FOR IMMEDIATE RELEASE NEWS MEDIA CONTACT: August 5, 1999 Emily Hoffnar 202/418-0253 Report No. 99-33 Commission Adopts Pricing Flexibility and Other Access Charge Reforms Today the Commission adopted an Order that allows competition, rather than regulation, to determine prices for interstate access services, thus providing customers more choices among services, carriers, and rates. The Order gives the nation's largest telephone companies progressively greater flexibility in setting interstate access rates as competition develops, gradually replacing regulation with competition as the primary means of setting prices. Long distance companies purchase interstate access service from local telephone companies to reach end user customers. Today's Order changes rules that govern the provision of interstate access services by local exchange carriers (LECs) subject to price cap regulation to make them more compatible with the development of competition in the marketplace. These reforms will enable those companies to compete more efficiently, and customers of interstate access service should benefit from increased choices among carriers and lower overall rates. The Order grants greater pricing flexibility to price cap LECs as competition for specific services develops, while ensuring that such flexibility neither deters efficient entry nor results in unreasonable rate increases for customers without competitive alternatives. In particular, the Order: Grants immediate relief by:  Permitting price cap LECs to file tariffs for new services on a streamlined basis, without prior approval or cost-support requirements  Permitting price cap LECs to define the scope and number of zones for geographic deaveraging rates for services within the trunking basket, so long as each zone, except the highest-cost zone, accounts for at least 15 percent of the incumbent LEC's trunking basket revenues in the study area and rate increases are limited to 15 percent per year  Permitting price cap LECs to remove interstate intraLATA toll services and corridor services from price cap regulation, upon full implementation of intra- and interLATA toll dialing parity Establishes a two-phase framework for granting additional pricing flexibility:  Phase I -- Price cap LECs must demonstrate that competitors have made sunk investment in facilities needed to compete with the price cap LECs in the provision of the services at issue, within a particular metropolitan area Permits price cap LECs to offer contract tariffs and volume and term discounts for those services, on one day's notice Requires price cap LECs to maintain their generally available, price-cap constrained tariffed rates  Phase II -- Price cap LECs must satisfy a more stringent showing for competition for the services at issue, sufficient to preclude the LECs maintaining unreasonable rates Permits price cap LECs to offer some services free of the Commission's rate structure and price cap rules Permits price cap LECs to file tariffs on one day's notice Establishes service-specific triggers for granting Phase I and Phase II relief: Dedicated transport and most special access services  Phase I trigger -- competitors have collocated and use competitive transport in 15 percent of a price cap LEC's wire centers in a metropolitan area, or in wire centers accounting for 30 percent of the price cap LEC's revenues from those services in that area  Phase II trigger -- competitors have collocated and use competitive transport in 50 percent of a price cap LEC's wire centers in a metropolitan area, or in wire centers accounting for 65 percent of the price cap LEC's revenues from those services in that area Channel terminations (special access facilities that carry traffic from LEC end offices to customer premises)  Phase I trigger -- competitors have collocated and use competitive transport in 50 percent of a price cap LEC's wire centers in a metropolitan area, or in wire centers accounting for 65 percent of the price cap LEC's revenues from those services in that area  Phase II trigger -- competitors have collocated and use competitive transport in 65 percent of a price cap LEC's wire centers in a metropolitan area, or in wire centers accounting for 85 percent of the price cap LEC's revenues from those services in that area Traffic sensitive and common line services  Phase I trigger -- competitors must offer service over their own facilities to 15 percent of incumbent LEC customer locations in a metropolitan area  Phase II trigger -- subject of the Further Notice of Proposed Rulemaking Price cap LECs exercising Phase I or Phase II flexibility are required to give up the low-end adjustment mechanism on a holding company-wide basis. The Notice seeks comment on a number of other issues:  Geographic deaveraging of rates for services in the common line and traffic- sensitive baskets  Rate structure for the local switching service category of the traffic-sensitive basket and for tandem-switched transport and whether capacity-based charges, rather than per-minute charges, better reflect the manner in which the underlying costs of these services are incurred  Adjustments to the traffic-sensitive and trunking price cap index formulae for these charges so that price cap LECs do not enjoy all the benefits of growth if they have not been exclusively responsible for creating that growth  Market-based or other approaches to ensure that rates charged by competitive carriers are just and reasonable. Action by the Commission August 5, 1999 by Fifth Report and Order and Further Notice of Proposed Rulemaking in CC Docket No. 96-262 (FCC 99-xxx); Chairman Kennard, Commissioners Powell and Tristani; Commissioner Ness approving and issuing a statement; Commissioner Furchtgott-Roth approving in part, concurring in part, and disssenting in part and issuing a statement at a later date. - FCC - COMMON CARRIER BUREAU CONTACT: Tamara Preiss, 202/418-1520