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                                Before the
                     Federal Communications Commission
                           Washington D.C. 20554

In the Matter of                      ) 
 )
Sprint Corporation                    ) CCB/CPD 98-2
Request for Declaratory Ruling        )
Regarding Application of PICCs        )

                       Memorandum Opinion and Order

Adopted:  May 19, 1998                              Released:                     May 19, 1998


By the Chief, Common Carrier Bureau:

I.  Introduction
                       
 1.    On December 31, 1997, Sprint filed a petition for a declaratory ruling that an
interexchange carrier (IXC) that has terminated service to a presubscribed customer for
nonpayment or for violation of any other term or condition in the IXC's tariff is not liable for
presubscribed interexchange carrier charges (PICCs) with respect to such customer's lines,
provided that the IXC has made a timely notification to the local exchange carrier (LEC) that
it has discontinued service to the customer.  In this order, we grant Sprint's petition.

II.  Background

 2.   The PICC is a flat, per-line charge assessed by price cap LECs on an end
user's presubscribed interexchange carrier.  If an end user does not select a presubscribed
carrier, price cap LECs are authorized to collect the PICC directly from the end user.  In its
petition for declaratory ruling, Sprint states that it is sometimes necessary to terminate service
to customers for nonpayment of their bills or for other violations of the terms and conditions
set forth in Sprint's tariffs.  Some terminated customers may not promptly select a new
primary interexchange carrier (PIC), such as customers who seldom make long distance calls
or customers who use the services of a "dial-around" IXC.  In these cases, the LEC's switch
may continue to indicate that a customer is presubscribed to Sprint, even though the customer
no longer has any business relationship with Sprint.  Because the Access Charge Reform
Order provides that the PICC is levied on the IXC to which a customer is presubscribed, a
price cap LEC may continue to charge Sprint a PICC for a customer with whom Sprint no
longer has any business relationship.  Sprint's petition seeks a declaratory ruling that an IXC
is not liable for the PICC with respect to a terminated customer's lines, provided that the IXC
has timely notified the price cap LEC of the termination.

III.   Discussion
            
 3.   We grant Sprint's request for declaratory relief.  We find that an IXC that has
terminated service to a presubscribed customer for nonpayment or for violation of any other
term or condition in the IXC's tariff is not liable for the PICC with respect to such
customer's lines, if the IXC has made a timely notification to the price cap LEC that it has
discontinued service to the customer.  This approach is consistent with the Commission's
determination in the Access Charge Reform Order that price cap LECs may bill the PICC
directly to those end users that do not presubscribe to an IXC, in order to eliminate the
incentive for end users to avoid paying long distance rates that reflect the PICC by using dial-
around services.  Once an IXC terminates service, it is unable to collect from that end user
the costs of the PICC associated with that end user's lines.  If the IXC continues to be liable
for the PICC with respect to those lines, it is forced to recover these costs from its remaining
customers, a result at odds with the stated goal of the Access Charge Reform Order that costs
be recovered in a manner that reflects cost-causation principles.  Relieving the IXC of
liability for the PICC with respect to a terminated customer and permitting price cap LECs to
charge the PICC directly to that customer until such time as the customer selects a new PIC
benefits other IXC customers by imposing the costs on the cost-causer.

 4.   We are not persuaded by the arguments raised by LECs in opposition to
Sprint's petition.  Some price cap LECs argue, for example, that IXCs may use a declaratory
ruling in Sprint's favor to shed low volume customers by terminating them unlawfully, thus
avoiding PICCs for those customers.  Apart from the speculative nature of this argument,
whether the termination is lawful is irrelevant to the question whether IXCs should be
responsible for PICCs with respect to customers they have in fact terminated; should an IXC
terminate a customer for reasons other than those allowed in its tariffs, any dispute between
the IXC and its customer regarding unlawful termination is a separate matter for Commission
enforcement.  The customer's remedy for unlawful termination would come from the IXC
through the enforcement proceeding, rather than from the LEC.  Price cap LECs also argue
that granting Sprint's petition would inject LECs into billing disputes between IXCs and their
customers.  This concern is misplaced.  Any billing dispute between an IXC and its
customer would involve charges billed by the IXC prior to terminating service, and the price
cap LEC would collect the PICC from the IXC for that time period.  After an IXC terminates
an end user's service, however, the price cap LEC would be collecting the PICC from that
end user on its own behalf, not on behalf of the IXC.  Finally, the price cap LECs argue
that it is premature for the Commission to rule on this issue without more evidence of adverse
financial impact on IXCs.  We disagree.  As stated above, forcing an IXC to recover from
its remaining customers the costs of the PICC associated with a terminated customer's lines is
inconsistent with the cost-causation principles underlying the Access Charge Reform Order.

 5.   In order for an IXC to avoid liability for the PICC attributable to the lines of a
terminated customer, an IXC must notify the price cap LEC that it has discontinued service to
that customer at least 15 days before the date on which that LEC determines the IXC's PICC
liability for a given month.  The IXC shall notify its customer of the termination of service in
accordance with its tariff requirements and explain in that notice that the customer must
select a new PIC if the customer wishes to continue to make "1+" long distance calls after
termination.  The IXC also must inform the customer that the customer's local service
provider is permitted to assess the PICC directly on the customer if the customer chooses not
to select a new PIC.  We leave it in the first instance to the IXCs and price cap LECs to
devise reasonable means for IXCs to provide appropriate notice to the price cap LECs that a
customer has been terminated.  We require, however, that the IXC furnish the LEC with a
copy of the customer notification.  We note that commenters have recommended that an IXC
use a certified statement or the CARE system to notify a price cap LEC that it has
terminated service to an end user.  IXCs and LECs may agree on one of these methods or
select another mechanism for ensuring timely notification.  Once the price cap LEC has
received such notification, it shall cease billing the IXC for the PICC with respect to the
terminated customer's lines in accordance with the terms and conditions of the LEC's tariff.

 6.   With respect to the notice requirement, we note that many of the price cap
LECs' arguments rest on the mistaken assumption that a ruling granting Sprint's petition
would permit an IXC to change a customer's PIC or to change the customer to a "no-PIC"
status, a procedure that is inconsistent with LEC tariffs and Commission rules that require
IXCs to obtain end user authorization before submitting PIC changes to a LEC.  Similarly,
one price cap LEC argues that IXCs should pay the costs associated with a PIC change. 
These arguments misconstrue the nature of the requested relief.

 7.   An IXC that has terminated service to a customer blocks that customer's calls
in its own switch, so that it cannot complete any "1+" calls originating on that customer's
line.  In order to make long distance calls, the customer might inform the LEC that it has
selected another PIC.  The LEC will then enter and store the new PIC information in its
switch.  If a customer does not select a new PIC (because, for example, it uses the services of
a "dial around" IXC), the LEC switch will continue to indicate that the customer is
presubscribed to the IXC that has terminated service.  Retention of discontinued PIC
designations in the LEC switch had no practical consequences before the advent of the
PICC.  Since the Access Charge Reform Order, however, this situation results in price cap
LECs assessing PICCs upon an IXC with respect to lines of customers with whom the IXC
has no business relationships, thus necessitating the relief Sprint seeks in its petition.

 8.   Despite the LECs' arguments to the contrary, granting Sprint's petition does
not affect the Commission's rules requiring IXCs to obtain end user authorization before
submitting PIC changes to a LEC.  Nor do we necessarily require the LEC to change the
PIC designation in its switch.  We merely require price cap LECs, upon timely notification, to
take whatever steps are necessary to cease billing PICCs to IXCs with respect to the lines of
terminated customers and to treat those lines as if there were no PIC, until and unless the
customer chooses a new PIC.  This requirement is consistent with Section 69.153(b) of the
Commission's rules, which permits price cap LECs to collect the PICC directly from an end
user that "does not have a presubscribed interexchange carrier."  We interpret this rule to
mean that a customer is not "presubscribed" to an IXC after the IXC has terminated service to
the customer and notified the LEC of the termination.  Whether the customer remains
"presubscribed" to the IXC in the LEC switch is irrelevant to this determination. 
Commenters' arguments relating to slamming or to rules regarding PIC changes are, therefore,
inapplicable to this proceeding.

 9.   Accordingly, when an IXC timely notifies a price cap LEC that it has
terminated long distance service to an end user for nonpayment or another violation of the
IXC's tariff, the LEC will cease billing the PICC to the IXC with respect to that end user's
lines and may bill the PICC directly to the end user until such time as the end user selects a
new presubscribed IXC.


IV.   Ordering Clauses

 10.  Accordingly, IT IS ORDERED that, pursuant to section 1.2 of the
Commission's rules, 47 C.F.R.  1.2, and the authority delegated pursuant to Sections 0.91
and 0.291 of the Commission's rules, 47 C.F.R.  0.91, 0.291, Sprint Corporation's Request
for Declaratory Ruling is GRANTED.


      Federal Communications Commission



      A. Richard Metzger, Jr.
      Chief, Common Carrier Bureau