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File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Implementation of the ) CC Docket No. 96-128 Pay Telephone Reclassification ) and Compensation Provisions of the) Telecommunications Act of 1996 ) NOTICE OF PROPOSED RULEMAKING Adopted: June 4, 1996 Released: June 6, 1996 Comments Due: June 27, 1996 Replies Due: July 8, 1996 By the Commission: Chairman Hundt issuing a statement. Table of Contents Topic Paragraph No. I. Introduction 1 II. Background 2 III. Issues 14 A. Compensation for Each and Every Completed Intrastate and Interstate Call Originated by Payphones 14 1. The Act 14 2. Discussion 15 a. Scope of Payphone Calls Covered by this Rulemaking 15 b. Entities Required to Pay Compensation 24 c. Ability of Carriers to Track Calls from Payphones 29 d. Administration of Per-Call Compensation 32 e. Per-Call Compensation Amount 35 B. Reclassification of LEC-Owned Payphones 41 1. The Act 41 2. Discussion 42 a. Classification of LEC Payphones as CPE 42 b. Transfer of Payphone Equipment to an Unregulated Status 49 c. Termination of Access Charge Compensation and Other Subsidies 50 d. Deregulation of AT&T Payphones55 C. Nonstructural Safeguards for BOC Provision of Payphone Service 57 1. The Act 57 2. Discussion 58 a. Background 58 b. BOC CEI Plans 60 D. Ability of BOCs to Negotiate with Location Providers on the Presubscribed InterLATA Carrier67 1. The Act 67 2. Discussion 69 E. Ability of Payphone Service Providers to Negotiate with Location Providers on the Presubscribed IntraLATA Carrier 74 1. The Act 74 2. Discussion 75 F. Establishment of Public Interest Payphones 76 1. The Act 76 2. Discussion 77 G. Other Issues 83 1. Dialing Parity 84 2. Letterless Keypads on Payphones 85 3. Other Pending Payphone Proceedings 88 4. Comments and Ex Parte Presentations 89 5. Initial Paperwork Reduction Act Analysis 93 6. Initial Regulatory Flexibility Act Analysis 95 IV. Conclusion 103 V. Ordering Clauses 104 I. INTRODUCTION 1. The Telecommunications Act of 1996 directs the Commission to promulgate new rules governing the payphone industry. Section 276 of the 1996 Act directs the Commission, among other things, to ensure that all payphone owners are compensated for calls originated on their payphones, and to "discontinue ... all intrastate and interstate" subsidies for payphones owned by incumbent local exchange carriers ("LECs"). In this Notice, the Commission proposes rules that would accomplish the following objectives set forth by Congress in Section 276: (1) compensation for "each and every completed intrastate and interstate call using [a] payphone[;]" (2) termination of all subsidies for LEC payphones, including "access charge payphone service elements[;]" (3) prescription of nonstructural safeguards for Bell Operating Company ("BOC") payphones; (4) promulgation of rules permitting the BOCs to negotiate with the payphone location provider about a payphone's presubscribed interLATA carrier, unless the Commission finds that such negotiations are "not in the public interest;" (5) promulgation of rules permitting all payphone providers to negotiate with the location provider about a payphone's presubscribed intraLATA carrier; and (6) establishment of a class of public interest payphones to be located "where there would otherwise not be a payphone[.]" We also note that in a separate proceeding on operator service provider issues, the Commission tentatively concludes that it should: (1) establish benchmarks for rates charged by operator service providers ("OSPs") that reflect consumers' expectations; and (2) require OSPs whose charges, and related aggregator surcharges or premises-owner fees, exceed such benchmarks to disclose orally to consumers, before connecting a call, the total charges for which consumers would be liable. II. BACKGROUND 2. Payphone service has been regulated primarily by the states as part of the LECs' basic service. For example, states have set the rates for local payphone usage. While some of the costs of payphones owned by LECs have been recovered through charges to payphone users, other components of those costs have been recovered through intrastate and interstate rates that are unrelated to payphone usage. Like LEC payphones, AT&T payphones are classified as network equipment and, therefore, may recover their costs in a similar manner. 3. In 1980, in its Computer Inquiry II, the Commission concluded that customer premises equipment ("CPE"), such as the telephone sets used by end users, should be competitively provided and that it should not be offered as part of a carrier's regulated transmission service. The Commission determined that, if carriers bundled CPE with tariffed basic service, both a consumer's freedom of choice and marketplace competition in a developing industry would be hampered. The Commission recognized the potential for carriers to engage in anti-competitive activities. For example, carriers could potentially subsidize services facing competition with revenues from regulated, monopolistic services or shift costs from a service in a competitive industry to a service that the carrier operates as a regulated monopolist. In an effort to prevent cost misallocations, the Commission concluded that BOC provision of CPE (as well as enhanced services) should be offered through a separate subsidiary. The Commission specifically excluded coin-operated payphones from the definition of CPE. The Commission found that, unlike other CPE, which could be "unbundled" from basic exchange service, coin-operated payphones were still integrated with the LECs' network facilities and it concluded that payphones should remain part of regulated basic communications service. The Commission later extended this determination to coinless payphones. 4. At the time of the break-up of the Bell System, payphones were regarded as a part of basic local service. The Bell System payphones were classified as exchange facilities installed by the BOCs for the provision of local service to the public. Thus, the Modification of Final Judgment ("MFJ") Court's plan of reorganization assigned all Bell System payphones to the BOCs rather than to AT&T. 5. Soon after divestiture, several manufacturers developed a "smart" payphone -- payphones with sufficient computer intelligence to perform most of the control and supervision functions previously performed by a LEC's network. Because smart payphones could be separated from local exchange service, the Commission revisited its determination to exclude all payphone service from Part 68 rules governing the connection of terminal equipment to the network. In the Coin Registration Order, the Commission reaffirmed that LEC payphones would continue to be classified as network elements rather than CPE. The Commission concluded, however, that Part 68 should apply to smart payphones and recognized the right of non-LEC providers to interconnect these payphones to the interstate public switched network. As with LEC payphones, the Commission concluded in a later proceeding that the states should retain the authority to regulate the rates and other terms of payphone interconnection. The FCC also recognized that state commissions had the authority to regulate the charges, terms, and conditions of local and intrastate payphone service. 6. Since the development of smart payphones, a number of independent or "competitive" payphone owners (referred to in previous Commission orders as "private payphone owners" or "PPOs") have begun to compete with the LECs for the provision of payphone service. Currently, there are approximately 1.5 million LEC payphones and approximately 350,000 competitively provided payphones. As a general matter, neither PPOs nor the LECs own the premises where a particular payphone is located. Instead, location providers select the payphone service provider who will provide payphone services on their premises. 7. While both PPOs and incumbent LECs receive coins as compensation for most local calls placed on their payphones, there are important differences in how PPOs and LECs are compensated. PPOs generally presubscribe their payphones to an interexchange carrier ("IXC") of their own choice. That IXC provides operator services to the payphone for collect calls and calls billed to a calling card or a third party. The PPO negotiates an agreement with the presubscribed IXC, pursuant to which the IXC pays a percentage of its revenues from the payphone to the PPO. The PPO, in turn, pays a commission to the location provider based on the revenues generated by the payphone. 8. Pursuant to the MFJ, BOCs were required to permit location providers to select the IXC to which the payphone would be presubscribed for interstate, interLATA traffic. With this requirement, the location provider makes its own contract with an IXC to share in the interLATA revenues generated by the phone, usually through a commission arrangement for each operator-service call generated by the payphone at a particular location. Therefore, while the non-BOC LECs, like the PPOs, may receive a portion of the commissions from IXCs on interLATA operator-service calls using the presubscribed carrier, the BOCs do not receive any revenue directly from these calls. On the other hand, unlike the PPOs, all LECs, including the BOCs, receive, as a part of the carrier common line ("CCL") charges paid by IXCs, compensation for LEC provision of the facilities necessary to deliver interexchange traffic to the IXCs. The payphone element of the CCL is charged to all interexchange customers, not just to traffic originating or terminating at a payphone, and it provides compensation to the LEC for making available the payphone through which calls are routed to the IXC. 9. To date, the Commission has focused on payphones primarily in the context of its regulation of carriers that provide operator-assisted long-distance service, known as operator service providers ("OSPs"), and in particular, its implementation of the Telephone Operator Consumer Services Improvement Act ("TOCSIA"). Because operator services prior to divestiture were provided exclusively by the Bell System at tariffed rates that were familiar to callers, there was widespread consumer dissatisfaction with the varying rates and practices of many OSPs after divestiture. The Commission responded to this dissatisfaction both through the formal complaints process and through a rulemaking proceeding. In 1990, Congress enacted TOCSIA, which required all OSPs to identify themselves to consumers and quote their rates upon request. TOCSIA also required aggregators to unblock access to other carriers and post certain disclosures on or near each telephone. 10. TOCSIA directed the Commission to determine whether PPOs 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, on an interim basis. Subsequently, two IXCs, AT&T and Sprint, certified to the Commission that they were able to pay compensation on a per-call basis and petitioned the Commission for approval to pay compensation on that basis. They argued that a per-call compensation mechanism would better serve the Commission's objective to implement a more cost-based approach to compensation for calls to non-presubscribed OSPs. The Common Carrier Bureau agreed and granted AT&T and Sprint the right to pay compensation in the amount of $.25 per call in lieu of paying per-phone compensation to PPOs. The Commission later adopted a notice of proposed rulemaking, which tentatively concluded that other large IXCs should be required to pay compensation on a per-call basis. The Common Carrier Bureau also granted waivers to two incumbent LECs, Ameritech and Southwestern Bell, that claimed the ability to track payphone calls on a per-call basis and proposed to remove payphone-related costs from their CCL charges and, instead, to impose a per-call charge on IXCs for interstate calls originated from those LECs' payphones. 11. When it 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 Congress in 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 American Public Communications Council ("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. 12. 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.'" The Commission's action on the remand is pending. 13. Section 276(b)(1)(A) directs the Commission to establish a compensation mechanism 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 permitted to be involved with the location provider's selection of the payphone's presubscribed carrier. Together with the other subsections of Section 276, these three provisions help to establish regulatory parity for all payphone service providers ("PSPs"), whether competitive payphone owners or incumbent LECs (both independents and BOCs). III. ISSUES A. COMPENSATION FOR EACH AND EVERY COMPLETED INTRASTATE AND INTERSTATE CALL ORIGINATED BY PAYPHONES 1. The 1996 Act 14. As stated above, Section 276(b)(1)(A) mandates that all payphone providers, whether independents or LECs, be "fairly compensated for each and every completed intrastate and interstate call using their payphone, except that emergency calls and telecommunications relay service calls for hearing disabled individuals shall not be subject to such compensation[.]" 2. Discussion a. Scope of Payphone Calls Covered by this Rulemaking 15. Currently, most calls originated on payphones are within one of the following categories: (1) coin calls; (2) directory assistance calls; (3) operator service ("0+" and "0-") calls; (4) access code calls (using e.g., "10XXX" codes and "1-800" or "950" carrier access numbers); and (5) subscriber 800 calls. Each of these categories can be further subdivided between local, intraLATA toll, intrastate interLATA, interstate interLATA and international. Each type of call is a potential source of revenue for the payphone owner, whether the revenue is derived from coins deposited into the payphone, through commission payments on operator service calls, or from compensation mandated by the FCC or the states. 16. The 1996 Act requires the Commission to ensure that PSPs are fairly compensated for all calls originated by their payphones. In light of the multiple sources of revenue for payphones, we seek comment on what constitutes "fair" compensation and how we should "ensure" that each PSP receives it for calls for originated by its payphones. We tentatively conclude that our mandate under Section 276(b)(1)(A) is to ensure that PSPs are "fairly compensated" for "each and every completed intrastate and interstate call" regardless of whether the PSP currently receives compensation for the particular call originated by its payphone. We tentatively conclude, however, that we should use this mandate to prescribe compensation only when payphone providers are not already "fairly compensated." Currently, PPOs and non-BOC LECs receive compensation, pursuant to individual contracts, from the payphone's presubscribed IXC for all "0+" calls. IXCs have long competed for this type of business. Therefore, we tentatively conclude that we need not prescribe per-call compensation for 0+ calls because competition in this area ensures "fair" compensation for PSPs. We seek comment on these tentative conclusions. 17. Although the 1996 Act directs us to prescribe compensation for all calls, Congress specifically expressed its concern in the legislative history about access code calls and subscriber 800 calls, whether the calls are intrastate or interstate in destination. We tentatively conclude that, because the 1996 Act requires us to ensure fair compensation for all calls, we must at least prescribe standards for determining fair compensation for all access code calls, subscriber 800 and other toll-free number calls, and debit card calls. The compensation we prescribe in this rulemaking will extend to all such calls, whether they are intrastate or interstate in destination. We seek comment on this tentative conclusion. 18. The 1996 Act does not expressly state that compensation should extend to international calls. We find no evidence, however, of congressional intent to leave these calls uncompensated. As discussed below, we tentatively conclude that PSPs should be compensated for their costs in originating calls from their payphones. Compensating international calls would be consistent with this approach, because the costs of originating these calls are similar to the costs of originating "each and every completed intrastate and interstate call." Therefore, despite the lack of reference to international calls in Section 276(b)(1)(A), we tentatively conclude that we should exercise our general jurisdiction under Sections 4(i) and 201(b) of the Communications Act of 1934, as amended, to ensure that PSPs are compensated for international as well as interstate and intrastate calls originating from their payphones in the United States. We seek comment on this tentative conclusion. 19. The rate for the most common type of call, the local coin call, is set by state commissions. Typically, the rate set for local coin services provided by the incumbent LECs also applies to the PPOs. In addition, for operator services rates, the rates for intrastate coin-paid toll services from competitive payphones are frequently capped by the states at the dominant carrier rate or some increment over that rate. In many jurisdictions, incumbent LECs currently do not charge the payphone caller for "411" directory-assistance calls made from their own phones. PPOs, however, often pay a charge to the incumbent LEC for directory-assistance calls made from their competitive payphones, and are not always allowed by the state to pass those charges on to callers. 20. Section 276 of the Act requires the Commission to ensure that the payphone provider receives fair compensation for each interstate and intrastate call, including local coin sent-paid calls. Section 276 also expressly preempts state regulations that are inconsistent with our regulations. We seek comment, however, on how we should exercise our jurisdiction under Section 276. We have a range of options for ensuring fair compensation for these calls, and we seek comment on which option will ensure fair compensation for PSPs with respect to local coin sent-paid calls. 21. More specifically, one option would be to set a nationwide local coin rate for all calls originated by payphones. We seek comment on whether the Commission should take such action and request that commenters identify the specific public interest benefits they believe would result from a nationwide rate, why local rates are inadequate to ensure fair compensation, the impacts of variations among the states in the local coin sent-paid rate on PSPs and the public, and whether those impacts are predominantly local, statewide, regional or national. Another option would be for the Commission to prescribe specific national guidelines that states would use to establish a local rate that would ensure that all PSPs are fairly compensated. We seek comment on whether the Commission should take such action and request that commenters identify specific public interest benefits they believe would result from us prescribing such guidelines, what factors such guidelines should consider, how the guidelines would ensure fair compensation for local coin calls, the impacts of variations among the states in local coin rates, and whether those impacts are predominantly local, statewide, regional or national. 22. A third option for ensuring fair compensation for PSPs would be for the states, in the first instance, to continue to set the coin rates for local payphone calls according to factors within their discretion. The Commission has long recognized the interest of the states in setting end-user rates for local calls, including rates for 411 calls. Indeed, as discussed above, the states have long had a traditional and primary role in regulating payphones. The states have a significant interest in setting local call rates paid by end users, because payphones are used by some residents as a substitute for local telephone service, in addition to being used by visitors and retail customers. However, because Section 276 of the 1996 Act requires the Commission to ensure that PSPs are fairly compensated for "each and every completed intrastate and interstate call," we seek comment on what further procedures, such as a complaint or petition process, we should establish, should we ultimately determine to defer to the states in setting payphone rates. We also seek comment on what standards we could use to adjudicate any complaints or petitions that challenge a particular rate. We further ask whether the states' setting of the rates for local coin calls subject to complaint or petition would be consistent with Section 276's mandate that the Commission ensure fair compensation for "each and every completed intrastate and interstate call." We seek comment on whether the Commission should take such action and request that commenters identify specific public interest benefits they believe would result from having coin rates for local payphone calls set by the states. In addition, we seek comment on whether we should treat intraLATA 0+ toll calls carried by the presubscribed intraLATA carrier differently from local coin calls, or treat them like local coin calls. 23. With regard to per-call compensation for subscriber 800 calls, the Commission has previously expressed its concern about the improper use of subscriber 800 numbers to increase compensation. The Commission noted in the First Report and Order that "a payphone owner could attach an autodialer to a payphone and have it place repeated 800 calls, which are free to the caller, in order to increase the amount of compensation that the payphone owner receives." We seek comment on what rules, if any, the Commission should adopt to prevent this and other types of fraud. We also seek comment on whether the autodialer problem would extend to other types of compensable calls. b. Entities Required to Pay Compensation 24. Because the 1996 Act directs the Commission to ensure that all PSPs are compensated, with limited exception, for "each and every intrastate and interstate call" using their payphones, we must also address who pays that compensation. The possible payors include: the caller using the payphone; the carrier over whose network the call is placed; or, in the case of subscriber 800 calls, the entity being called (who may or may not directly pass all the charges on to the caller using the payphone). Industry participants have made two compensation proposals that might satisfy the per-call compensation requirement. 25. The first proposal builds on the per-call compensation mechanism proposed for interstate access code calls in CC Docket No. 91-35. If this "carrier-pays" mechanism were extended to all dial-around calls, the IXC who receives such a call from a payphone would be required to pay a per-call charge to the provider of the payphone. Each IXC would decide independently how to recover this cost. 26. Another approach would be to rely on a "set use fee." The "set use fee" is a fee that the IXC would bill and collect from the end user. The fee would then be remitted to the PSP. In the case of the subscriber 800 and other toll-free number calls, the set use fee could be collected from the subscriber. For access code calls and operator-assisted calls, the set use fee would be collected from the end user that is billed for the call. Set use fees currently are applied to local and intraLATA 0+ and 0- calls in the state of Florida, and to intraLATA 0+, 0-, and access code calls in the state of California. 27. The Commission has previously rejected the "set use" payphone fee because such a fee could produce "unequal treatment among interstate payphone callers[.]" Because the 1996 Act requires the Commission to prescribe compensation for both intrastate and interstate dial-around calls, there may be sufficient cause to reexamine a "set use" fee for payphone end users. We have considered a proposal under which payphone callers, including calling card users, were required to deposit coins into the payphone before placing a call. As we found before, we tentatively conclude that we should reject that coin-deposit approach here. In addition, we note that TOCSIA expressly prohibits the Commission from adopting compensation rules for interstate access code calls that require "advance payment by consumers." We find here that a coin-deposit approach would appear to unduly burden many transient payphone callers by requiring them to deposit coins in addition to providing call-billing information. 28. We tentatively conclude that, for non-coin payphone calls, either a "carrier- pays" system or a "set use fee" system where the end user pays would satisfy the requirements of the 1996 Act. As a general principle, however, we tend to favor an approach that minimizes transaction costs on the caller and on the industry. We believe that the carrier-pays mechanism is preferable because it would result in less transaction costs because the IXC could aggregate its payments to payphone providers. Under a set-use fee, these payments would be spread among a vast number of payphone callers through their individual telephone bills. Therefore, we tentatively conclude that we should adopt a "carrier-pays" compensation mechanism that builds on existing procedures. We seek comment on these tentative conclusions. Commenters are encouraged to include data on the transaction costs that would likely be imposed by either the "carrier-pays" or "set use fee" compensation mechanisms. We also seek comment on whether we should adopt one method of compensation that can apply to all dial-around calls. c. Ability of Carriers to Track Calls From Payphones 29. The next issue for our consideration is how calls are to be tracked, so that actual compensation amounts can be determined by the carriers and PSPs. In both the Second Report and Order and the Reconsideration Order in CC Docket No. 91-35, the Commission found that no entity was capable of tracking accurately the number of interstate access code calls originated by each competitive payphone. Because of this technical barrier, the Commission adopted a flat rate per phone, as opposed to a per-call, compensation mechanism. Later, as noted above, AT&T and Sprint were permitted to pay compensation in the amount of $.25 per call in lieu of paying per-phone compensation. Last year, in the Second Further Notice, the Commission found that IXCs are now able to track 1-800 and 10XXX access code calls through automatic number identification ("ANI") and other coding digits that appear on payphone-originated calls (e.g., the "07" code on calls from competitive payphones). Although IXCs do not receive ANI for 1-950 access code calls, the Commission tentatively concluded that the volume of 1-950 calls did not appear to be so significant as to justify rejection of a per-call compensation mechanism. The Commission stated that it would be reasonable to require OSPs that employ 1-950 access codes to rely upon a usage-based surrogate, such as the ratio of 1-950 access code calls to total access code calls received by OSPs, to calculate their compensation obligations to PPOs. 30. Based on our prior proceedings, we tentatively conclude that tracking mechanisms and surrogates exist, or might readily be made available, to support the complete per-call compensation plan mandated by Section 276(b)(1)(A). We seek comment on what tracking options are currently, or may soon be, available. We seek further comment on the ability of existing IXC-based tracking mechanisms to accommodate all payphone providers and IXCs. In the event that there is no standard technology or mechanism available for tracking, we seek comment on alternative surrogate methodologies that could be devised and by whom. Finally, we seek comment on which party or parties, whether IXCs, PSPs, or intraLATA carriers, should be required to develop and maintain the tracking or surrogate methodologies. 31. Under the existing per-call compensation waivers AT&T, Sprint, Ameritech and SW Bell are responsible for tracking the calls for which they are obligated to pay compensation. Pursuant to the rules we adopt in this proceeding, all IXCs that carry access code calls and toll-free calls originated from payphones, including the intrastate interexchange operations of LECs, would be required to track payphone calls. We tentatively conclude that IXCs should be required to initiate an annual independent verification of their per-call tracking functions, to be made available for FCC inspection, to ensure that they are tracking all of the calls for which they are obligated to pay compensation. We seek comment on this tentative conclusion. We note that additional forms of tracking may become available to be used as a check on IXC tracking. We understand that some BOCs are able to track, in their network, calls originating from their payphones. As discussed below, we seek comment on whether we should require BOCs and other LECs that provide network tracking for their own payphones to make those tracking services available to PPOs at the same rates, terms, and conditions as they provide themselves. d. Administration of Per-Call Compensation 32. Having discussed who should be responsible for paying and who should track the calls, we next turn to who should administer the payment of compensation. In the Second Report and Order, the Commission established a direct-billing arrangement for the payment of compensation from IXCs to PPOs. It was left to the parties to determine the details of the direct-billing arrangement. To assist the IXCs in verifying their compensation obligations, the Commission also required every incumbent LEC on a quarterly basis to provide each IXC responsible for compensation with a list of all lines taking customer-owned, coin-operated telephone (COCOT) service in the LEC's region. The existing direct-billing arrangement has the advantage of placing the burden of implementing the compensation mechanism on those parties that receive the benefits of dial-around calls -- IXCs and PPOs. 33. We tentatively conclude that this direct-billing arrangement should be maintained with the simple addition of requiring IXCs, and the intrastate interexchange operations of LECs to send back to each PSP a statement indicating the number of toll-free and access code calls that each carrier has received from each of that PSP's payphones. This is the method used by AT&T and Sprint under waivers that permit them to pay per-call compensation for access code calls. We propose to continue to leave the details of the billing arrangements for the parties to determine. All parties, whether carriers or PSPs, would be free to retain the services of one or more clearinghouses to assist them with billing and collection and/or payment of the compensation. We would require, however, that the carrier responsible for paying compensation file each year a brief report with the Common Carrier Bureau listing the total amount of compensation paid, pursuant to the rules adopted in this proceeding, to PSPs for intrastate, interstate, and international calls; the number of compensable calls received by the carrier; and the number of payees. On the other hand, for a "set use" fee arrangement under which the end user pays the PSP, we tentatively conclude that a compensation mechanism similar to the one in CC Docket No. 91-35 would require substantial modifications to account for the difference in the structuring of compensation obligations. As discussed above, we believe that a set use fee would lead to greater transaction costs. For administration of the compensation mechanism, because it would likely be unduly burdensome to require all PSPs (including single-payphone providers) to collect a set use fee from all those who are required to pay it, an independent entity would be required to bill and collect the set use fee and, in turn, remit it to the individual PSP. We seek comment on these tentative conclusions. 34. Our proposed compensation plan would use the ANI as the basis for tracking calls. We, therefore, also tentatively conclude that we should adopt minimal regulatory guidelines for the industry on the resolution of disputed ANIs in the per-call compensation context. Possible guidelines for which we seek comment are as follows: First, intraLATA carriers could be required to provide a list of payphone ANIs to IXCs within 30 days of the close of each compensation period (i.e., each quarter). Second, intraLATA carriers could be required to provide verification of disputed ANIs on request, in a timely fashion. Data for verification could be required to be maintained and available for at least 18 months after the close of a compensation period. Third, once an intraLATA carrier makes a positive identification of a payphone as having been installed, the IXC could be required to accept claims for that payphone's ANI until such time as the intraLATA carrier provides information that the payphone has been disconnected. If an intraLATA carrier fails to provide either positive or negative verification of a claimed ANI from a PSP, the IXC could be required to pay compensation on that ANI. Fourth, IXCs should be able to refuse payment for compensation claims that are submitted long after they were due. IXCs should not refuse payment on timeliness grounds, however, for ANIs submitted by a PSP up to one year after the end of the period in question. Further, the submission of a claim on a disputed ANI by a PSP to the IXC would toll any limitation period for bringing a complaint to the Commission until such time as the IXC issues a final denial of the claim. We seek comment on these or any alternative guidelines for resolution of disputed ANIs. e. Per-Call Compensation Amount 35. Section 276(b)(1)(A) of the 1996 Act requires the Commission to "ensure that all payphone service providers are fairly compensated for each and every completed intrastate and interstate call" from their payphones. 36. The Commission has previously examined various compensation methods in the Second Report and Order. In particular, the Commission rejected arguments by PPOs that compensation for interstate access code calls should reflect their "opportunity costs" of initiating these calls in lieu of 0+ calls that produce commissions from a presubscribed carrier. The Commission found that this approach would maintain PPO revenue streams that existed previously when PPOs or premises owners were permitted to direct all operator-assisted traffic (other than 0- traffic) to the presubscribed carrier, whatever the wishes of the caller. The Commission also rejected arguments that it should base compensation on the actual costs of PPOs, because individual cost data was not available for each PPO and such data, if it existed, would likely not be uniform. The Commission opted instead for a compensation approach using cost-based surrogates that it found were reasonable and viable. The Commission identified three "reasonable" compensation approaches that established a range of reasonable compensation rates for access code calls. The three approaches were: (1) as a surrogate for PPO costs, access charge compensation that an incumbent 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. The three measures yielded estimated charges in the range of $.22 to $.61 per call. In 1992, the Commission based the compensation rate of $6 per phone on the average 15 access-code calls originated by a competitive payphone each month, or a rate of $.40 per call, which is at the middle of that range. In the Reconsideration Order, and in the recent Second Further Notice, the Commission reaffirmed the reasonableness of the compensation measures within the range it established in the Second Report and Order. Both AT&T and Sprint pay per-call compensation fall within this range, pursuant to waivers, in the amount of $.25. Similarly, two BOCs, Ameritech and Southwestern Bell, each charge IXCs a per-call rate for "toll-free" and access code calls originated by their payphones. Ameritech has filed a tariff, which is currently under review, proposing a per-call rate of $.256 for this service. 37. More recently, in the Second Further Notice, the Commission again sought comment on the appropriate per-call compensation amount. Commenters responding to this notice suggested rates ranging from $.083 to $.55 per call. Sprint, MCI, and Frontier argued that $.25 per call was too high when compared to LEC payphone costs. Pacific and Nevada Bell suggested a company-specific rate of $.32 to $.55 -- the result of adjusting the CCL price cap index to eliminate the payphone element. The Illinois Public Telecommunications Association ("IPTA") submitted data showing that PPO costs average between $.37 and $.55 per call, and argued that a market-based methodology would justify rates ranging from $.42 per call to $.95 per call. APCC proposed a flexible rate that would be equal to the maximum rate for a local coin call in each area, while AT&T, Sprint, and MCI all stated that the cost of a local coin call is irrelevant to the cost of a dial-around call. 38. We believe that the theory of compensation and price surrogates that the Commission has historically relied upon in its determination of the "range of reasonable compensation rates" provide some guidance for our analysis of how to ensure that PSPs are "fairly compensated" and what should be the appropriate per-call compensation amount for all calls within the scope of this rulemaking. As before, while we are still confronted in the instant proceeding by the lack of reliable PPO cost data, we tentatively conclude that PSPs should be compensated for their costs in originating the types of calls for which we have tentatively concluded that compensation is appropriate. We tentatively conclude further that these costs should be measured by appropriate cost-based surrogates. We seek comment on these tentative conclusions. With regard to the appropriate cost-based surrogates, we also seek comment on whether some measure of generic or industry-wide costs is available, whether incumbent LECs' costs would be a reasonable surrogate for PPOs' costs, and whether some other existing set of rates, such as state-established rates for local coin calls, would be a reasonable surrogate. In addition, to ensure that PSPs receive fair compensation, should we prescribe different per-call compensation amounts for the different types of calls originated by payphones? We also seek comment on how compensation levels should be permitted to change in the future, and whether some cost index or price cap system would be appropriate to ensure that compensation levels reflect expected changes in unit costs over time. Commenters should submit a summary of any data that support their arguments. 39. We also seek comment on whether we should provide PPOs some measure of interim compensation, to be paid until the effective date of the final rules we adopt in this proceeding, for the growing volume of dial-around calls originated from their payphones. While the Commission will complete the instant proceeding within the nine months mandated by Section 276, we are aware from data filed in other pending proceedings, most notably in response to the Court's remand of Florida Payphone concerning subscriber 800 compensation, that the number of dial-around calls for which PPOs receive no compensation (e.g., subscriber 800 and debit card calls) or flat-rate, non-traffic sensitive compensation (interstate access code calls) has grown since we first considered the need for compensation in 1991. Subscriber 800 services, in particular, have experienced sustained growth in the past several years. For example, in an ex parte letter filed with the Commission in the proceeding entitled "Operator Service Access and Pay Telephone Compensation," CC Docket No. 91-35, the APCC, a trade association of PPOs, argues that since the adoption of the First Report and Order in 1991, "the market for subscriber 800 services has experienced explosive growth, both in terms of revenues and minutes of use." It further argues that the implementation of 800 number portability has led to "vigorous competition" in this area among the IXCs, which, in turn, has fostered "millions of new 800 subscribers and users in the last few years." APCC cites news stories suggesting that on a typical business day, 30 to 40 percent of all long distance calls involve 800 numbers. It also cites data gathered by one PPO from approximately 500 to 1000 competitive payphones in various states over a period of seven months, which "consistently showed about twice as many subscriber 800 calls as access code calls." According to AT&T, these "subscriber 800" calls currently account for about 40% of all toll calling on AT&T's network on an average business day. 40. In addition, according to APCC, the use of "vanity" access numbers, such as MCI's "1-800-COLLECT" or AT&T's "1-800-CALL-ATT" and "10ATT," which can be easily remembered by callers because they contain words or phrases, has grown dramatically. APCC argues that these calls represent additional interstate access code calls originated by competitive payphones for which additional compensation is warranted. For both interstate access code calls and subscriber 800 calls, PPOs are not able to collect payment from either the carrier or the end user, in the absence of regulation prescribing such payment. According to APCC, the incumbent LECs, on the other hand, have been relatively unaffected by the increase in dial-around calling because the LECs have had the ability to support their payphone operations with revenue from other regulated services and access charge compensation. Parties are encouraged to comment on whether we should establish an interim compensation plan for PPOs. Those who support such relief should comment on the appropriate interim compensation amount and how such an interim compensation mechanism could be structured. We seek comment on whether we should adopt a system similar to the interim mechanism for interstate access code calls in CC Docket No. 91-35. We also seek comment on the feasibility of implementing an interim plan when final rules are required to be in place in nine months. To this end, we request comment on the legal basis for, and practical consequences of, making such interim compensation effective as of the release date of this Notice. B. RECLASSIFICATION OF INCUMBENT LEC-OWNED PAYPHONES 1. The 1996 Act 41. The issues we need to address here are (1) the prospective classification of incumbent LEC payphones as CPE; (2) the transfer of incumbent LEC payphone equipment assets from regulated accounts to an unregulated status; (3) the termination of access charge compensation and all other subsidies for incumbent LEC payphones; and (4) the classification of AT&T payphones. Currently, incumbent LEC payphones, classified as part of the network, recover their costs from CCL access charges to those carriers that connect with the incumbent LEC. Section 276(b)(1)(B) directs the Commission to "discontinue the intrastate and interstate carrier access charge payphone service elements and payments in effect on such date of enactment, and all intrastate and interstate payphone subsidies from basic exchange and exchange access revenues, in favor of a [per-call] compensation plan[.]" 2. Discussion a. Classification of LEC Payphones as CPE 42. To effectuate the Act's mandate that access charge payphone service elements and payphone subsidies be discontinued, we tentatively conclude that we should treat incumbent LEC payphones as unregulated, detariffed CPE. We tentatively conclude further that incumbent LECs should be required to provide to PSPs, on a nondiscriminatory tariffed basis, all functionalities used in a LEC's delivery of payphone services. 43. These issues were raised previously in the context of a Petition for Declaratory Rulemaking filed by the Public Telephone Council, a petition which focused on BOC payphones. Some parties who filed comments in response to the PTC petition argue that the BOCs have used their control over the public switched network to disadvantage PPOs because the PPOs are unable to obtain access to the same technologies as those used by the BOCs. As discussed above, incumbent LECs are able to offer payphone services using either instrument- implemented "smart" payphones, or "dumb" payphones that utilize central office coin services, or some combination of the two. Meanwhile, PPOs are limited to instrument-implemented "smart" payphones only. The option of using central office coin services, such as coin recognition, answer detection, and other related services, allows incumbent LECs to use the less expensive "dumb" pay telephones, which gives incumbent LECs a cost advantage over their competitors. We tentatively conclude that requiring that central office coin services be made available to PPOs eliminates this cost advantage and will increase competition in the payphone industry. We recognize that some of the BOCs have begun offering in several states central office coin services as a tariffed service to PPOs. 44. The Commission concluded in Computer II that in order to prevent improper cross-subsidization, CPE should be unbundled from its underlying transmission. Additionally, the Commission determined that CPE should be detariffed to ensure that the costs associated with regulated services are separated from the competitive provision of the equipment used in conjunction with those services. Therefore, as stated above, we tentatively conclude that incumbent LEC payphones should be classified as CPE for Computer II regulatory purposes. Our classification of payphones as CPE, however, is not intended to adopt Computer II's requirement that CPE be provided only through a structurally separated affiliate. We seek comment on this tentative conclusion. 45. To unbundle payphones from their underlying transmission, we tentatively conclude that incumbent LECs, whether or not they themselves provide payphone service, must offer individual central office coin transmission services to PSPs under a nondiscriminatory, public, tariffed offering. We seek comment on this tentative conclusion and on which central office coin services must be made available by incumbent LECs to the PSPs to achieve this goal. Commenters who supported this approach in the proceeding initiated by the PTC petition listed a variety of central office coin services, such as answer and coin detection, currently available to the BOCs but not offered to PPOs at any price. In the interest of clarity, we seek comment on both the type of services and the technological requirements necessary to allow PPOs to use payphones that are equivalent to those payphones currently used by LECs. In addition, we seek comment on any industry standards that may need to be developed with respect to potential claims regarding any demonstrable network reliability concerns that may result from PSPs connecting their payphones that make use of central office coin transmission services. Commenters should clearly demonstrate what, if any, specific harm to the network could occur, and if industry standards are necessary. If so, who should develop these standards, and what time frame would be needed to implement such standards? 46. We anticipate that incumbent LECs will continue to use central office coin services for their payphones after their payphones are unbundled and detariffed. In the Amendments of Part 69 of the Commission's Rules Relating to the Creation of Access Charge Subelements for Open Network Architecture, the Commission concluded that LECs may have an incentive to price basic transmission services, used to deliver an enhanced service, at unreasonably high rates in an effort to raise their rivals' costs of delivering the enhanced service. To deter this type of anti-competitive conduct, the Commission revised the new service test, which all "new services" offered by incumbent LECs regulated by price caps must satisfy. Under the new services test, local exchange carriers (LECs) must submit cost support for the prices they intend to charge for new services. The new services test thus places a flexible, cost-based upper bound on new service prices to guard against unreasonably high rates and, by requiring that prices exceed direct costs, also establishes a price floor, ensuring that prices are not predatory. In addition, to prevent predatory pricing, the new services test requires that the projected revenues from the new service outweigh the costs of provision of that service. We seek comment on whether incumbent LEC provision of coin transmission services on an unbundled basis should be treated as a new service under the Commission's rules. While the incumbent LECs have used central office coin services in the past, they have not made these services available to PPOs for use in their provision of payphone services. Because incumbent LECs may have an incentive to charge their competitors unreasonably high prices for these services, we also tentatively conclude that the new services test is necessary to ensure that central office coin services are priced reasonably. We seek comment on whether incumbent LECs not currently subject to price cap regulation be required to submit cost support for their central office coin services, pursuant to Sections 61.38, 61.39, and 61.50(i) of our rules. 47. In Section 68.3 of the Commission's rules, the Commission defined a coin implemented telephone as a telephone containing all circuitry required to execute coin acceptance and related functions within the instrument itself and not requiring coin service signaling from the central office. Coin service is defined as central-office-implemented coin telephone service. Under the Coin Registration Order and current Part 68 rules, only instrument-implemented payphones can be registered for connection to the network. On the other hand, central-office-implemented coin telephone service interacts with the telephone itself to provide coin service and answer supervision. PTC's petition requests that the coin service line be tariffed and offered to the public presumably for connection of instruments capable of interacting with the central-office-implemented line and service. We tentatively conclude that Section 68.2(a)(1) of the Commission's regulations should be amended to facilitate registration of both instrument implemented and central-office-implemented payphones. We seek comment on this tentative conclusion. We also seek comment on the location of the demarcation point for reclassified LEC payphones. We tentatively conclude that the demarcation for all new LEC payphones should be consistent with the minimum point of entry ("MPOE") standards for other wireline services. In addition, we tentatively conclude the demarcation point should be the same one as incumbent LECs use for PPOs today. 48. Incumbent LECs, particularly the BOCs, also provide to their own payphones a number of other services that may be appropriate to unbundle and make available to PSPs. We seek comment on whether any of the following services, or others suggested by commenters, should be unbundled under the rules to be adopted in this proceeding: fraud protection; installation and maintenance services; joint marketing opportunities; per-call tracking capabilities; and call validation services. With regard to fraud protection, the superior fraud protection available to BOC payphones is partly due to the BOCs' use of network coin control functions, which are not as easily bypassed as set-based coin control functions. Another fraud protection feature is the use of specialized telephone numbers to alert international operators that a telephone to which a collect or third-party call is attempted to be billed is a payphone. Should the Commission require these aspects of fraud protection to be available on an unbundled basis, as discussed above? b. Transfer of Payphone Equipment to Unregulated Status 49. If we conclude that we will treat payphones as detariffed CPE, the incumbent LECs would have to transfer their payphones and related equipment from regulated to unregulated activities. Our rules provide that, if reallocations of telecommunications plant (i.e., central office equipment and outside plant) from regulated to nonregulated operations are required, such plant will be transferred at undepreciated baseline cost plus an interest charge based on the authorized interstate rate of return to reflect the time value of money. We seek comment on the specific assets to be transferred. We tentatively conclude that the assets to be transferred should be defined generally in terms of CPE deregulation. Thus, the assets to be transferred may include all facilities related to payphone service, including associated taxes and depreciation, but likely would not include the loops connecting the payphones to the network, or the central office "coin-service" or operator service facilities supporting incumbent LEC payphones. Including these network support facilities may be inappropriate because it would allow incumbent LECs to continue providing a different form of interconnection to their payphones than is available to PSPs. We also tentatively conclude that a phase-in period for a transfer of payphone-related assets is not necessary, because payphone terminal equipment consists of less than one percent of total plant investment for the entire LEC industry. We seek comment on our tentative conclusions and the general approach to asset transfers outlined here. We note that we will seek comment in a separate proceeding on how we should treat the LECs' payphone service operations for accounting purposes. We also seek comment on whether our approach to asset transfers is consistent with the 1996 Act's definition of "payphone service" as the "provision of public or semi-public pay telephones, the provision of inmate telephone service in correctional institutions, and any ancillary services." c. Termination of Access Charge Compensation and Other Subsidies 50. Incumbent LECs today generally recover payphone costs allocated to the interstate jurisdiction through the per-minute carrier common line ("CCL") charge they assess on IXCs and other interstate access customers for originating and terminating interstate calls. The incumbent LEC assesses the PPO a subscriber line charge ("SLC") (at the multi-line business rate) to recover the payphone common line costs associated with that phone. In the case of competitive payphones, a PPO recovers its payphone costs out of the revenue it receives from end users, premises owners, and OSPs to whom its payphones are presubscribed. 51. The 1996 Act 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[.]" Accordingly, we must adopt rules that provide for the removal from regulated intrastate and interstate rate structures of all charges that recover the costs of payphones (i.e., the costs of payphone sets, not including the costs of the lines connecting those sets to the public switched network, which, like the lines connecting competitive payphones to the network, will continue to be treated as regulated). We tentatively conclude that incumbent LECs must reduce their interstate CCL charges by an amount equal to the interstate allocation of payphone costs currently recovered through those charges. LECs subject to the price cap rules would treat this as an exogenous cost change to the Common Line basket pursuant to Section 61.44(c) of our rules. We request incumbent LECs to identify in their comments all accounts that contain costs attributable to their payphone operations. We also request comment on whether specific cost pools and allocators should be used to capture the nonregulated investment and expenses associated with their payphone operations. We also seek comment on whether a transition period is necessary to move from subsidized compensation to per-call compensation for LEC payphones, and how that transition would proceed. For example, should there be a one-time elimination of the subsidies, or should they be phased out over a specified time? If the latter, what time period would be appropriate? 52. We also propose, pursuant to the mandate of Section 276(b)(1)(B), to require incumbent LECs to remove from their intrastate rates any charges that recover the costs of payphones. We solicit comment on whether the Commission should set a deadline and a specific mechanism for elimination of any intrastate subsidies as well, or whether it would be both consistent with the statute as well as preferable from a policy perspective to permit the states to formulate their own mechanisms for achieving this result within a specific time frame? We ask parties to provide state-specific information regarding the intrastate rate elements that recover payphone costs. 53. In the telephone network, payphones, as well as all other telephones, are connected to the local switch by means of a subscriber line. The costs of the subscriber line that are allocated to the interstate jurisdiction are recovered through two separate charges: a flat-rate SLC assessed upon the end user customer who subscribes to local service; and a per-minute CCL charge that recovers the balance of the interstate subscriber line costs not recovered through the SLC. As noted earlier, LEC payphone costs are also included in the CCL charge. The CCL charge, however, applies to interstate switched access service that is unrelated to payphone service costs. While PPOs are required to pay the SLC for the loop used by each of their payphones, LECs have not been required to pay this charge because the subscriber lines connected to LEC payphones have been recovered entirely through the CCL charge. We tentatively conclude that, to avoid discrimination among payphone providers, the SLC should apply to subscriber lines that terminate at both LEC and competitive payphones. We tentatively conclude that the removal of payphone costs from the CCL and the payment or imputation of a SLC to the subscriber line that terminates at a LEC nonregulated payphone would result in the recovery of LEC payphone costs on a more cost-causative basis. We seek comment on these tentative conclusions and, more generally, on how removing LEC payphones from the CCL charge would affect the SLC. 54. The incumbent LECs' multi-line business SLC is currently subject to a $6.00 per month cap. As noted above, those LECs with interstate subscriber line costs that exceed this amount recover a portion of the interstate costs of subscriber lines through the CCL charge. The issue of the appropriate interstate SLC for the future has been referred to a Federal- State Joint Board. To the extent that LECs charge or impute to their own payphone operations only the multi-line business SLC, which may be less than the full interstate cost of the subscriber lines connecting their payphones to the network, and recover the balance of the cost of these lines through the CCL charge, they may, in effect, be subsidizing their payphones with access charge revenues, in violation of Section 276. We seek comment on whether LECs in those circumstances should charge or impute to their own payphone operations, as well as to PPOs, an additional monthly charge representing the difference between the SLC cap and the full interstate cost of these subscriber lines. We also seek comment on whether comparable changes should be made to incumbent LECs' intrastate rates. d. Deregulation of AT&T Payphones 55. In the Interstate, Interexchange Marketplace proceeding, we noted that we would consider in the instant proceeding "the issue of bundling pay telephone equipment with the underlying transmission capacity." We tentatively conclude that other IXC bundling issues should be treated under the same rules we have proposed in the Interstate, Interexchange Marketplace proceeding. Commenters who disagree with this tentative conclusion, however, are invited to comment in this proceeding. 56. Like LEC payphones, AT&T payphones are classified as network equipment and, therefore, may receive subsidies. We tentatively conclude that payphones provided by AT&T should be classified as CPE. While the 1996 Act does not expressly address AT&T payphones, Section 276 directs the Commission to adopt regulations that will "promote competition among payphone service providers and promote the widespread deployment of payphone services to the benefit of the general public[.]" Discontinuing possible subsidies for AT&T payphones would be congruent with the 1996 Act's requirement that the Commission discontinue subsidies for other payphones (i.e., those owned by incumbent LECs) and would provide for symmetrical regulation of the payphone industry. There are other reasons why this proposed action is in harmony with the other rules we propose in this NPRM. First, since Tonka, AT&T payphones have been treated the same as BOC payphones. Once LEC telephones, including those provided by the BOCs, are declared to be CPE, the basis for treating AT&T payphones as network equipment no longer exists. Second, we believe that deregulating AT&T payphones is in line with our general policy to deregulate non-dominant carriers. We seek comment on this tentative conclusion. C. NONSTRUCTURAL SAFEGUARDS FOR BOC PROVISION OF PAYPHONE SERVICE 1. The 1996 Act 57. 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." 2. Discussion a. Background 58. 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 framework, BOCs are permitted to provide enhanced services on an integrated basis subject to nondiscrimination safeguards. The safeguards the Commission adopted in Computer III include: (1) nondiscriminatory access to network features and functionalities; (2) restrictions on the use of Customer Proprietary Network Information ("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 tentatively conclude that all Computer III nonstructural safeguards must be applied to meet our obligation under the 1996 Act. We seek comment on this tentative conclusion. We also seek comment on whether there are other nonstructural safeguards that, while not explicitly specified in the Computer III, should be applied to BOC payphones. 59. Currently, the Commission regulates BOC provision of enhanced services through Comparably Efficient Interconnection ("CEI") and Open Network Architecture ("ONA") requirements that require 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 (ESPs) 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 it offers in addition to fulfilling the access requirements of its ONA plan. b. BOC CEI Plans 60. To ensure BOC compliance with the Computer III and ONA requirements, we propose to require that each BOC file, within 90 days of the effective date of the order in this proceeding, 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. Thereafter, the BOCs may integrate the filing of information on payphone services unbundling and nonstructural safeguards with their ongoing ONA filings. Generally, 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. We discuss those parameters in more detail below. For each parameter listed, we seek comment on whether that particular CEI requirement should apply to a BOC's provision of payphone service. In addition, a BOC must describe in a CEI plan how it will handle CPNI; network disclosure; and nondiscrimination in the provision of installation, maintenance, and quality of service. Because the 1996 Act requires that we apply safeguards that are equal to those set forth in Computer III "at a minimum," we also seek comment on any other parameters or requirements for BOC payphone service that, while not listed in this Notice, are consistent with the intent of the 1996 Act. 61. Under Computer III and ONA, BOCs must provide comparably efficient interconnection (CEI) to unbundled network features and functionalities. The Commission has specified seven parameters to judge whether a BOC is providing CEI. We tentatively conclude that these CEI parameters should apply to BOC provision of basic payphone services. Thus, we propose to require that the BOCs specify how they will provide CEI for payphone services in the payphone CEI plan for the following parameters: (1) Interface functionality. A BOC would "make available standardized hardware and software interfaces that are able to support transmission, switching, and signalling functions identical to those utilized" in its own payphone services. (2) Technical Characteristics. A BOC would provide basic services with technical characteristics that are equal to the technical characteristics it uses for its own payphone services. (3) Installation, Maintenance, and Repair. The time for installation, maintenance and repair of the basic services and facilities included in a CEI offering would be the same as those the BOC provides to its own payphone service operations. (4) Resale. A BOC's payphone service operations would take the basic services used in its payphone service offerings at their unbundled tariffed rates to prevent improper cost-shifting to regulated operations and anti- competitive pricing in unregulated markets." (5) End User Access. A BOC would provide to all end users the same capabilities to use abbreviated dialing or signalling to activate or obtain access to payphone services that utilize its facilities. This parameter would require the BOC to provide end users equal opportunities to obtain access to basic facilities through derived channels, whether they use the payphone service offerings of the BOC or of a competing provider. (6) CEI Availability. A BOC's CEI offering would be available and fully operational on the date that it offers its corresponding payphone service to the public. That parameter also would require the BOC to provide a reasonable time prior to that date when prospective users of the CEI offering can utilize the CEI facilities and services for purposes of testing their payphone service offerings. BOCs would be prevented from restricting the availability of the CEI offering to any particular class of customer or payphone service competitor. (7) Minimization of Transport Costs. A BOC would provide competitors with interconnection facilities that minimize transport costs. 62. In its CEI plan, a BOC would explain how it would unbundle basic payphone services. Thus, a BOC would indicate how it plans to unbundle, and associate with a specific rate element in the 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 would 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. As discussed above, we tentatively conclude that all incumbent LEC payphones should be treated as detariffed CPE. With this treatment, incumbent LECs must make payphone services available to customers on an individual, unbundled basis. We seek comment on whether this tentative conclusion concerning all incumbent LECs would satisfy this aspect of the nonstructural safeguards for BOC payphones. 63. In a separate proceeding, the Commission is currently examining a carrier's obligations under the CPNI provisions of the Act. We tentatively conclude that the rules we adopt in that proceeding should apply to a BOCs' provision of payphone service. We invite comments on this tentative conclusion. 64. We tentatively conclude that the 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 would disclose information about changes in their networks or new network services at two different points in time. First, disclosure would 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 would publicly disclose technical information about a new service 12 months before it is introduced. If the BOC could 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, would not occur less than six months before the introduction of the service. We also seek comment on whether the network information disclosure requirements we have proposed in the Implementation of the Local Competition Provisions in the Telecommunications Act of 1996 proceeding should augment or replace the application of the Computer III disclosure requirements proposed in this proceeding. 65. In addition, we tentatively conclude that 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 would comply with these requirements. BOCs must also report quarterly on nondiscrimination in installation and maintenance, semi-annually on tariffed payphone services, and annually on any changes to its payphone CEI plan to comply with other Computer III and ONA requirements. BOCs must also annually certify with regard to nondiscrimination in the quality of service. We seek comment on how these reporting requirements should apply to BOC payphones. 66. We will seek comment in a separate proceeding on whether we should apply accounting safeguards identical to those safeguards adopted in Computer III to prevent the subsidization of payphone services by BOC telephone exchange service or exchange access operations, or whether additional accounting safeguards are necessary to fulfill our responsibilities under Sections 276(a)(1) and (b)(1)(C). D. ABILITY OF BOCs TO NEGOTIATE WITH LOCATION PROVIDERS ON THE PRESUBSCRIBED INTERLATA CARRIER 1. The 1996 Act 67. Section 276(b)(1)(D) directs the Commission to provide for Bell operating company payphone service providers to have the same right that independent payphone providers have to negotiate with the location provider on the location provider's selecting and contracting with, and, subject to the terms of any agreement with the location provider, to select and contract with, the carriers that carry interLATA calls from their payphones, unless the Commission determines in the rulemaking pursuant to this section that it is not in the public interest[.] 68. Section 276(b)(3) states that "[n]othing in this section shall affect any existing contracts between location providers and payphone service providers or interLATA or intraLATA carriers that are in force and effect as of the date of enactment of the Telecommunications Act of 1996." The legislative history of Section 276 states "that the location provider has the ultimate decision-making authority in determining interLATA services in connection with the choice of payphone providers." 2. Discussion 69. In the years immediately following divestiture, the BOCs routed all 1+ and 0+ interLATA traffic from their payphones to AT&T. This practice continued until 1988, when the U.S. District Court for the District of Columbia found that the solution most in keeping with the Decree's terms was a "billing party pays" system where "the billed party [would] select the interexchange carrier of his choice simply by dialing 0+." But the Court also recognized that the technology for such a system would not be available for several years. The Court, therefore, adopted an interim solution in which the owners or proprietors of the premises on which BOC payphones are located would select the presubscribed IXC for those telephones. This solution is still in force today. 70. While the location provider selects the OSP for BOC and GTE payphones, all other payphone providers are able to select the OSP serving their payphones. As discussed above, payphone providers, both PPOs and independent LECs, compete in the market for payphone services by offering the location provider a commission on coin and 0+ traffic originating from the payphones located on the location provider's premises. In turn, payphone providers earn revenue by reselling local and 1+ long distance service and by contracting for 0+ traffic with OSPs that pay commissions on 0+ traffic. The legislation directs the Commission to provide similar rights to BOCs, unless the Commission determines that it is not in the public interest. 71. We seek comment on the extent to which extending to the BOCs the same rights that all other payphone providers have to select and contract with the interLATA carriers that carry interLATA traffic from their payphones would be "not in the public interest." Will these rights benefit the general public by increasing competition, available services, and overall efficiency? Will carrier-selection rights help to foster increased competition and market parity that will "promote the widespread deployment of payphone services to the benefit of the general public"? Parties commenting on this issue should also address how any Commission action with respect to a BOC's right to select and contract with interLATA carriers would be consistent with the other goals enunciated in Section 276, such as promoting regulatory parity between BOCs and independent payphone providers, and that the location provider has the ultimate decision-making authority in determining interLATA services in connection with the choice of payphone providers. 72. We also seek comment on whether the ability to select the interLATA carrier serving their payphones is likely to permit the BOCs to behave anticompetitively in the payphone market in the absence of safeguards to prevent cost misallocations and discrimination. For example, if the Commission ultimately provides the BOCs with carrier-selection rights, should we be concerned that the BOCs, if they are able to provide interLATA service, will direct such service to themselves? In addition, we seek comment on whether the structural and accounting safeguards mandated under Sections 271 and 272 of the 1996 Act, and any Commission rules implementing these safeguards, are sufficient to prevent anticompetitive abuses. If not, we seek comment on whether the Commission should adopt rules to prevent BOCs from giving more favorable interLATA rates to their own payphone operations than to their payphone competitors. Parties are asked to specify what safeguards would be necessary to prevent potential anticompetitive behavior by the BOCs in this regard. We also seek comment on to what extent a BOC not authorized to provide in-region interLATA service under Section 271 of the 1996 Act should be allowed to participate in the selection of the interLATA carrier, especially if the BOC has a non-attributable interest in the interLATA carrier, such as an option to purchase or an agreement to merge. Parties commenting on the BOCs' role in selecting a presubscribed interLATA carrier for BOC payphones should include a detailed analysis of why a BOC's participation, together with the location provider, in the selection of the presubscribed interLATA carrier is or is not in the public interest. 73. We tentatively conclude that, Section 276(b)(3) of the Act, which provides that "nothing in this section shall affect any existing contracts between location providers and payphone service providers or interLATA or intraLATA carriers that are in force and effect as of the date of enactment of the [Act]," grandfathers all contracts in existence as of February 8, 1996. In addition to seeking comment on this tentative conclusion, however, we also seek comment on what should be considered a Section 276(b)(3) contract for purposes of Section 276(b)(1)(D). For example, should a location provider's letter of authorization ("LOA") for a particular IXC be considered a "contract"? We tentatively conclude that a Section 276(b)(1)(D) contract must be a lawful agreement where both parties intended to be bound. Commenters should address the issue of whether an LOA or other such similar documents fit within this definition. E. ABILITY OF PAYPHONE SERVICE PROVIDERS TO NEGOTIATE WITH LOCATION PROVIDERS ON THE PRESUBSRIBED INTRALATA CARRIER 1. The 1996 Act 74. Section 276(b)(1)(E) directs the Commission to "provide for all payphone service providers to have the right to negotiate with the location provider on the location provider's selecting and contracting with, and, subject to the terms of any agreement with the location provider, to select and contract with, the carriers that carry intraLATA calls from their payphones. 2. Discussion 75. Currently, in some states, competitive payphones are required to route intraLATA 0+ and 0- calls, and sometimes other intraLATA calls, to the incumbent LEC. In contrast, Section 276(b)(1)(E) requires us to prescribe regulations to allow PSPs to negotiate with the location provider on the selecting and contracting with the intraLATA carrier serving the payphone. In accordance with this requirement, we tentatively conclude that all PSPs, whether LECs or PPOs, should be given this right to negotiate with location providers concerning the intraLATA carrier. We also tentatively conclude that the intraLATA carrier presubscribed to a payphone should be required to meet our minimum standards for the routing and handling of emergency calls. We seek comment on these tentative conclusions. F. ESTABLISHMENT OF PUBLIC INTEREST PAYPHONES 1. The 1996 Act 76. Section 276(b)(2) requires the Commission to "determine whether public interest payphones, which are provided in the interest of public health, safety, and welfare, in locations where there would otherwise not be a payphone, should be maintained, and if so, ensure that such public interest payphones are supported fairly and equitably." 2. Discussion 77. Because Section 276(b)(2) directs the Commission to "determine whether public interest payphones ... should be maintained," we seek comment on whether it would be in the public interest to maintain payphones provided in the interest of public health, safety, and welfare, in locations where there would otherwise not be a payphone." 78. If we determine that public interest payphones should be maintained, then Section 276(b)(2) gives the Commission statutory authority to determine further how public interest payphones should be regulated. As with our jurisdiction over local call rates, we seek comment on a range of options for maintaining public interest payphones. One option would be for the Commission to prescribe federal regulations for the maintenance of these payphones. We seek comment on whether and how this approach would serve the public interest, and on whether Section 276 requires the Commission to assume this responsibility. 79. A second option would be for us to establish national guidelines for public interest payphones. We seek comment on whether there are any state initiatives or programs concerning public interest payphones that the Commission could use as a model for national guidelines. For example, California has established an extensive statewide program for the designation and funding of public interest payphones. Commenters supporting national guidelines should specify what factors the guidelines should consider and how the guidelines should be applied on a nationwide basis. 80. In the event that the Commission establishes national guidelines for public interest payphones, we seek comment on what is to be considered a "public interest payphone." The Joint Explanatory Statement for Section 276 clarifies that the term "public interest payphones" refers to payphones where payphone service would not otherwise be available as a result of the operation of the market. "Thus, the term does not apply to a payphone located near other payphones, or to a payphone that, even though unprofitable by itself, is provided for a location provider with whom the payphone provider has a contract." The Commission has previously examined, in the context of the PTC petition, the availability of payphones in unprofitable locations where public policy objectives would call for such availability. In proposing a definition of public interest payphones, several commenters in that proceeding would include certain payphones that generate very little revenue or that operate at a financial loss. They note that these payphones are generally in isolated locations or in areas with a high incidence of vandalism. This definition from commenters does not take into account the congressional directive that one must look to whether a particular payphone is part of a "package" of payphones in determining whether a payphone is a public interest payphone. We seek comment, therefore, on whether a "public interest payphone" should be defined as a payphone (1) that operates at a financial loss, but also fulfills some public policy objective, such as emergency access; and (2) even though unprofitable by itself, is not provided for a location provider with whom the PSP has a contract. Under this definition, many payphones that fulfill important public policy objectives would not be included because they would be paid for, in the form of lower commission payments, by the entity that is requesting that a payphone be placed in a particular location to fulfill a public policy objective. This proposed definition would not necessarily decrease the number of payphones in existence fulfilling public policy objectives, but would require the entities that most directly benefit from these low profitability payphones to assume the cost of their availability. We seek comment generally on this possible definition. Parties may specify whether the definition should be narrower, broader, or more specific. 81. A third option for maintaining public interest payphones would be to defer to the states to determine, pursuant to their own statutes and regulations, which payphones should be treated as "public interest payphones." This approach would treat the provision of "public interest payphones" as primarily a matter of state concern. We seek comment on whether it would be consistent with the statute and better serve the public interest to allow the states to develop their own guidelines regarding which payphones are "public interest payphones." 82. With regard to a funding mechanism to support public interest payphones "fairly and equitably," we seek comment on whether such a mechanism should be handled in conjunction with how public interest payphones are maintained, whether through federal regulations, federal guidelines for the states, or by the states themselves. In the alternative, would it serve the public interest for the Commission and the states to administer different portions of a public interest payphone program? For example, should the states determine which payphones are "public interest payphones," yet have the FCC prescribe guidelines to govern the funding mechanism for those payphones? Commenters that support a Commission-mandated funding mechanism should detail how the mechanism would function, including who would be eligible to receive funding, who would be responsible for paying into the fund, and who would administer the funding mechanism. G. OTHER ISSUES 83. In this section, we address a number of issues that, while not specifically mandated by the 1996 Act, are ancillary to the new rules proposed in this NPRM. 1. Dialing Parity 84. Section 251(b)(3) states that all LECs have the duty to "provide dialing parity to competing providers of telephone exchange service and telephone toll service." We tentatively conclude that the benefits of dialing parity requirements that we adopt pursuant to Section 251(b)(3) of the Act should extend to all payphone location providers. We seek comment on this tentative conclusion and on other methods for achieving dialing parity for payphone location providers, and users, of payphones that are consistent with the definition of dialing parity under Section 3(15) of the 1934 Act, as amended. As a related matter, we seek comment on whether the Commission should extend the type of intraLATA carrier unblocking requirements established in TOCSIA to all local and long distance calls. 2. Letterless Keypads 85. At least two distributors of payphone equipment have been promoting letterless keypads. Such keypads defeat callers' attempts to reach their OSP of choice through a "vanity" access number, such as MCI's "1-800-COLLECT" or AT&T's "1-800-CALL-ATT" and "10ATT," that can be easily remembered by callers. Standard payphone keypads contain certain letters of the alphabet that correspond to each digit (e.g., A, B, and C correspond to the digit "2"). A "letterless" keypad does not include any letters associated with the requisite digits. We are concerned that use of letterless keypads may frustrate the intent of Congress, as expressed in TOCSIA, to permit callers to reach the OSP of their choice from payphones. In addition, we are concerned that these keypads ultimately frustrates congressional intent, as expressed in the 1996 Act, "to promote competition among payphone service providers and promote the widespread deployment of payphone services to the benefit of the general public[.]" 86. To promote consumer access to OSPs, TOCSIA required the unblocking of 800 and 950 access numbers at aggregator locations and directed the Commission to mandate the unblocking of 10XXX access codes and/or the establishment of 800/950 access numbers by each OSP. In the succeeding years, some OSPs have chosen to use "vanity" dialing sequences for access numbers. While we previously have found that the Commission does not have conclusive data showing a net change in the average number of access code calls (both 10XXX and 800/950 access calls) originated by each competitive payphone each month, payphone industry representatives have argued that use of "vanity" dialing sequences by payphone users has grown since their introduction. 87. The Common Carrier Bureau staff has reviewed advertisements for letterless keypads that specifically refer to a "by-pass keypad" that "prevents dial around [calls]." We tentatively conclude that the use of letterless keypads violates both TOCSIA and the 1996 Act by preventing callers from accessing their OSP of choice. We seek comment on how the Commission should take action to prohibit use of these "by-pass" letterless keypads to restrict the availability of "vanity" access numbers. 3. Other Pending Payphone Proceedings 88. Several proceedings pending before the Commission concern the rules governing the payphone industry. We tentatively conclude that it would further the public interest to consolidate and address those proceedings within this rulemaking. The pending proceedings are as follows: (1) Petition of the Public Telephone Council to Treat BOC Payphones as CPE, DA 88-2055; (2) Policies and Rules Concerning Operator Service Access and Pay Telephone Compensation, CC Docket. No. 91-35 (payphone compensation issues only); (3) Petition of Oncor Communications, Inc. Requesting Compensation for Competitive Payphone Premises Owners and Presubscribed Operator Services Providers, DA 95-1921; and (4) Amendment of Section 69.2(m) and (ee) of the Commission's Rules to Include Independent Public Payphones Within the "Public Telephone" Exemption from End User Common Line Access Charges, RM 8723. Each of these proceedings addresses issues covered by Section 276 of the Act. We seek comment on the implications of our tentative conclusion. Specifically, we wish to know which proceedings on the list commenters believe may be resolved here, and reasons for such opinions, and which proceedings should continue separately from this rulemaking, and the reasons for those opinions. We also conclude in this Notice that the Commission need not address the Florida Payphone remand in a separate proceeding because the rules adopted in this proceeding will address the remand by ensuring that PSPs are compensated, pursuant to the 1996 Act, for all intrastate and interstate calls, including subscriber 800 calls. 4. Comments and Ex Parte Presentations 89. All interested may file comments on the issues set forth in this NPRM, on which comment is specifically sought, by June 27, 1996, and reply comments by July 8, 1996. All relevant and timely comments will be considered by the Commission before final action is taken in this proceeding. To file formally in this proceeding, which involves issues concerning the Commission's expedited implementation of the 1996 Act, participants must file an original, ten copies, and the electronic version on disk of all comments and reply comments. Comments and reply comments should be sent to the Office of the Secretary, Federal Communications Commission, Washington, DC 20554. If participants want each Commissioner to have a personal copy of their comments, an original plus fourteen copies must be filed. In addition, participants should submit two additional copies directly to the Common Carrier Bureau, Enforcement Division, Room 6008, 2025 M Street NW, Washington, D.C. 20554. The petition, comments, and reply comments will be available for public inspection during regular business hours in the Dockets Reference Room (Room 230) of the Federal Communications Commission, 1919 M Street, NW, Washington, DC 20554. Copies of the petition and any subsequently filed documents in this matter may be obtained from ITS, Inc., 2100 M Street, NW, Suite 140, Washington, DC 20037, (202) 857-3800. 90. To facilitate review of comments and replies, both by parties and by Commission staff, we require that comments be no longer than seventy-five (75) pages and replies be no longer than thirty-five (35) pages, including exhibits, appendices, and affidavits of expert witnesses. Empirical economic studies and copies of relevant state orders will not be counted against these page limits. The page limits will not be waived and will be strictly enforced. Comments and replies must include a short and concise summary of the substantive arguments raised in the pleading. Comments and replies must also comply with Section 1.49 and all other applicable sections of the Commission's rules. We also direct all interested parties to include the name of the filing party and the date of the filing on each page of their comments and replies. Comments and replies also must clearly identify the specific portion of this Notice to which a particular comment or set of comments is responsive. If a portion of a party's comments does not fall under a particular topic listed in the outline of this Notice, such comments must be included in a clearly labelled section at the beginning or end of the filing. Parties may not file more than a total of ten (10) pages of ex parte submissions, excluding cover letters. This 10 page limit does not include: (1) written ex parte filings made solely to disclose an oral ex parte contact; (2) written material submitted at the time of an oral presentation to Commission staff that provides a brief outline of the presentation; or (3) written material filed in response to direct requests from Commission staff. Ex parte filings in excess of this limit will not be considered as part of the record in this proceeding. 91. Parties are invited to submit, in conjunction with their comments or replies, proposed text for rules that the Commission could adopt in this proceeding. Specific rule proposals should be filed as an appendix to a party's comments or reply, and will not be counted against the page limits set forth in the preceding paragraph. Such appendices may include only proposed text for rules that would implement proposals set forth in the parties' comments and replies in this proceeding, and may not include any comments or arguments. 92. This is a non-restricted notice and comment rule making proceeding. Ex parte presentations are permitted, except during the Sunshine Agenda period, provided they are disclosed as provided in Commission rules. 5. Initial Paperwork Reduction Act Analysis 93. This NPRM contains both proposed and modified information collections. As part of its continuing effort to reduce paperwork burdens, we invite the general public and the Office of Management and Budget (OMB) to take this opportunity to comment on the information collections contained in this NPRM, as required by the Paperwork Reduction Act of 1995, Pub. L. No. 104-13. Public and agency comments are due at the same time as other comments on this NPRM; OMB comments are due 60 days from the date of publication of this NPRM in the Federal Register. Comments should address: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. 94. Written comments by the public on the proposed and/or modified information collections are due June 26, 1996. Written comments must be submitted by the Office of Management and Budget (OMB) on the proposed and/or modified information collections on or before 60 days after date of publication in the Federal Register. In addition to filing comments with the Secretary, a copy of any comments on the information collections contained herein should be submitted to Dorothy Conway, Federal Communications Commission, Room 234, 1919 M Street, N.W., Washington, D.C. 20554, or via the Internet to dconway@fcc.gov and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 725 - 17th Street, N.W., Washington, D.C. 20503 or via the Internet to fain_t@al.eop.gov. 6. Initial Regulatory Flexibility Act Analysis 95. Reason for Action: The Commission is issuing this NPRM to seek comment on various issues concerning the deregulation of payphones owned by LECs, as mandated by Section 276 of the Telecommunications Act of 1996. 96. Objectives: To provide an opportunity for public comment and to provide a record for a Commission decision on the issues discussed in the NPRM. 97. Legal Basis: The NPRM is adopted pursuant to Section 276 of the 1996 Act; Sections 1, 2, 4(i), and 226 of the Communications Act of 1934, as amended. 98. Description, potential impact, and number of small entities affected: Any rule changes that might occur as a result of this proceeding could impact entities which are small business entities, as defined in Section 601(3) of the Regulatory Flexibility Act. After evaluating the comments in this proceeding, the Commission will further examine the impact of any rule changes on small entities and set forth findings in the Final Regulatory Flexibility Analysis. The Secretary shall send a copy of this Notice of Proposed Rulemaking to the Chief Counsel for Advocacy of the Small Business Administration in accordance with Section 603(a) of the Regulatory Flexibility Act, Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C.  601, et seq. (1981). 99. Reporting, recordkeeping, and other compliance requirements: The NPRM proposes to require the BOCs to follow nonstructural safeguards that include reporting requirements. However, the BOCs are not small business entities as defined in Section 601(3) of the Regulatory Flexibility Act. 100. Federal rules which overlap, duplicate, or conflict with the Commission's proposal: None. 101. Significant alternatives minimizing the impact on small entities consistent with the stated objectives: The NPRM solicits comments on a variety of alternatives. 102. IRFA Comments: Written public comments are requested on the IRFA. These comments must be filed in accordance with the same filing deadlines as comments on the rest of the Notice, but they must have a separate and distinct heading designating them as responses to the Initial Regulatory Flexibility Analysis. The Secretary shall send a copy of this Notice of Proposed Rulemaking, including the Initial Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration in accordance with paragraph 603(a) of the Regulatory Flexibility Act. IV. CONCLUSION 103. This Notice proposes rules that would accomplish the goals mandated by Congress in Section 276 of the Telecommunications Act of 1996: (1) compensation for "each and every completed intrastate and interstate call using [a] payphone[;]" (2) reclassification of LEC payphones and a termination of all subsidies, including "access charge payphone service elements[;]" (3) prescription of safeguards for Bell Operating Company ("BOC") payphones; (4) promulgation of rules permitting the BOCs to negotiate with the payphone location provider about a payphone's presubscribed interLATA carrier; (5) promulgation of rules permitting all payphone providers to negotiate with the location provider about a payphone's presubscribed intraLATA carrier; and (6) establishment of a class of public interest payphones to be located "where there would otherwise not be a payphone." We seek comment on our tentative conclusions detailed throughout this Notice. V. ORDERING CLAUSES 104. Accordingly, IT IS FURTHER ORDERED, pursuant to Sections 1, 4(i)-4(j), 201-205, 226, and 276 f the Communications Act of 1934, as amended, 47 U.S.C.  151, 154(i), 154(j), 201-205, 226, and 276 that a Notice of Proposed Rulemaking is ADOPTED. 105. IT IS FURTHER ORDERED that the Chief of the Common Carrier Bureau is delegated authority to require the submission of additional information, make further inquiries, and modify the dates and procedures, if necessary, to provide for a fuller record and a more efficient proceeding. 106. IT IS FURTHER ORDERED that this Notice of Proposed Rulemaking is the Commission's disposition of all matters remanded by the U.S. Court of Appeals for the District of Columbia Circuit in Florida Public Telecommunications Ass'n. v, FCC, 54 F.3d 857 (D.C. Cir. 1995). 107. IT IS FURTHER ORDERED that the Secretary shall send a copy of this NPRM, including the IRFA, to the Chief Counsel for Advocacy of the Small Business Administration in accordance with paragraph 603(a) of the Regulatory Flexibility Act, Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C.  601, et seq. (1981). FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary