******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** DA 98-1772 Before the Federal Communications Commission Washington, D.C. In the Matter of ) ) CC Docket No. 98-103 Pacific Bell Telephone Company ) Pacific Bell Tariff FCC No. 128 ) Pacific Transmittal No. 1986 ) ORDER DESIGNATING ISSUES FOR INVESTIGATION Adopted: September 2, 1998 Released: September 2, 1998 By the Chief, Competitive Pricing Division, Common Carrier Bureau: I. INTRODUCTION 1. On June 15, 1998, Pacific Bell Telephone Company (Pacific) filed Transmittal No. 1986 establishing a new offering, Asymmetrical Digital Subscriber Line (DSL) to become effective June 30, 1998, and to be deployed in 87 wire centers in California. Pacific describes its DSL offering as an interstate data special access service that provides a high speed access connection between an end user subscriber and an Internet Service Provider (ISP) or Network Service Provider (NSP) by utilizing a combination of the subscriber's existing local exchange physical plant (i.e. copper facility), a specialized DSL-equipped wire center, and transport to the ATM Cell Relay Switch where the ISP or NSP will connect to Pacific's network. DSL Service will allow for the simultaneous transmission of voice dialed calls and high speed data access over a single path, thereby reducing the need for subscribers to obtain additional lines for their Internet access capabilities, according to Pacific. On June 29, 1998, the Common Carrier Bureau (Bureau) released a suspension order regarding the transmittal that suspended the transmittal for one day and required Pacific to keep an accurate accounting of all revenue received from its DSL Service. 2. In the Suspension Order, we found that issues raised by petitioners in support of their petitions to reject, or petitions to suspend and investigate, Pacific's Transmittal No. 1986 raised substantial questions of lawfulness that warrant investigation of this tariff. In this Order, we designate for investigation under section 204(a) of the Communications Act (the Act) the question of whether Pacific's DSL service offering constitutes an interstate access service, and thus is subject to the Commission's jurisdiction. II. DISCUSSION A. Background 3. Pacific's Transmittal No. 1986 seeks to offer DSL service through an interstate access tariff. Pacific's transmittal contends that an interstate tariff is appropriate because: (1) Internet traffic is primarily interstate in nature; (2) Pacific's DSL service offering involves a dedicated data transport of data; and (3) it is an access service under 47 C.F.R.  69.2(b). The Commission has not substantively addressed the lawfulness of a DSL service in the context of an interstate tariff such as that filed by Pacific. B. Petitions 4. A number of petitioners argue that Pacific's DSL service is an intrastate service offering that should be tariffed at the state level. For example AOL, contends that seventeen states have already held that traffic from an end user to an ISP is local, and that Pacific's tariff is an attempt to forum shop to avoid these decisions. Specifically, ALTS maintains that these states have held that incumbent local exchange carriers (ILECs) must pay reciprocal compensation when they exchange this type of traffic with competitive local exchange carriers (CLECs). Further, ALTS argues that Commission precedent holds that ISPs are end users, not telecommunications carriers, and therefore Pacific's DSL service offering tariff cannot constitute local exchange access under Part 69. 5. Several parties contend that a DSL call terminates at the point where the call reaches an ISP interconnected to Pacific. For example, ALTS argues that the telecommunications portion of the DSL call terminates at the point where the call reaches an ISP interconnected to Pacific because ISPs are end users, and that any subsequent information services provided by the ISPs are irrelevant in determining the "jurisdictional end points." Pacific's DSL tariff, therefore, should be subject to state ratemaking authority. ALTS also contends that any change in the states' authority should be done in the context of a rulemaking. 6. Northpoint raises another jurisdictional argument. Northpoint contends that data CLECs could be subject to a price squeeze unless regulators review both Pacific's retail DSL rates and Pacific's wholesale charges for unbundled network elements (UNEs) used by competitors to provide their own DSL services. Northpoint argues that the Commission does not have the UNE cost data needed to conduct the necessary analysis because UNEs are tariffed at the state level, while Pacific is tariffing retail DSL services at the federal level. This allows, according to Northpoint, the possibility that cost data submitted at the federal level will be significantly different than the cost data submitted at the state level. Northpoint, therefore, argues that the Commission should consider deferring the retail tariffing of DSL services to the states, to ensure consistent tariff review. C. Reply 7. Pacific contends that its DSL service is properly tariffed at the federal level. It argues that Internet traffic is recognized as being primarily interstate in nature, and can connect an end user to information either locally or worldwide. Pacific contends that it is the nature of the communication itself rather than the physical location of the technology that determines the jurisdictional classification of a service. 8. Pacific also argues that its DSL service offering is part of one continuous transmission path, originating at the end user's site and terminating at the Internet servers accessed. It should not be viewed, argues Pacific, as one local call terminating at the ISP's location, followed by another transmission from the ISP to the Internet. According to Pacific, such a bifurcation analysis has already been rejected by the Commission. 9. Pacific states that the difference between Pacific's DSL service offering and traditional dial up access services using standard business lines is that its service is a dedicated offering. It is, according to Pacific, a special, not switched, access arrangement. Pacific maintains that the state decisions cited by petitioners regarding reciprocal compensation for switched calls to ISPs are therefore not relevant to the jurisdictional classification of Pacific's DSL service offering. D. Discussion 10. The threshold issue raised by Pacific's tariff and the petitioners is whether Pacific's DSL service offering is an interstate service, properly tariffed at the federal level, or an intrastate service that should be tariffed at the state level. We find that the record in this proceeding to date does not contain sufficient information on which to decide this issue. We, therefore, designate for investigation the question whether Pacific's DSL service offering is a jurisdictionally interstate service. We solicit comments on the jurisdictional issues raised by Pacific's DSL service offering and whether it should be tariffed at the state or federal level. We also solicit comments on whether the Commission should defer to the states the tariffing of retail DSL services in order to lessen the possibility of a price squeeze. III. Filing Schedules 11. This investigation will be conducted as a notice and comment proceeding. We have designated CC Docket No. 98-103. Pacific is designated as a party to this proceeding, and shall file its direct case no later than September 11, 1998. The direct case must present the party's positions with respect to the issues described in this Order. Pleadings responding to the direct case may be filed no later than September 18, 1998, and must be captioned "Oppositions to Direct Case" or "Comments on Direct Case." Pacific may file a "Rebuttal" to oppositions or comments no later than September 25, 1998. 12. An original and six copies of all pleadings shall be filed with the Secretary of the Commission. In addition, parties shall file two copies of any such pleadings with the Competitive Pricing Division, Common Carrier Bureau, Room 518, 1919 M Street, N.W., Washington, D.C. 20554. Parties shall also deliver one copy of such pleadings to the Commission's commercial copying firm, International Transcription Service, Inc., 1231 20th Street, NW, Washington, DC 20036. Members of the general public who wish to express their views in an informal manner regarding the issues in this investigation may do so by submitting one copy of their comments to the Office of the Secretary, Federal Communications Commission, 1919 M Street, N.W., Room 222, Washington, D.C. 20554. Such comments should specify the docket number of this investigation. Parties are also encouraged to submit their pleadings electronically through the Electronic Tariff Filing System. 13. All relevant and timely pleadings will be considered by the Commission. In reaching a decision, the Commission may take into account information and ideas not contained in pleadings, provided that such information or a writing containing the nature and source of such information is placed in the public file, and provided that the fact of reliance on such information is noted in the order. IV. Ex Parte Requirements 14. This tariff investigation is a "permit-but-disclose proceeding" and subject to the "permit-but-disclose" requirements under section 1.1206(b) of the rules, 47 C.F.R.  1.1206(b), as revised. Persons making oral ex parte presentations are reminded that memoranda summarizing the presentation must contain a summary of the substance of the presentation and not merely a listing of the subjects discussed. More than a one or two sentence description of the views and arguments presented is generally required. Other rules pertaining to oral and written presentations are set forth in section 1.1206 (b), as well. V. Paperwork Reduction Act 15. The collections of information contained within are contingent upon approval by the Office of Management and Budget, in accordance with the provisions of the Paperwork Reduction Act, 44 U.S.C.  3506 et seq. VI. ORDERING CLAUSES 16. Accordingly, IT IS ORDERED that, pursuant to Section 204(a) of the Communications Act of 1934, as amended, 47 U.S.C.  204(a), and authority delegated pursuant to Section 0.91 and Section 0.291 of the Commission's Rules, 47 C.F.R.  0.91, 0.291, Transmittal No. 476 IS SUSPENDED for one day from the effective date and an investigation of the referenced tariff transmittal IS INSTITUTED. 17. IT IS FURTHER ORDERED that Pacific SHALL FILE tariff revisions within five business days of the release date of this Order to reflect this suspension. 18. IT IS FURTHER ORDERED that, for the above purposes, Pacific should cite the "DA" number of the instant Order as the authority for this filing. 19. IT IS FURTHER ORDERED that, pursuant to Section 204(a) of the Communications Act of 1934, as amended, 47 U.S.C. 204(a), Pacific shall keep accurate account of all amounts received by reason of the rates that are the subject of this investigation. 20. IT IS ORDERED that, pursuant to sections 4(i), 4(j), 201(b), 203(c), 204(a), 205, and 403 of the Communications Act, 47 U.S.C.  154(i), 154(j), 201(b), 203(c), 204(a), 205 and 403, and sections 0.91 and 0.291 of the Commission's rules, 47 C.F.R.  0.91 and 0.291, the issues set forth in this Order ARE DESIGNATED FOR INVESTIGATION. 21. IT IS FURTHER ORDERED that Pacific is a party to this proceeding and SHALL INCLUDE, in its direct case, a response to each issue designated in this Order. FEDERAL COMMUNICATIONS COMMISSION Jane E. Jackson Chief, Competitive Pricing Division Common Carrier Bureau