WPCU 2 B7P Z Courier 10cpiCourier 10cpiCourier 10cpi (Bold)CG Times (Scalable)HP LaserJet IIISi in Rm 544 (lpt2)HPLASIII.PRSx  @HpX@2<Zs 3|xurier 10cpi (Bold)CG Times (Scalable)HP LaserJet IIISi ROOM 544 (LPT2)HPLASIII.PRSx  @H58\X@3|x2!Xq_?xxx,wx6X@8;X@?xxx,x `B;XV"G($,#hG P7hPTES DRS_ROTATE_F MSGCANCELOKMNUGETGROUPFROMMENUt WP51STRNCATfSH1ENTRY D"Sh5^$(8<><q*"xxxxWWxxxWWkkxxx$\d ( CP <ԍ The Price Cap rules establish a single Price Cap Index (PCI) for the Common Line Category, which includes the SLC and CCL rate elements. Thus, a forecast decrease in SLC revenue permits the LEC to increase CCL rates, absent other offsetting factors. 47 U.S.C.  61.46(d).> We also believe that policies that would appear to reduce dramatically SLC charges to large business customers, but not to residential  C<customers, must be carefully examined.a%( C`<ԍ See infra para. 26. HH8ăa x19. 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. x20. 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"| %0*((z" 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 X(1. Overview x21. 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 T1 facility. At the other extreme, we could maintain the current rule under which a SLC is applied to each derived communications channel. x22. 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 T1 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 T1 connection, including line cards, is six times the average cost of providing an ordinary T1 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. x23. 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 perchannel 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 PerFacility Approach x24. 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"' %0*((/" 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. x25. 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  CH <flows intrinsic to the existing per minute CCL charge.P&H ( C<ԍ See para. 18 & n.35 supra.P 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  C<service configurations.^'\( C<ԍ For example, in its tariff, NY  NEX proposed to continue to apply SLCs on a perderivedchannel basis when a single T1 facility was used to provide more than one service to one  ?D<customer. Rejection Order at para.6; Reconsideration Order at para 19.^ x26. 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 perfacility 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" '0*((&" use of a second line does not require additional plant investment. x 3. Intermediate Options x27. 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  C<loop or T1 facility.}(( C( <ԍ The need to obtain and analyze cost data may represent a drawback to this approach.} Under this approach, a PRI customer, for example, would pay six SLCs if the LEC cost of providing an ISDN T1 connection, including line or trunk cards, is six times the cost of providing an ordinary T1 facility. x28. While we do not have data on the relationship between the cost of providing ISDN and nonISDN local loops and T1 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. x29. This approach does appear to depart from the averaging reflected in SLCs to date. Subject to the $3.50 and $6.00 caps, SLCs are based on averaged loop costs within each study area, and the Commission has not previously established lower SLCs for a particular service or group of customers based on the lower cost of serving them. While the maximum SLCs for residential and single line business customers are lower than the maximum SLCs for multiline business customers, this difference in the rate cap  C|<is not based on cost differences.)|$( C0#<ԍ For an explanation of how SLCs are calculated see para. 8  ?#<supra. This approach also includes the cost of the line cards in developing the cost relationship between ISDN connections and nonISDN connections even though line cards are treated as switching, not local loop facilities for jurisdictional separations and Part 69 cost allocation"! )0*(((" 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. x30. Reducing SLCs for derived channel connections to 50 percent of the level required by the current rules is another intermediate option between the perfacility and perderived channel approaches. Under this approach, the LECs would charge  C<one SLC for every two derived channels.*( C` <ԍ This could also be done by applying 50 percent of the otherwise applicable SLC charge to each derived channel. 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 perfacility 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 PerDerived Channel Approach x31. 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 offsetting 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  C<flows intrinsic to the CCL charge*)\*$( C`<ԍ See, paras. 18 & 20 supra.  \ even as areas of competition are developing in the interstate access market. 5. Additional Options x32. 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. "h"*0*((|)"Ԍx 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. x!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. L6. Request for Comments x"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  C <the subscriber or not.H+ ( Cx<ԍ See para. 5 supra.H  ?<x#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""$\+0*((.,"  C<that differs from the current separations definition in Part 36.I,( CX<ԍ See para. 11 supra.I 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  ?, <x$37. This proceeding is a nonrestricted notice and comment  ? <rulemaking. Ex parte presentations are permitted, except during the Sunshine Agenda period, provided that they are disclosed as  C <provided in the Commission's rules.- \( Cp<ԍ See generally, Sections 1.1202, 1.1203 and 1.1206(a) of the Commission's rules, 47 C.F.R.  1.1202, 1.1203 & 1.1206(a).  ?<  V. Regulatory Flexibility Analysis  C<x%38. We certify that the Regulatory Flexibility ActC.( C<ԍ 5 U.S.C.  60112.C 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. LV. Comment Filing Dates  ?L<x&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" L.0*(('" 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  ?<x'40. Accordingly, IT IS ORDERED that, pursuant to the authority contained in Sections 1, 4, and 201205 of the Communications Actof 1934, as amended, 47 U.S.C. SS 151, 154, & 201205, a NOTICE OF PROPOSED RULEMAKING IS HEREBY ADOPTED. FEDERAL COMMUNICATION COMMISSION William F. Caton Acting Secretary