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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Application for Review of ) Ad Hoc Telecommunications Users Committee, ) California Bankers Clearing House Association, ) New York Clearing House Association, ) MasterCard International Incorporated, ) and VISA, U.S.A., Inc. ) MEMORANDUM OPINION AND ORDER Adopted: July 28, 1998 Released: August 7, 1998 By the Commission: Commissioner Furchtgott-Roth concurring and issuing a statement. I. INTRODUCTION 1. The Ad Hoc Telecommunications Users Committee, the California Bankers Clearing House Association, the New York Clearing House Association, MasterCard International Incorporated, and VISA, U.S.A., Inc. (Ad Hoc) filed an application for review of an order of the Commission's Common Carrier Bureau (Bureau). The Bureau's order granted Ameritech a waiver of Part 69 of the Commission's rules to establish unbundled rate elements for its Signalling System 7 (SS7) services. For the reasons set forth below, we dismiss in part, and deny in part, Ad Hoc's application for review. II. BACKGROUND A. Pleadings 2. On May 17, 1995, Ameritech filed a petition requesting a waiver of Part 69 of the Commission's rules to establish unbundled rate elements for its SS7 services. In its petition, Ameritech proposed separate usage-sensitive charges for SS7 signal formulation, signal switching, signal tandem switching, and signal transport. In the absence of a waiver, existing Part 69 rules precluded Ameritech from recovering its SS7 costs through separate SS7 rate elements. Instead, Ameritech was required to recover the costs for its SS7 service generally through existing rate elements that comprise per-minute-of- use access charges. In support of its petition, Ameritech stated that its upgraded equipment had the capability of measuring third-party usage of its SS7 network, enabling Ameritech to charge for SS7 services separately from its underlying switched access services. Ameritech argued that unbundling and separately pricing the different elements of its SS7 services would enable it to recover its costs in a manner that more closely reflects the way it incurred signalling costs. Ameritech contended that such a restructure would be responsive to numerous customer and competitor requests for further unbundling of SS7 functions. 3. On March 27, 1996, the Bureau adopted an order granting Ameritech's waiver request, with some modification. The Bureau concluded that Ameritech's ability to measure third-party usage of its SS7 network constituted special circumstances justifying waiver of the Commission's rules. In addition, the Bureau concluded that granting Ameritech's waiver request was in the public interest because a waiver would permit Ameritech to recover its SS7 costs in a more economically efficient manner, thereby enabling potential competitive entrants to engage in more rational economic decision-making. 4. On April 26, 1996, Ad Hoc filed an application for review, in which it urges the Commission to vacate the Ameritech SS7 Waiver Order, arguing that the Bureau exceeded its delegated authority in granting Ameritech's waiver request. According to Ad Hoc, the Bureau did not have authority to resolve "novel questions of fact, law or policy which cannot be resolved under outstanding precedents and guidelines." Ad Hoc contends that the Ameritech SS7 Waiver Order decided new rate structure modifications that should have been considered in a rulemaking proceeding, and that similar issues were being considered in then-pending rulemakings. In addition, Ad Hoc argues that Ameritech did not satisfy the two-prong test that is a prerequisite for granting a waiver under the Commission's rules and applicable legal precedent. Specifically, Ad Hoc contends that Ameritech's possession of equipment capable of measuring third-party usage of its SS7 network does not demonstrate the "special circumstances" necessary to justify a waiver of the Commission's rules, and that the public interest rationale presented in the Ameritech SS7 Waiver Order did not justify granting Ameritech's SS7 waiver request. 5. On May 13, 1996, Ameritech filed an opposition to Ad Hoc's application for review, in which it argues that requests for new rate elements need not always be resolved through a rulemaking proceeding. Ameritech also asserts that the Ameritech SS7 Waiver Order did not involve "novel questions of fact, law, or policy which cannot be resolved under outstanding precedents and guidelines," because it was based on already-existing policies favoring competitive entry, unbundling, and cost-based pricing. Ameritech reiterates that it has equipment capable of measuring and billing SS7 signalling services separately from access charges, and has received requests for unbundled SS7 signalling services. Ameritech argues, therefore, that its proposal to unbundle SS7 costs meets the public interest test because it will enable customers to purchase SS7 signalling services on more cost-based terms. 6. Ad Hoc filed a reply to Ameritech's opposition on May 28, 1996. In its reply, Ad Hoc reiterates that the rate structure modification granted in the Ameritech SS7 Waiver Order should have been considered only within the context of a rulemaking because it represented a fundamental departure from the access charge scheme embodied in Part 69 of the Commission's rules. Ad Hoc generally argues that Ameritech's opposition failed to: (1) refute the arguments presented in Ad Hoc's application for review; (2) cite to a Commission decision authorizing separate SS7 charges; or (3) refute Ad Hoc's claim that these issues will be considered in upcoming rulemaking proceedings. B. Intervening Commission Actions 7. On December 24, 1996, the Commission released the Price Cap Performance Review Third Report and Order, in which it amended Part 69 to relax the procedures for introducing new switched access services. Pursuant to Section 69.4(g), incumbent price cap LECs are no longer required to file a waiver petition to introduce rate elements for new services. Instead, incumbent LECs may now introduce a rate element for a new service by filing a petition that demonstrates that the new rate element is consistent with the public interest. Further, once an incumbent LEC has satisfied the public interest requirement for establishing new rate elements for a new switched access service, any other incumbent price cap LEC may file a petition seeking authority to introduce identical rate elements for an identical new service, and its petition will be reviewed within ten days of the release of a Public Notice. The incumbent LEC shall have authority to introduce these new rate elements after expiration of a ten-day period, unless the Bureau has informed the LEC that it has not demonstrated that its new rate element qualifies as a "me-too" rate element. 8. On May 16, 1997, the Commission released the Access Charge Reform Order, in which it adopted certain rate structure modifications that enable or require incumbent LECs to recover their costs in a manner that is more reflective of the way those costs are incurred. With regard to SS7 costs, the Commission stated that the removal of SS7 costs from the local switching and transport interconnection charge rate elements would promote efficiency and benefit both access customers and alternative local service providers by ensuring that signalling charges more accurately reflect the costs of providing such services. Although the Commission sought to encourage incumbent LECs to take steps that would promote disaggregation and unbundling of SS7 services, it did not require incumbent LECs to implement such an approach because of associated equipment costs of doing so. The Commission, therefore, permitted incumbent LECs, pursuant to 47 C.F.R.  69.4(g), to adopt unbundled signalling rate structures at their discretion and expressly permitted incumbent LECs to implement the same unbundled rate structure for SS7 services that had been approved by the Bureau in the Ameritech SS7 Waiver Order. In addition, the Commission noted that, pursuant to the same rule, an incumbent LEC may implement an unbundled signalling rate structure that varies from the approach implemented in the Ameritech SS7 Waiver Order by filing a petition demonstrating that the establishment of new rate elements implementing such a service is consistent with the public interest. III. DISCUSSION 9. As a preliminary matter, we dismiss as moot Ad Hoc's challenge to the Bureau's adoption of an unbundled rate structure for SS7 costs. In the Access Charge Reform Order, the Commission concluded that unbundling SS7 costs from local switching and transport interconnection rate elements would promote efficient use of the network. The Commission expressly endorsed the SS7 rate structure approved in the Ameritech SS7 Waiver Order, and authorized incumbent price cap LECs, at their discretion, to unbundle SS7 from their local switching and transport interconnection charge, on the same basis as previously approved in the Ameritech SS7 Waiver Order. By endorsing the rate structure approved in the Ameritech SS7 Waiver Order, which is what Ad Hoc opposes in its application for review, the Commission effectively eliminated any possibility for meaningful relief that Ad Hoc could seek in the future. Accordingly, we dismiss as moot Ad Hoc's challenge to Ameritech's SS7 rate structure adopted by the Bureau in the Ameritech SS7 Waiver Order. 10. Notwithstanding the above, we also find that Ad Hoc's specific procedural challenges to the waiver order are without merit. Ad Hoc's application for review of the Ameritech SS7 Order was based upon two grounds: (1) that Ameritech's request should have been considered in a rulemaking proceeding because the SS7 Waiver Order decided novel questions of fact, law or policy; and (2) that the Bureau did not adequately address the requirements for waiver of the Commission's rules. We are unpersuaded by these arguments, and accordingly, we deny Ad Hoc's request to vacate the Ameritech SS7 Waiver Order on these grounds. 11. We disagree with Ad Hoc's contention that Ameritech's waiver request involved "novel questions of fact, law, or policy" that should have been addressed in a rulemaking proceeding. Grant of a waiver of Part 69 for purposes of introducing new rate elements based on advanced technology does not create "new or novel questions of fact, law or policy which cannot be resolved under outstanding precedents and guidelines." The Bureau has previously granted numerous Part 69 waivers to enable carriers to establish new rate elements "that are tailored precisely to their respective services," stating that "the creation of new rate elements would advance the goals of the Commission's access charge regime by enabling the carriers to better match relevant costs and rate elements," thus allowing recovery of costs from the customers using those services. In the instant case, we find no "novel question of fact, law or policy" that would have required Commission action or a rulemaking before permitting Ameritech to introduce a new rate element for its unbundled SS7 costs. 12. We also disagree with AdHoc's contention that the Bureau erred in granting Ameritech's waiver request because it did not satisfy the Commission's waiver standard. Waiver of a Commission rule is appropriate if special circumstances warrant a deviation from the general rule, and such deviation would better serve the public interest than strict adherence to the general rule. The record shows that Ameritech had several customer requests to unbundle its SS7 services from its switched access services. The record also shows that Ameritech had purchased and deployed the equipment necessary for measuring third-party usage of its SS7 networks, thereby allowing Ameritech to bill for its SS7 services separately from its switched access services. The Bureau found that Ameritech's newly deployed ability to measure third-party usage of its SS7 network constitutes special circumstances. We affirm that the availability of this new service, based on a new technology that was not available at the time our Part 69 rules were adopted, is sufficient to constitute special circumstances for purposes of our Part 69 waiver standard, and we deny Ad Hoc's petition to vacate on this ground. 13. We also affirm that Ameritech's SS7 service offering satisfied the public interest test of the Part 69 waiver standard. We find that the Bureau's grant of Ameritech's waiver request to unbundle its SS7 costs better serves the public interest than requiring Ameritech to follow the Part 69 rules, which did not allow carriers to recover SS7 costs separately from other switching costs. Pending adoption of rate structure modifications in the Access Charge Reform proceeding, the waiver permitted Ameritech to design a rate structure that more accurately reflects the manner in which those costs are incurred. A rate structure that recovers costs in a cost-causative manner promotes efficient use of the network and facilitates movement to a competitive market, which in turn benefits consumers through innovation and increased choices in telecommunication services. We find that these circumstances warrant a deviation from the general rule and that such deviation is in the public interest. IV. ORDERING CLAUSE 14. Accordingly, IT IS ORDERED that the application for review filed by the Ad Hoc Telecommunications Users Committee, the California Bankers Clearing House Association, the New York Clearing House Association, MasterCard International Incorporated, and VISA, U.S.A., Inc. IS DISMISSED in part, and DENIED in part. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary CONCURRING STATEMENT OF COMMISSIONER HAROLD FURCHTGOTT-ROTH Re: Memorandum Opinion and Order Dismissing Ad Hoc's Application for Review of the Ameritech SS7 Waiver Order. I concur in today's decision to dismiss Ad Hoc's challenge to the Bureau's adoption of an unbundled rate structure for SS7 costs in the Ameritech SS7 Waiver Order. I agree that the Commission's subsequent Access Charge Reform Order effectively eliminated the possibility of meaningful relief by endorsing the rate structure that the Bureau had previously adopted. Thus, I support the decision to dismiss Ad Hoc's challenge as moot. I concur, however, because I am concerned with the Bureau's exercise of its delegated authority in waiving a Commission Rule in response to what appears to be a novel factual situation. I am also concerned about a regulatory scheme based on detailed requirements that merely encourage the Bureau to waive those rules without delegated authority whenever a new factual situation arises. Ad Hoc challenged the Bureau's decision, arguing that the Ameritech SS7 Waiver Order should have been considered in a rulemaking because it decided novel questions of fact, law or policy. The Bureau does not have specific delegated authority to review Part 69 waiver requests; thus, such waivers can only be reviewed by the Bureau pursuant to the limitations on its delegated authority in section 0.291(a)(2) of the Commission's rules. I recognize that the Bureau has previously granted other general waivers of Part 69 for the purpose of introducing new rate elements based on advances in technology, and I am not interested in encouraging full Commission review of every change requested under Part 69. I am concerned, however, with the conclusion that advances in technology -- certainly something I would consider a changed "fact" -- that subsequently require the Commission to amend its own rules are not "novel" questions of fact, law or policy. I appreciate that the real problem in this case may be that the Part 69 regulations are too specific and inflexible, and that the Commission's prior waiver policy was too cumbersome. Indeed, in amending that policy to allow LECs additional flexibility in introducing rate elements for new services, the Commission concluded that requiring a waiver to introduce a new rate element imposes a "costly, time-consuming and unnecessary burden on incumbent LECS and significantly impedes the introduction of new services." The appropriate resolution of such difficulties, however, is providing additional flexibility in the Commission's regulations and/or its procedures. I cannot endorse a regulatory scheme that provides excruciatingly explicit and detailed requirements regarding rate elements and then encourages the Bureau to waive those rules without delegated authority whenever a new factual situation arises.