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

NONSTRUCTURAL SAFEGUARDS FOR BOC PROVISION OF PAYPHONE SERVICE

192. The foregoing parts establish a compensation arrangement that applies equally to the payphone operations of the BOCs, other LECs, AT&T and PSPs not affiliated with LECs. In this part, we address certain operating requirements that are imposed only on the BOCs' payphone operations.

      

193. Section 276(b)(1)(C) directs the Commission to "prescribe a set of nonstructural safeguards for Bell operating company payphone service to implement the provisions of paragraphs (1) and (2) of subsection (a), which safeguards shall, at a minimum, include the nonstructural safeguards equal to those adopted in the Computer Inquiry - III (CC Docket No. 90-623) proceeding[.]" As referred to in Section 276(b)(1)(C), Section 276(a) provides that a BOC "(1) shall not subsidize its payphone service directly or indirectly from its telephone exchange service operations or its exchange access operations; and (2) shall not prefer or discriminate in favor of its payphone service."

      

     1. The Notice

194. In the Notice, we tentatively concluded that all Computer III nonstructural safeguards must be applied to meet our obligation "to prescribe nonstructural safeguards for [BOC] payphone service" under the 1996 Act. We also solicited comment on whether there are other nonstructural safeguards that, while not explicitly specified in Computer III, should be applied to BOC payphones.

      

195. To ensure BOC compliance with the Computer III and Open Network Architecture (ONA) requirements, we proposed a requirement that each BOC file, within 90 days of the effective date of this Report and Order, an initial Comparably Efficient Interconnection (CEI) plan describing how it intends to comply with the CEI equal access parameters and nonstructural safeguards for the provision of payphone services.

      

196. Currently, the Commission regulates BOC provision of enhanced services through CEI and ONA requirements that mandate unbundled nondiscriminatory access to BOC network features and functionalities. Pursuant to these requirements, BOCs must file a service-specific CEI plan before offering any enhanced service on an integrated basis. A BOC must demonstrate in its CEI plan how it would provide competing enhanced service providers with "equal access" to all basic underlying network services the BOC used to provide its own enhanced services. Subsequently, the Commission required BOCs to develop and implement ONA plans detailing more fundamental unbundling of their basic network services. ONA requires further unbundling of network elements than under CEI because it is not limited to those elements associated with specific BOC enhanced services. In 1993, the Common Carrier Bureau lifted structural separation requirements after each BOC demonstrated that its ONA plan complied with the BOC Safeguards Order. Following the California III court decision, the Commission has continued to require BOCs to file CEI plans for each individual enhanced service they offer in addition to fulfilling the access requirements of its ONA plan.

      

     2. Comments

197. California PUC, One Call, Ameritech, and USTA support Computer III safeguards and CEI. Florida PSC argues that, if nonstructural safeguards are used, specific cost pools and allocators should be used to identify the existence of subsidies. GPCA supports the Computer III safeguards and argues that they should be strengthened by requiring that the BOCs also: (1) provide unbundled specific services such as answer supervision and flexible call rating based on subscribers specifications, and continue to provide dialtone and blocking and screening; (2) offer volume discounts on a equal basis to aggregators; (3) provide service order processing; (4) implement safeguards against interference with letters of agency; (5) follow Customer Proprietary Network Information (CPNI) restrictions; (6) file CEI plans; (7) conduct independent audits; and (8) maintain publicly available contracts. SW Bell argues that there is no incentive for cross-subsidization with price cap regulation and the elimination of sharing. Ameritech disagrees with the Commission that a separate proceeding is necessary to develop accounting safeguards different than those applied in Computer III. Inmate Coalition argues that additional safeguards should include accounting and fraud control, billing and collection, and CPNI availability. USTA argues that pursuant to Section 276, nonstructural safeguards only apply to BOCs. GPCA argues that the Computer III safeguards should apply to other LECs, particularly those with annual revenues greater than 100 million dollars, including GTE, Sprint and Alltel, and LECs that service Puerto Rico and the Virgin Islands. Ohio PUC argues that Computer III nonstructural safeguards should apply to all LECs if payphones are deregulated and structural separation is not imposed.

      

198. AT&T and GPCA support the imposition of CEI plans on the BOC provision of payphone services. The RBOCs and PacTel argue that CEI plans are not necessary because these are basic, not enhanced services. AT&T contends that CPNI requirements should apply to BOC provision of payphones. One Call argues that if CPNI is not restricted, it should be available to all providers. GPCA contends that information about the use of LEC payphones is CPNI that should be available to any party upon reasonable request. AT&T supports the network information disclosure requirements established in our implementation of Section 251 of the 1996 Act, plus the addition of two requirements that BOCs file network information disclosures with the Commission, and that there be one year notification of network changes.

      

     3. Discussion

     a. Nonstructural Safeguards

199. In addition to the accounting safeguards that we will adopt with respect to payphone services in the accounting safeguards proceeding, we conclude that the Computer III and ONA nonstructural safeguards will provide an appropriate regulatory framework to ensure that BOCs do not discriminate or cross-subsidize in their provision of payphone service. The Commission and the BOCs have substantial experience in the application of these safeguards that will facilitate their use in the context of BOC payphone services. We conclude that we do not have to adopt any additional safeguards beyond Computer III and ONA because of the comprehensive nature of that regulatory structure and the lack of a record necessary to conclude that a more burdensome framework should be adopted and is in the public interest. As discussed above, we decline to require structural separation requirements. To ensure that the BOCs comply with the Computer III and ONA nonstructural separation requirements for the provision of payphone services, we require that, within 90 days after the effective date of this Report and Order, BOCs must file CEI plans describing how they will comply with the Computer III unbundling, CEI parameters, accounting requirements, CPNI requirements as modified by Section 222 of the 1996 Act, network disclosure requirements, and installation, maintenance, and quality nondiscrimination requirements.

      

200. The Computer III nonstructural safeguards currently apply to a BOC's provision of payphone service if enhanced services are provided through the payphone. Under the Computer III and ONA framework, BOCs are permitted to provide enhanced services on an integrated basis subject to nondiscrimination safeguards. The safeguards the Commission adopted in Computer III and ONA include: (1) nondiscriminatory access to network features and functionalities; (2) restrictions on the use of CPNI; (3) network information disclosure rules; (4) nondiscrimination in the provision, installation, and maintenance of services as well as nondiscrimination reporting requirements; and (5) cost accounting safeguards. We conclude that all Computer III and ONA nonstructural safeguards must be applied to meet our obligation under the 1996 Act. Pursuant to these requirements, we note that any basic services provided by a BOC to its payphone affiliate must be available on a nondiscriminatory basis to other payphone providers and that payphone providers may request additional unbundled payphone services through the 120 day ONA service request process.

      

201. Except for the Commission's Part 64 cost allocation rules and Part 32 affiliate transaction rules, we decline to apply the Computer III nonstructural safeguards to other LECs. We concluded in the BOC CPE Relief Order that application of those safeguards would be "unduly burdensome and not necessary to protect against potential anticompetitive conduct." We similarly, declined to apply Computer III and ONA nonstructural safeguards to other LECs, except GTE. Moreover, Section 276 specifically directs the Commission to establish nonstructural safeguards for the BOCs, but does not include such a requirement regarding other LECs.

      

     b. BOC CEI Plans

202. We require that each BOC file, within 90 days of the effective date of this Report and Order, an initial CEI plan describing how it intends to comply with the CEI equal access parameters and nonstructural safeguards for the provision of payphone services. In Computer III, CEI plans have been an integral part of ensuring that BOCs do not discriminate in providing basic underlying services to enhanced services providers. We likewise require the filing of CEI plans for payphone services, even though we have traditionally only required such plans for the BOC provision of enhanced services, to ensure that the BOCs provide payphone services in a nondiscriminatory manner and consistent with other Computer III and ONA requirements. Finally, we conclude that this requirement is consistent with the requirement in Section 276 that we establish safeguards, at a minimum, "equal to those adopted in the Computer III Inquiry."

      

203. In a CEI plan, a BOC must describe how it intends to comply with the CEI "equal access" parameters for the specific payphone service it intends to offer. The CEI equal access parameters include: interface functionality; unbundling of basic services; resale; technical characteristics; installation, maintenance, and repair; end user access; CEI availability; minimization of transport costs; and availability to all interested customers or enhanced service providers.

      

204. In its CEI plan, a BOC must explain how it will unbundle basic payphone services. Thus, a BOC must indicate how it plans to unbundle, and associate with a specific rate element in a tariff, the basic services and basic service functions that underlie its provision of payphone service. Nonproprietary information used by the BOC in providing the unbundled basic services will be made available as part of CEI. In addition, any options available to the BOC in the provision of such basic services or functions would be included in the unbundled offerings.

      

205. A BOC also must explain in its CEI plan how it will comply with the CPNI requirements. We have continued to require compliance with the Computer III and ONA CPNI requirements that are not inconsistent with Section 222 of the 1996 Act, which was immediately effective. In the CPNI NPRM, we are currently examining a carrier's obligations under the CPNI provisions of the 1996 Act. We disagree with GPCA's contention that pursuant to the Commission's CPNI requirements, usage of LEC payphones should be treated as aggregate CPNI that should be made available to any party upon request. Under Computer III and ONA BOCs must make aggregate CPNI available to third parties if they make it available to BOC personnel for marketing. This requirement does not apply merely upon a third party's request, and the requirement does not apply to LECs other than the BOCs. Moreover, aggregate CPNI includes compilations of CPNI information, not individual locations. We will consider the requirements for LEC provision of aggregate CPNI under Section 222 in the CPNI proceeding.

      

206. BOCs must comply with the Computer III and ONA network information disclosure requirements. The BOCs cannot design new network services or change network technical specifications to the advantage of their own payphones. Pursuant to these rules, the BOCs must disclose information about changes in their networks or new network services at two different points in time. First, disclosure must occur at the "make/buy" point: when a BOC decides to make for itself, or procure from an unaffiliated entity, any product whose design affects or relies on the network interface. Second, a BOC must publicly disclose technical information about a new service 12 months before it is introduced. If the BOC can introduce the service within 12 months of the make/buy point, it would make a public disclosure at the make/buy point. The public disclosure, however, must not occur less than six months before the introduction of the service.

      

207. In addition, BOCs must comply with the Computer III and ONA requirements regarding nondiscrimination in the quality of service, installation, and maintenance. BOCs must indicate in their CEI plans how they will comply with these requirements. We do not impose any new continuing reporting requirement because BOCs are already subject to reporting requirements pursuant to Computer III and ONA. BOCs must report on payphone services as they do for other basic services.