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

Interim Compensation Mechanism

a. The Notice

117. The Commission sought comment on whether independent payphone providers should receive some measure of interim compensation, to be paid until the effective date of the final rules adopted in this proceeding, for the growing volume of dial-around calls originated from their payphones. Those who support such relief were instructed to comment on the appropriate interim compensation amount, how such an interim compensation mechanism could be structured, and the feasibility of implementing an interim plan when final rules are required to be in place in nine months. The Commission also requested comment on the legal basis for, and practical consequences of, making such interim compensation effective as of the release date of the Notice.

      

     b. Comments

118. Various independent payphone providers and BellSouth argue that the Commission should prescribe interim relief for independent payphone providers, retroactive to the date of the Notice and to be paid until the effective date of the rules adopted in this proceeding, for the growing volume of dial-around calls originated from their payphones. They argue that independent payphone providers, unlike the LECs, are uncompensated for the majority of coinless calls that use their payphones, and that the quantity of these calls is increasing. They also argue that delays for unforeseen reasons will likely impact the effective date of the final rules in this proceeding, which makes an interim relief mechanism a necessity for the survival of their businesses. These commenters suggest compensation amounts that range from $.40 on a per-call basis to $24, $38.70, and $40 on a flat rate per phone basis. Intellicall suggests that the Commission prescribe interim relief through a "caller-pays" coin deposit approach. BellSouth also argues that LEC-owned payphones should be eligible to receive interim relief once they have removed all subsidies from their payphone operations. The RBOCs, GTE, AT&T, MCI, Sprint, and One Call all oppose granting interim relief to independent payphone providers. They argue that such relief would be unadministrable because it would require parties to participate in two payment systems, and interim relief would be without a statutory basis. AT&T states that it does not oppose interim relief for access code calls only.

      

     c. Discussion

119. Because the IXCs required to pay compensation to PSPs are not required to track individual compensable calls until one year from the effective date of the rules adopted in this proceeding, we conclude that PSPs should be paid monthly compensation on a flat rate by IXCs with annual toll revenues in excess of $100 million, beginning on the effective date of the rules adopted in this proceeding and ending on October 1, 1997. This flat-rate monthly compensation will apply proportionally to individual IXCs, based on their respective annual toll revenues. For reasons of administrative convenience of the parties, we conclude that we should model the interim mechanism adopted in this Report and Order on that set forth in the access code call compensation proceeding. In the access code compensation proceeding, CC Docket No. 91-35, we excused several carriers from the obligation to pay flat-rate compensation for originating access code calls, because they certified that they were not providers of "operator services," as defined by TOCSIA. We note that Section 276's requirement that we ensure fair compensation for "each and every completed intrastate and interstate call," including access code calls, supersedes the compensation obligations established in CC Docket No. 91-35, including the waivers granted to AT&T and Sprint. Because Section 276 is the statutory authority for mandating per-call compensation for all compensable calls, including access code calls, the statutory exclusion in TOCSIA for those carriers that are not providers of "operator services" is no longer a basis for being excused from the obligation to pay either the total flat-rate compensation amount established in the instant proceeding, or a portion thereof.

      

120. In the Notice, we set forth the history of the flat-rate compensation mechanism we adopted for access code calls. TOCSIA had 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 concluded in the Second Report and Order that a per-call compensation mechanism was preferable because it would create greater incentives for PPOs to place their payphones in locations that generate the most traffic. The Commission concluded, however, that it was not technically feasible to implement such a mechanism at that time. Instead, the Commission adopted flat-rate compensation in the amount of $6 per phone per month (based on average of 15 access code calls at a rate of $.40 per call), on an interim basis.

      

121. When we adopted a compensation mechanism for interstate access code calls, the Commission concluded that, because they did not involve use of a "carrier-specific access code" and were routed directly to an end user, subscriber 800 calls were not within the class of calls for which TOCSIA directed the Commission to consider compensation. The Commission, therefore, limited compensation to interstate "access code calls." In July 1992, in response to a petition for reconsideration by the APCC, the Commission affirmed its conclusion that subscriber 800 calls were not within the Commission's definition of interstate "access code calls" for which compensation should be paid. In 1992, after the Commission affirmed its exclusion of subscriber 800 calls from the class of compensable access code calls, the Florida Pay Telephone Association ("FPTA") sought judicial review in the United States Court of Appeals for the District of Columbia Circuit of this aspect of the First Report and Order and the Subscriber 800 Reconsideration Order. In its Florida Payphone decision, the Court found no reason to distinguish between the routing of access code calls and subscriber 800 calls. Therefore, it reversed and remanded the case to the Commission to "consider the need to prescribe compensation for subscriber 800 calls 'routed to providers of operator services that are other than the presubscribed provider of operator services.'"

      

122. We first re-examine the basis for setting the $.40 per-call compensation amount that was aggregated to a flat rate of $6 per month. In the 1992 Second Report and Order, the Commission identified three reasonable compensation approaches that established a range of reasonable compensation rates. The three approaches were: (1) as a surrogate for independent payphone provider costs, access charge compensation that a LEC receives for its regulated provision of payphones; (2) as a measure of value to OSPs of receiving access code calls, charges for a transfer by a LEC live operator to an OSP of the caller's choice ("O- transfer service charges"); and (3) AT&T's federally regulated operator service rates on calls made from payphones presubscribed to AT&T. We conclude that these three approaches, which are based on a different standard than that in Section 276, are inapplicable for determining interim compensation in the instant proceeding. Our focus in the instant proceeding is to let the market set the appropriate compensation amount. As discussed above, for the limited purpose of calculating compensation for PSPs on a flat-rate basis until per-call compensation becomes mandatory we will use a rate of $.35 per call, which is the rate in the majority of states that have allowed the market to determine the appropriate local coin rate.

      

123. We next re-examine the average number of access code calls originated by a payphone per month. In 1992, the Commission found that the average was 15 calls. As summarized below, data on the record in the instant proceeding indicate that the average number of access code calls per month is now considerably higher. In addition, similar data show the volume of subscriber 800 calls generated by the average payphone.

      

124. Various independent payphone providers and the RBOCs submitted data on the average number of access code and subscriber 800 calls originated respectively by their payphones. Together, these data cover payphones located in geographically diverse areas across the country. Peoples, the largest independent provider, states that each of its payphones originates, on average, 43 access code calls and 86 subscriber 800 calls per month (total of 129 compensable calls). Communications Central, another large independent payphone provider, states that each of its payphones originates an average of 49.5 access code calls and 79.7 subscriber 800 calls per month (total of 130 compensable calls). Telaleasing states that each of its payphones originates an average of 37 access code calls and 87 subscriber 800 calls per month (total of 124 compensable calls). APCC states that it surveyed approximately 100,000 payphones owned by 20 diverse providers and found that, in a three-month period in 1996, each payphone originated an average of 40 access code calls and 100 subscriber 800 calls per month (total of 140 compensable calls). Data provided by the RBOCs show that the payphones maintained by five of the seven RBOCs originate, on average, 52 access code calls and 80 subscriber 800 calls per payphone per month (total of 132 compensable calls).

      

125. The data on the record from the five PSP sources noted in the preceding paragraph yield similar average monthly compensable call volumes. Based on the call volume data provided by the PSPs, we conclude that, for purposes of calculating flat-rate compensation, that the average payphone originates a combined total of 131 access code calls and subscriber 800 calls per month. When 131 calls per month is multiplied by the $.35 compensation amount, the monthly flat-rate compensation amount is $45.85. We conclude that this $45.85 flat-rate amount must be paid by carriers, proportionally to their annual toll revenues, to PSPs. This flat-rate obligation applies to access code calls and subscriber 800 calls originated on or after the effective date of the rules adopted in this proceeding. PSPs that are affiliated with LECs will not be eligible for this interim compensation until the first day of the month following their reclassification and transfer of payment equipment along with the termination of subsidies, as discussed below.

      

126. We decline to require that per-call compensation be paid retroactive to the date of release of the Notice. We conclude that the rules adopted in this Report and Order, including the requirement that interim flat-rate compensation be paid until per-call tracking capabilities are in place, provides compensation to PSPs as soon as practicable. For the same reasons discussed elsewhere in this Report and Order, we also reject Intellicall's argument that interim compensation be mandated through a "caller pays" coin-deposit approach.