCs).