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                                                Before the
                Federal Communications Commission
                      Washington, D.C. 20554

                                 
                                )
In the Matter of                )
                                )
Computer III Further Remand Proceedings:)         CC Docket No. 95-20
Bell Operating Company          )
Provision of Enhanced Services  )
                                )  
1998 Biennial Regulatory Review -- )         CC Docket No. 98-10
Review of Computer III and ONA  )
Safeguards and Requirements     )


             FURTHER NOTICE OF PROPOSED RULEMAKING


   Adopted:  January 29, 1998           Released:  January 30, 1998

Comment Date:  March 27, 1998
Reply Date:  April 23, 1998

By the Commission:  Commissioner Furchtgott-Roth issuing a separate statement.

                        TABLE OF CONTENTS
                                                            Paragraph
     
     I.  INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . .  1

     II.  BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . .  9
               A.   Overview of Computer III/ONA and Related Court Decisions  9
               B.   Overview of the 1996 Act . . . . . . . . . . . . . . 17
                         1.   Opening the Local Exchange Market . . . . . . . 18
                         2.   BOC Provision of Information Services . . . . . 20

     III.  CALIFORNIA III REMAND. . . . . . . . . . . . . . . . . . 24
               A.   Background . . . . . . . . . . . . . . . . . . . . . 24
               B.   Subsequent Events May Have Alleviated the Ninth Circuit's California III
          Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

     IV.  EFFECT OF THE 1996 ACT  . . . . . . . . . . . . . . . . . 37
               A.   Basic/Enhanced Distinction . . . . . . . . . . . . . 38
               B.   Cost-Benefit Analysis of Structural Safeguards . . . 43
                         1.   Background. . . . . . . . . . . . . . . . . . . 43
                         2.   Effect of the 1996 Act and Other Factors. . . . 48
                                   a.   Section 251 and Local Competition. . . . . 49
                                   b.   Structural Separation and the 1996 Act . . 52
               C.   Comparably Efficient Interconnection (CEI) Plans . . 60
                         1.   Proposed Elimination of Current Requirements. . 60
                         2.   Treatment of Services Provided Through 272/274 Affiliates 66
                                   a.   Section 272. . . . . . . . . . . . . . . . 66
                                   b.   Section 274. . . . . . . . . . . . . . . . 71
                         3.   Treatment of Telemessaging and Alarm Monitoring Services 74
                         4.   Related Issues. . . . . . . . . . . . . . . . . 75
               D.   ONA and Other Nonstructural Safeguards . . . . . . . 78
                         1.   ONA Unbundling Requirements . . . . . . . . . . 78
                                   a.   Introduction . . . . . . . . . . . . . . . 78
                                   b.   ONA Unbundling Requirements. . . . . . . . 80
                                   c.   Effect of the 1996 Act . . . . . . . . . . 92
                         2.   ONA and Nondiscrimination Reporting Requirements 99
                                   a.   Introduction . . . . . . . . . . . . . . . 99
                                   b.   Annual ONA Reports . . . . . . . . . . .  103
                                   c.   Semi-Annual ONA Reports. . . . . . . . .  108
                                   d.   Nondiscrimination Reports. . . . . . . .  112
                         3.   Other Nonstructural Safeguards. . . . . . . .  117
                                   a.   Network Information Disclosure Rules . .  117
                                   b.   Customer Proprietary Network Information (CPNI) 124

     V.  JURISDICTIONAL ISSUES. . . . . . . . . . . . . . . . . .  130

     VI.  PROCEDURAL MATTERS. . . . . . . . . . . . . . . . . . .  133
               A.   Ex Parte Presentations . . . . . . . . . . . . . .  133
               B.   Initial Paperwork Reduction Act Analysis . . . . .  134
               C.   Initial Regulatory Flexibility Certification . . .  135
               D.   Comment Filing Procedures. . . . . . . . . . . . .  137

     VII.  ORDERING CLAUSES . . . . . . . . . . . . . . . . . . .  141

                         I.  INTRODUCTION

     1.   In the Commission's Computer III and Open Network Architecture (ONA)
proceedings, the Commission sought to establish appropriate safeguards for the provision by the
Bell Operating Companies (BOCs) of "enhanced" services.  Examples of enhanced services
include, among other things, voice mail, electronic mail, electronic store-and-forward, fax store-
and-forward, data processing, and gateways to online databases.  Underlying this effort, as well
as our reexamination of the Computer III and ONA rules in this Further Notice of Proposed
Rulemaking (Further Notice), are three complementary goals.  First, we seek to enable
consumers and communities across the country to take advantage of innovative "enhanced" or
"information" services offered by both the BOCs and other information service providers (ISPs). 
Second, we seek to ensure the continued competitiveness of the already robust information
services market.  Finally, we seek to establish safeguards for BOC provision of enhanced or
information services that make common sense in light of current technological, market, and legal
conditions.                       

     2.   Under Computer III and ONA, the BOCs are permitted to provide enhanced
services on an "integrated" basis (i.e., through the regulated telephone company), subject to
certain "nonstructural safeguards," as described more fully below.  These rules replaced those
previously established in Computer II, which required AT&T (and subsequently the BOCs) to
offer enhanced services through structurally separate subsidiaries.  On February 21, 1995, the
Commission released a Notice of Proposed Rulemaking (Computer III Further Remand Notice)
following a remand from the United States Court of Appeals for the Ninth Circuit (California
III).  The Computer III Further Remand Notice sought comment on both the remand issue in
California III relating to the replacement of structural separation requirements for BOC provision
of enhanced services with nonstructural safeguards, as well as the effectiveness of the
Commission's Computer III and ONA nonstructural rules in general.  

     3.   Since the adoption of the Computer III Further Remand Notice, significant
changes have occurred in the telecommunications industry that affect our analysis of the issues
raised in this proceeding.  Most importantly, on February 8, 1996, Congress passed the
Telecommunications Act of 1996 (1996 Act) to establish "a pro-competitive, de-regulatory
national policy framework" in order to make available to all Americans "advanced
telecommunications and information technologies and services by opening all
telecommunications markets to competition."  As the Supreme Court recently noted, the 1996
Act "was an unusually important legislative enactment" that changed the landscape of
telecommunications regulation.

     4.   The 1996 Act significantly alters the legal and regulatory framework governing
the local exchange marketplace.  Among other things, the 1996 Act opens local exchange
markets to competition by imposing new interconnection, unbundling, and resale obligations on
all incumbent local exchange carriers (LECs), including the BOCs.  In addition, the 1996 Act
allows the BOCs, under certain conditions, to enter markets from which they previously were
restricted, including the interLATA telecommunications and interLATA information services
markets.  In some cases, the 1996 Act requires a BOC to offer services in these markets through
a separate affiliate.  In addition, the 1996 Act incorporates new terminology and definitions that
differ from those the Commission had been using. 

     5.   In light of the 1996 Act and ensuing changes in telecommunications technologies
and markets, we believe it is necessary not only to respond to the issues remanded by the Ninth
Circuit, but also to reexamine the Commission's nonstructural safeguards regime governing the
provision of information services by the BOCs.  Congress recognized, in passing the 1996 Act,
that competition will not immediately supplant monopolies and therefore imposed a series of
safeguards to prevent the BOCs from using their existing market power to engage in improper
cost allocation and discrimination in their provision of interLATA information services, among
other things.  These statutory safeguards seek to address many of the same anticompetitive
concerns as, but do not explicitly displace, the safeguards established by the Commission in the
Computer II, Computer III, and ONA proceedings.  We therefore issue this Further Notice to
address issues raised by the interplay between the safeguards and terminology established in the
1996 Act and the Computer III regime.  These 1996 Act-related issues were not raised in the
Computer III Further Remand Notice.  We therefore ask interested parties to respond to the
issues raised in this Further Notice and, to the extent that parties want any arguments made in
response to the Computer III Further Remand Notice to be made a part of the record for this
Further Notice, we ask them to restate those arguments in their comments.  

     6.   We note, in addition, that Congress required the Commission to conduct a
biennial review of regulations that apply to operations or activities of any provider of
telecommunications service and to repeal or modify any regulation it determines to be "no longer
necessary in the public interest."  Accordingly, the Commission has begun a comprehensive
1998 biennial review of telecommunications and other regulations to promote "meaningful
deregulation and streamlining where competition or other considerations warrant such action." 
In this Further Notice, therefore, we seek comment on whether certain of the Commission's
current Computer III and ONA rules are "no longer necessary in the public interest."  To the
extent parties identify additional Computer III and ONA rules they believe warrant review under
the Act, we invite those comments as well.    
  
     7.   Consistent with the 1996 Act, in this Further Notice we seek to strike a reasonable
balance between our goal of reducing and eliminating regulatory requirements when appropriate
as competition supplants the need for such requirements to protect consumers and competition,
and our recognition that, until full competition is realized, certain safeguards may still be
necessary.  We want to encourage the BOCs to provide new technologies and innovative
information services that will benefit the public, as well as ensure that the BOCs will make their
networks available for the use of competitive providers of such services.  We therefore seek
comment in this Further Notice on, among other things, the following tentative conclusions:

                --  notwithstanding the 1996 Act's adoption of separate affiliate requirements for
          BOC provision of certain information services (most notably, interLATA
          information services), the Act's overall pro-competitive, de-regulatory framework,
          as well as our public interest analysis, support the continued application of the
          Commission's nonstructural safeguards regime to BOC provision of intraLATA
          information services [ 43-59];

               --   given the protections established by the 1996 Act and our ONA rules, we should
          eliminate the requirement that BOCs file Comparably Efficient Interconnection
          (CEI) plans and obtain Common Carrier Bureau (Bureau) approval for those plans
          prior to providing new intraLATA information services [ 60-65]; 

               --   at a minimum, we should eliminate the CEI-plan requirement for BOC
          intraLATA information services provided through an Act-mandated affiliate
          under section 272 or 274 [ 66-72]; and

               --   the Commission's network information disclosure rules established pursuant to
          section 251(c)(5) should supersede certain, but not all, of the Commission's
          previous network information disclosure rules established in Computer II and
          Computer III [ 122].      

We also generally seek comment on, among other things, the following issues:

               --   whether enactment and implementation of the 1996 Act, as well as other
          developments, should alleviate the Ninth Circuit's concern about the level of
          unbundling mandated by ONA [ 29-36];
     
               --   whether the Commission's definition of the term "basic service" and the 1996
          Act's definition of "telecommunications service" should be interpreted to extend
          to the same functions [ 38-42];

               --   whether the Commission's current ONA requirements have been effective in
          providing ISPs with access to the basic services that ISPs need to provide their
          own information service offerings [ 85-90]; 

               --   whether the Commission, under its general rulemaking authority, should extend to
          ISPs some or all section 251-type unbundling rights, which the Commission
          previously concluded was not required by section 251 of the Act [ 94-96]; and

               --   how the Commission's current ONA reporting requirements should be streamlined
          and modified [ 99-116]. 

     8.   As set forth in the 1998 appropriations legislation for the Departments of
Commerce, Justice, and State, the Commission is required to undertake a review of its
implementation of the provisions of the 1996 Act relating to universal service, and to submit its
review to Congress no later than April 10, 1998.  The Commission must review, among other
things, the Commission's interpretations of the definitions of "information service" and
"telecommunications service" in the 1996 Act, and the impact of those interpretations on the
current and future provision of universal service to consumers, including consumers in high cost
and rural areas.  We recognize that there is a some overlap between the inquiry in this Further
Notice about the relationship between the Commission's definition of the term "basic service"
and the 1996 Act's definition of "telecommunications service," and the issues to be addressed in
the Commission's report to Congress.  Furthermore, we recognize that other aspects of this
Further Notice also may be affected by the analysis in the Universal Service Report.  We note
that the inquiry in this Further Notice is primarily focused on the rules and terminology the
Commission should be using in the context of its Computer II and Computer III requirements. 
We also note that the order in this proceeding will be issued after the Universal Service Report is
submitted to Congress, and will thus take into account any conclusions made in that report.

                         II.  BACKGROUND

               A.   Overview of Computer III/ONA and Related Court Decisions

     9.   We discussed in detail the factual history of Computer III/ONA in the Computer
III Further Remand Notice.  One of the Commission's main objectives in the Computer III and
ONA proceedings has been to permit the BOCs to compete in unregulated enhanced services
markets while preventing the BOCs from using their local exchange market power to engage in
improper cost allocation and unlawful discrimination against ESPs.  The concern has been that
BOCs may have an incentive to use their existing market power in local exchange services to
obtain an anticompetitive advantage in these other markets by improperly allocating to their
regulated core businesses costs that would be properly attributable to their competitive ventures,
and by discriminating against rival, unaffiliated ESPs in the provision of basic network services
in favor of their own enhanced services operations.  In Computer II, the Commission addressed
these concerns by requiring the then-integrated Bell System to establish fully structurally
separate affiliates in order to provide enhanced services.  Following the divestiture of AT&T in
1984, the Commission extended the structural separation requirements of Computer II to the
BOCs.

     10.  In Computer III, after reexamining the telecommunications marketplace and the
effects of structural separation during the six years since Computer II, the Commission
determined that the benefits of structural separation were outweighed by the costs, and that
nonstructural safeguards could protect competing ESPs from improper cost allocation and
discrimination by the BOCs while avoiding the inefficiencies associated with structural
separation.  The Commission concluded that the advent of more flexible, competition-oriented
regulation would permit the BOCs to provide enhanced services integrated with their basic
network facilities.  Towards this end, the Commission adopted a two-phase system of
nonstructural safeguards that permitted the BOCs to provide enhanced services on an integrated
basis.  The first phase required the BOCs to obtain Commission approval of a service-specific
CEI plan in order to offer a new enhanced service.  In these plans, the BOCs were required to
explain how they would offer to ESPs all the underlying basic services the BOCs used to provide
their own enhanced service offerings, subject to a series of "equal access" parameters.  Thus,
the CEI phase of nonstructural safeguards imposed obligations on the BOCs only to the extent
they offered specific enhanced services.  The Commission indicated that such a CEI requirement
could promote the efficiencies of competition in enhanced services markets by permitting the
BOCs to participate in such markets provided they open their networks to competitors.

     11.  During the second phase of implementing Computer III, the Commission required
the BOCs to develop and implement ONA plans.  The ONA phase was intended to broaden a
BOC's unbundling obligations beyond those required in the first phase.  ONA plans explain how
a BOC will unbundle and make available to unaffiliated ESPs network services in addition to
those the BOC uses to provide its own enhanced services offerings.  These ONA plans were
required to comply with a defined set of criteria in order for the BOC to obtain structural relief
on a going-forward basis.  This means that a BOC would not need to obtain approval of CEI
plans prior to offering specific enhanced services on an integrated basis.  The Commission also
required the BOCs to comply with various other nonstructural safeguards in the form of rules
related to network disclosure, customer proprietary network information (CPNI), and quality,
installation, and maintenance reporting.  All of these nonstructural safeguards were designed to
promote the efficiency of the telecommunications network, in part by permitting the technical
integration of basic and enhanced services and in part by preserving competition in the enhanced
services market through the control of potential anticompetitive behavior by the BOCs.

     12.  In 1990, the Court of Appeals for the Ninth Circuit vacated three orders in the
Computer III proceeding, finding that the Commission had not adequately justified the decision
to rely on (nonstructural) cost accounting safeguards as protection against cross-subsidization of
enhanced services by the BOCs.  In response to this remand, the Commission adopted the BOC
Safeguards Order, which strengthened the cost accounting safeguards, and reaffirmed the
Commission's conclusion that nonstructural safeguards should govern BOC participation in the
enhanced services industry, rather than structural separation requirements.

     13.  During the period from 1988 to 1992, the Commission approved the BOCs' ONA
plans, which described the basic services that the BOCs would provide to unaffiliated and
affiliated ESPs and the terms on which these services would be provided.  During the two-year
period from 1992 to 1993, the Bureau approved the lifting of structural separation for individual
BOCs upon their showing that their initial ONA plans complied with the requirements of the
BOC Safeguards Order, and these decisions were later affirmed by the Commission.

     14.  After California I and the Commission's response in the BOC Safeguards Order,
the Ninth Circuit in California II upheld the Commission's orders approving BOC ONA plans. 
In California II, the court concluded that the Commission had scaled back its vision of ONA
since Computer III by approving BOC ONA plans before "fundamental unbundling" had been
achieved.  The court also concluded that the issue of whether implementation of ONA plans
justified the lifting of structural separation, as the Commission had determined, was not properly
before it. 

     15.  In California III, the Court of Appeals for the Ninth Circuit partially vacated the
Commission's BOC Safeguards Order.  The California III court found that, in granting full
structural relief based on the BOC ONA plans, the Commission had not adequately explained its
apparent "retreat" from requiring "fundamental unbundling" of BOC networks as a component of
ONA and a condition for lifting structural separation.  The court was therefore concerned that
ONA unbundling, as implemented, failed to prevent the BOCs from engaging in discrimination
against competing ESPs in providing access to basic services.  The court did find, however, that
the Commission had adequately responded to its concerns regarding cost-misallocation by
strengthening its cost accounting rules and introducing a system of "price cap" regulation; the
court indicated its belief that these strengthened safeguards would significantly reduce the BOCs'
incentive and ability to misallocate costs.  The court also upheld the scope of federal
preemption adopted in the BOC Safeguards Order. 

     16.  In response to California III, the Bureau issued the Interim Waiver Order, which
reinstated the requirement that BOCs must file CEI plans, and obtain Commission approval of
those plans, to continue to provide specific enhanced services on an integrated basis.  Also in
response, the Commission issued the Computer III Further Remand Notice, which sought
comment on the California III court's remand question regarding the sufficiency of ONA
unbundling as a condition of lifting structural separation, and on the general issue of whether
relying on nonstructural safeguards serves the public interest.

               B.   Overview of the 1996 Act

     17.  Since the California III remand and the Commission's release of the Computer III
Further Remand Notice, the 1996 Act became law and the Commission has conducted a number
of proceedings to implement its provisions.  These developments give us a fresh perspective
from which to evaluate the Commission's current regulatory framework for the provision of
information services.  In this section, we describe some of the major provisions of the 1996 Act,
and in later sections we examine how those provisions may affect our current rules.  

                         1.   Opening the Local Exchange Market

     18.  Various provisions of the 1996 Act are intended to open local exchange markets
to competition.  Section 251(c) of the Act requires, among other things, incumbent LECs,
including the BOCs and GTE, to provide to requesting telecommunications carriers
interconnection and access to unbundled network elements at rates, terms, and conditions that are
just, reasonable, and nondiscriminatory, and to offer telecommunications services for resale. 
Section 253(a) bars state and local governments from imposing certain legal requirements that
prohibit or have the effect of prohibiting the ability of any entity to provide any
telecommunications service, and section 253(d) authorizes the Commission to preempt such
legal requirements to the extent necessary to correct inconsistency with the Act.  As a result,
telecommunications carriers may now enter the local exchange market, and compete with the
incumbent LEC, through access to unbundled network elements, resale, or through construction
of network facilities.  

     19.  In implementing section 251 of the Act, the Commission prescribed certain
minimum points of interconnection necessary to permit competing carriers to choose the most
efficient points at which to interconnect with the incumbent LEC's network.  The Commission
also adopted a minimum list of unbundled network elements (UNEs) that incumbent LECs must
make available to new entrants, upon request.  In Parts III and IV below, we discuss and seek
comment on the potential impact of these unbundling requirements in more detail, both with
respect to the issue in California III regarding the Commission's justification of ONA
unbundling as a condition of lifting structural separation, as well as our overall reexamination of
the Commission's current nonstructural safeguards framework.  

                         2.   BOC Provision of Information Services

     20.  The 1996 Act conditions the BOCs' entry into the market for many in-region
interLATA services, among other things, on their compliance with the separate affiliate,
accounting, and nondiscrimination requirements set forth in section 272.  In the Non-
Accounting Safeguards Order, we noted that these safeguards are designed to prohibit
anticompetitive discrimination and improper cost allocation while still permitting the BOCs to
enter markets for certain interLATA telecommunications and information services, in the
absence of full competition in the local exchange marketplace.  We also concluded in the Non-
Accounting Safeguards Order that the Commission's Computer II, Computer III, and ONA
requirements are consistent with section 272 of the Act, and continue to govern the BOCs'
provision of intraLATA information services, since section 272 only addresses BOC provision of
interLATA services.

     21.  Sections 260, 274, and 275 of the Act set forth specific requirements governing
the provision of telemessaging, electronic publishing, and alarm monitoring services,
respectively, by the BOCs and, in certain cases, by incumbent LECs.  Section 260 delineates the
conditions under which incumbent LECs, including the BOCs, may offer telemessaging services. 
We affirmed our conclusion in the Non-Accounting Safeguards Order that, since telemessaging
service is an "information service," BOCs that offer interLATA telemessaging services are
subject to the separation requirements of section 272.  We further concluded that the Computer
III/ONA requirements are consistent with the requirements of section 260(a)(2), and, therefore,
BOCs may offer intraLATA telemessaging services on an integrated basis subject to both
Computer III/ONA and the requirements in section 260.  

     22.  Section 274 permits the BOCs to provide electronic publishing services, whether
interLATA or intraLATA, only through a "separated affiliate" or an "electronic publishing joint
venture" that meets certain separation, nondiscrimination, and joint marketing requirements in
that section.  The Commission found that there was no inconsistency between the
nondiscrimination requirements of Computer III/ONA and section 274(d).  We therefore found
that the Computer III/ONA requirements continue to govern the BOCs' provision of intraLATA
electronic publishing.  We also noted that the nondiscrimination requirements of section 274(d)
apply to the BOCs' provision of both intraLATA and interLATA electronic publishing.     

     23.  Section 275 of the Act prohibits the BOCs from providing alarm monitoring
services until February 8, 2001, although BOCs that were providing alarm monitoring services as
of November 30, 1995 are grandfathered.  Section 275 of the Act does not impose any separation
requirements on the provision of alarm monitoring services.  We concluded in the Alarm
Monitoring Order that the Computer III/ONA requirements are consistent with the requirements
of section 275(b)(1), and therefore continue to govern the BOCs' provision of alarm monitoring
service.  We discuss the potential impact of the Act's new requirements for BOC provision of
certain information services on our cost-benefit analysis of structural versus nonstructural
safeguards in more detail in Part IV.B below.

                   III.  CALIFORNIA III REMAND

               A.   Background

     24.  As noted above, in California III, the Ninth Circuit reviewed the BOC
Safeguards Order, in which the Commission reaffirmed its earlier determination to remove
structural separation requirements imposed on a BOC's provision of enhanced services, based on
a BOC's compliance with ONA requirements and other nonstructural safeguards.  The court
found that, in the BOC Safeguards Order, and in the orders implementing ONA, the Commission
had "changed its requirements for, or definition of, ONA so that ONA no longer contemplates
fundamental unbundling."  Because, in the Ninth Circuit's view, the Commission had not
adequately explained why this perceived shift did not undermine its decision to rely on the ONA
safeguards to grant full structural relief, the court remanded the proceeding to the Commission. 

     25.  In the Computer III Phase I Order, the Commission declined to adopt any specific
network architecture proposals or specific unbundling requirements, but instead set forth general
standards for ONA.  BOCs were required to file initial ONA plans presenting a set of
"unbundled basic service functions that could be commonly used in the provision of enhanced
services to the extent technologically feasible."  The Commission stated that, by adopting
general requirements rather than mandating a particular architecture for implementing ONA, it
wished to encourage development of efficient interconnection arrangements.  The Commission
also noted that inefficiencies might result from "unnecessarily unbundled or splintered
services."

     26.  The Computer III Phase I Order required the BOCs to meet a defined set of
unbundling criteria in order for structural separation to be lifted.  In the BOC ONA Order, the
Commission generally approved the "common ONA model" proposed by the BOCs.  The
common ONA model was based on the existing architecture of the BOC local exchange
networks, and consisted of unbundled services categorized as basic service arrangements
(BSAs), basic service elements (BSEs), complementary network services (CNSs), and
ancillary network services (ANSs).

     27.  In the BOC ONA proceeding, certain commenters criticized the common ONA
model.  The commenters argued that the BOCs had avoided the Computer III Phase I Order
unbundling requirements by failing to "disaggregate communications facilities and services on an
element-by-element basis."  They urged the Commission to adopt a more "fundamental"
concept of unbundling in the ONA context, by requiring the BOCs to unbundle facilities such as
loops, as well as switching functions, inter-office transmission, and signalling.  Specifically,
they claimed that BSAs could be further unbundled; e.g., trunks could be unbundled from the
circuit-switched, trunk-side BSA, so that ESPs could connect their own trunks to BOC
switches.  

     28.  In the BOC ONA Order, the Commission rejected arguments that ONA, as set
forth in the Computer III Phase I Order, required unbundling more "fundamental" than that set
forth in the "common ONA model" proposed by the BOCs.  The Commission indicated that the
Computer III Phase I Order anticipated that the BOCs would unbundle network services, not
facilities, and determined that the ONA services developed by the BOCs under the common
ONA model were consistent with the examples of service unbundling set forth in the Computer
III Phase I Order.  The Ninth Circuit, however, agreed with the view that the Commission's
approval of the BOC ONA plans, and subsequent lifting of structural separation, was a retreat
from a "requirement" of "fundamental unbundling."  

               B.   Subsequent Events May Have Alleviated the Ninth Circuit's California III
          Concerns

     29.  In this section, we seek comment on whether the enactment and implementation
of the 1996 Act, as well as other developments, should alleviate the Ninth Circuit's underlying
concern about the level of unbundling mandated by ONA.  Section 251 of the Act requires
incumbent LECs, including the BOCs and GTE, to provide to requesting telecommunications
carriers interconnection and access to unbundled network elements at rates, terms, and
conditions that are just, reasonable, and nondiscriminatory, and to offer telecommunications
services for resale.  Section 251 also requires incumbent LECs to provide for physical
collocation at the LEC's premises of equipment necessary for interconnection or access to
unbundled network elements, under certain conditions.  

     30.  In its regulations implementing these statutory provisions, the Commission
identified a minimum list of network elements that incumbent LECs are required to unbundle,
including local loops, network interface devices (NIDs), local and tandem switching capabilities,
interoffice transmission facilities (often referred to as trunks), signalling networks and call-
related databases, operations support systems (OSS) facilities, and operator services and
directory assistance.  Additional unbundling requirements may be specified during voluntary
negotiations between carriers, by state commissions during arbitration proceedings, or by the
Commission as long as such requirements are consistent with the 1996 Act and the Commission's
regulations.  We note that the 1996 Act creates particular incentives for the BOCs to unbundle
and make available the elements of their local exchange networks.  For example, section 271
provides that a BOC may gain entry into the interLATA market in a particular state by
demonstrating, inter alia, that it has entered into access and interconnection agreements with
competing telephone exchange service providers that satisfy the "competitive checklist" set forth
in section 271(c)(2)(B).

     31.  In our view, the unbundling requirements imposed by section 251 and our
implementing regulations (hereinafter referred to as "section 251 unbundling") are essentially
equivalent to the "fundamental unbundling" requirements proposed by certain commenters, and
rejected by the Commission as premature, in the BOC ONA Order.  These commenters asked the
Commission to require the BOCs to unbundle network elements such as loops, switching
functions, inter-office transmission, and signalling.  As noted above, section 251(c)(3) and the
Commission's implementing regulations require those elements, and others, to be unbundled by
the BOCs, and by other incumbent LECs that are subject to the requirements of section 251(c). 
In addition, the type and level of unbundling under section 251 is different and more extensive
than that required under ONA.  This may be because one of Congress's primary goals in
enacting section 251 -- to bring competition to the largely monopolistic local exchange market --
is more far-reaching than the Commission's goal for ONA, which has been to preserve
competition and promote network efficiency in the developing, but highly competitive,
information services market.  

     32.  We recognize that, according to the terms of section 251, only "requesting
telecommunications carriers" are directly accorded rights to interconnect and to obtain access to
unbundled network elements.  In that regard, the section 251 unbundling requirements do not
provide access and interconnection rights to the identical class of entities as does the ONA
regime, since these rights do not extend to entities that provide solely information services ("pure
ISPs").  We also recognize that the development of competition in the local exchange market has
not occurred as rapidly as some expected since the enactment of the 1996 Act.

     33.  We believe, however, that section 251 is intended to bring about competition in
the local exchange market that, ultimately, will result in increased variety in service offerings and
lower service prices, to the benefit of all end-users, including ISPs.  Moreover, because local
telecommunications services are important inputs to the information services ISPs provide, ISPs
are uniquely positioned to benefit from an increasingly competitive local exchange market. 
There is evidence, for example, that carriers that have direct rights under section 251 will
compete with the incumbent LECs to provide pure ISPs with the basic network services that ISPs
need to create their own information service offerings, either by obtaining unbundled network
elements for the provision of telecommunications services or through the resale of such
services.  As a result, incumbent LECs have an incentive to provide an increased variety of
telecommunications services to pure ISPs at lower prices in response to the market presence of
such competitors.  Pure ISPs also could enter into partnering or teaming arrangements with
carriers that have direct rights under section 251.  In addition, ISPs can obtain certification as
telecommunications service providers in order to receive direct benefits under section 251.  We
also note that many ISPs that currently provide both telecommunications services and
information services will have the benefit of both section 251 unbundling as well as ONA.

     34.  For all these reasons, the fact that section 251's access and interconnection rights
apply by their terms only to a "requesting telecommunications carrier" does not, in our view,
change our conviction that the 1996 Act, as well as other factors, should alleviate the court's
underlying concern in California III that the level of unbundling required under ONA does not
provide sufficient protection against access discrimination.  We seek comment on this analysis. 
In light of several recent court decisions bearing on these issues, we also ask commenters to
address how the opinions of the Eighth Circuit Court of Appeals, including the decision
regarding the recombination of unbundled network elements, as well as the decision of the
United States District Court for the Northern District of Texas concerning the constitutionality of
sections 271 through 275 of the Act, affect our analysis. 

     35.  In addition to the changes engendered by the 1996 Act, there have been other
regulatory and market-based developments that, we believe, also should alleviate the court's
underlying concern about whether the level of unbundling mandated by ONA provides sufficient
protection against access discrimination.  For example, the Commission's Expanded
Interconnection proceeding requires Class A LECs, including the BOCs and GTE, to allow
all interested parties to provide competitive interstate special access, transport, and tandem
switched transport by interconnecting their transmission facilities with the LECs' networks. 
Competing ISPs that utilize transmission facilities thus may provide certain transport functions
as part of their enhanced services independent of the Computer III framework.  These additional
interconnection requirements, together with section 251 unbundling and the Commission's
current ONA requirements, further help to protect ISPs against access discrimination by the
BOCs.  We seek comment on this analysis.    

     36.  In addition, the level of competition within the information services market,
which the Commission termed "truly competitive" as early as 1980, has continued to increase
markedly as new competitive ISPs have entered the market.  The phenomenal growth of the
Internet over the past several years illustrates how robustly competitive one sector of the
information services market has become.  Recent surveys suggest that there are some 3,000
Internet access providers in the United States; these providers range from small start-up
operations, to large providers such as IBM and AT&T, to consumer online services such as
America Online.  We believe that other sectors of the information services market have also
continued to grow, as we observed in the Computer III Further Remand Notice.  The presence
of well-established participants in the information services market, such as EDS, MCI, AT&T,
Viacom, Times-Mirror, General Electric, and IBM, may make it more difficult for BOCs to
engage in access discrimination.  For example, the California I court indicated that "the
emergence of powerful competitors such as IBM, which have the resources and expertise to
monitor the quality of access to the network, reduces the BOCs' ability to discriminate in
providing access to their competitors."  We seek comment on whether the sustained growth of
competition within the information services market, including the continued participation of
large information service competitors, serves to diminish further the threat of access
discrimination and, consequently, the court's concern about whether the level of unbundling
mandated by ONA is sufficient.

                  IV.  EFFECT OF THE 1996 ACT 

     37.  As detailed in the background section, the Commission issued the Computer III
Phase I Order more than ten years ago, shortly after divestiture, and before the BOCs had
obtained authorization from the MFJ court to begin to provide information services.  Similarly,
the implementation of ONA primarily took place between 1988 and 1992.  Our objective is now,
as it was then, to promote efficiency and increased service offerings while controlling
anticompetitive behavior by the BOCs.  We therefore reevaluate below the continuing need for
these safeguards, in light of the 1996 Act and the significant technological and market changes
that have taken place since the Computer III nonstructural safeguards were first proposed.  This
reevaluation is also part of the Commission's 1998 biennial review of regulations as required by
the 1996 Act.    

               A.   Basic/Enhanced Distinction

     38.  In the Computer II proceeding, the Commission adopted a regulatory scheme that
distinguished between the common carrier offering of basic transmission services and the
offering of enhanced services.  The Commission defined a "basic transmission service" as the
common carrier offering of "pure transmission capability" for the movement of information
"over a communications path that is virtually transparent in terms of its interaction with
customer-supplied information."  The Commission further stated that a basic transmission
service should be limited to the offering of transmission capacity between two or more points
suitable for a user's transmission needs.  The common carrier offering of basic services is
regulated under Title II of the Communications Act.  In contrast, the Commission defined
enhanced services as:

          services, offered over common carrier transmission facilities used in interstate
     communications, which employ computer processing applications that act on the format,
     content, code, protocol or similar aspects of the subscriber's transmitted information;
     provide the subscriber additional, different, or restructured information; or involve
     subscriber interaction with stored information.  

Enhanced services are not regulated under Title II of the Communications Act. 

     39.  The 1996 Act does not utilize the Commission's basic/enhanced terminology, but
instead refers to "telecommunications services" and "information services."  The 1996 Act
defines "telecommunications" as:

          the transmission, between or among points specified by the user, of information of the
     user's choosing, without change in the form or content of the information as sent and
     received.  

"Telecommunications service" is defined as:

          the offering of telecommunications for a fee directly to the public, or to such classes of
     users as to be effectively available directly to the public, regardless of facilities used.  

The 1996 Act defines "information service" as:

          the offering of a capability for generating, acquiring, storing, transforming, processing,
     retrieving, utilizing, or making available information via telecommunications, and
     includes electronic publishing, but does not include any use of any such capability for the
     management, control, or operation of a telecommunications system or the management of
     a telecommunications service.  

     40.  We concluded in the Non-Accounting Safeguards Order that, although the text of
the Commission's definition of "enhanced services" differs from the 1996 Act's definition of
"information services," the two terms should be interpreted to extend to the same functions. 
We found no basis to conclude that, by using the term "information services," Congress intended
a significant departure from the Commission's usage of "enhanced services."  We further
explained that interpreting "information services" to include all "enhanced services" provides a
measure of regulatory stability for telecommunications carriers and ISPs by preserving the
definitional scheme under which the Commission exempted certain services from traditional
common carriage regulation.

     41.  Consistent with our conclusion in the Non-Accounting Safeguards Order that
"enhanced services" fall within the statutory definition of "information services," we seek
comment in this Further Notice on whether the Commission's definition of "basic service" and
the 1996 Act's definition of "telecommunications service" should be interpreted to extend to the
same functions, even though the two definitions differ.  We ask parties to address whether
there is any basis to conclude that, by using the term "telecommunications services," Congress
intended a significant departure from the Commission's usage of "basic services."  As noted in
the Non-Accounting Safeguards Order, we believe the public interest is served by maintaining
the regulatory stability of the definitional scheme under which the Commission exempted certain
services from traditional common carriage regulation.  To the extent parties believe that
"telecommunications services" differ from "basic services" in any regard, they should identify
the distinctions that should be drawn between the two categories, describe any overlap between
the two categories, and delineate the particular services that would come within one category and
not the other.  

     42.  In light of our conclusion in the Non-Accounting Safeguards Order that the
statutory term "information services" includes all services the Commission has previously
considered to be "enhanced," and our decision in this proceeding to seek comment on whether
the statutory term "telecommunications services" includes all services the Commission has
previously considered to be "basic services," we seek comment on whether the Commission
hereafter should conform its terminology to that used in the 1996 Act.  We ask commenters to
discuss whether the Commission's rules, which previously distinguished between basic and
enhanced services, should now distinguish between telecommunications and information
services.  For example, we ask whether the Commission's Computer II decision should now be
interpreted to require facilities-based common carriers that provide information services to
unbundle their telecommunications services and offer such services to other ISPs under the same
tariffed terms and conditions under which they provide such services to their own information
services operations.

               B.   Cost-Benefit Analysis of Structural Safeguards

                         1.   Background 

     43.  The Commission's goals in addressing BOC provision of information services
have been both to promote innovation in the provision of information services and to prevent
access discrimination and improper cost allocation.  Because the BOCs control the local
exchange network and the provision of basic services, in the absence of regulatory safeguards
they may have the incentive and ability to engage in anticompetitive behavior against ISPs that
must obtain basic network services from the BOCs in order to provide their information service
offerings.  For example, BOCs may discriminate against competing ISPs by denying them access
to services and facilities or by providing ISPs with access to services and facilities that is inferior
to that provided to the BOCs' own information services operations.  BOCs also may allocate
costs improperly by shifting costs they incur in providing information services, which are not
regulated under Title II of the Act, to their basic services.

     44.  Under rate-of-return regulation, which allows carriers to set rates based on the
cost of providing a service, the BOCs may have had an incentive to shift costs incurred in
providing information services to their basic service customers.  In 1990, the Commission
replaced rate-of-return regulation with price cap regulation of the BOCs and certain other LECs
to discourage improper cost allocation, among other things.  Recently, the Commission revised
its price caps regime to eliminate the sharing mechanism, which required price cap carriers to
"share" with their access customers half or all their earnings above certain levels in the form of
lower rates.  This revision substantially reduces the BOCs' incentive to misallocate costs.  

     45.  Since the adoption of Computer I in 1971, the Commission has employed various
regulatory tools, including structural separation, to prevent access discrimination and cost
misallocation, first by AT&T and then, after divestiture, by the BOCs, in providing information
services.  In Computer I, we imposed a "maximum separation policy" on the provision of "data
processing" services by common carriers other than AT&T and its Bell System subsidiaries. 
We continued to impose structural separation on the provision of enhanced services by AT&T
and its Bell System subsidiaries in Computer II, until we replaced structural separation with a
system of nonstructural safeguards in 1986, in Computer III.  

     46.  The Commission has long recognized both the benefits as well as the costs of
structural separation as a regulatory tool.  The Commission noted in Computer II that a
structural separation requirement reduces firms' ability to engage in anticompetitive activity
without detection because the extent of joint and common costs between affiliated firms is
reduced, transactions must take place across corporate boundaries, and the rates, terms, and
conditions on which services will be available to all potential purchasers must be made publicly
available.  Structural separation thus is useful as an enforcement tool and as a deterrent,
because firms are less likely to engage in anticompetitive activity the more easily it can be
detected.  As for costs, the Commission recognized that structural separation increases firms'
transaction and production costs, but did not agree with arguments presented at the time that
structural separation reduces innovation. 

     47.  The Commission similarly weighed the benefits and costs of structural separation
in Computer III when, with the passage of time and the accumulation of experience, it replaced
the Computer II structural separation requirements with a system of nonstructural safeguards. 
The Commission concluded in Computer III that the benefits of structural separation are not
significantly greater than the benefits of nonstructural safeguards in preventing anticompetitive
practices by the BOCs, and that structural separation imposes greater costs on the public and the
BOCs than nonstructural safeguards.  The Commission also found that the benefits of
structural separation had decreased since the adoption of the BOC Separation Order, due to
technological and market developments that diminished the BOCs' ability to misallocate costs
and engage in access discrimination.  Further, the Commission found, based on its experience,
that the introduction of new information services by the BOCs was slowed or prevented
altogether by structural separation, thus denying the public the benefits of innovation.  The
Commission also found that structural separation imposed direct costs on the BOCs resulting
from duplication of facilities and personnel, limitations on joint marketing, and deprivation of
economies of scope.  The Ninth Circuit upheld the Commission's analysis of the costs of
structural separation in California I and California III.
                         2.   Effect of the 1996 Act and Other Factors 

     48.  In the Computer III Further Remand Notice, the Commission sought comment on
how various factors, including reports of anticompetitive behavior by the BOCs and the increase
in the number of BOC information service offerings since the elimination of structural
separation, affected the Commission's cost-benefit analysis of structural separation in Computer
III.  The 1996 Act was enacted after the Commission issued the Computer III Further Remand
Notice, and raises additional issues that may affect this cost-benefit analysis.  As discussed in
more detail below, we tentatively conclude that the Act's overall pro-competitive, de-regulatory
framework, as well as our public interest analysis, support the continued application of the
Commission's nonstructural safeguards regime to the provision by the BOCs of intraLATA
information services.  We also tentatively conclude that allowing the BOCs to offer
intraLATA information services subject to nonstructural safeguards serves as an appropriate
balance of the need to provide incentives to the BOCs for the continued development of
innovative new technologies and information services that will benefit the public with the need
to protect competing ISPs against the potential for anticompetitive behavior by the BOCs.  We
thus propose to allow the BOCs to continue to provide intraLATA information services on an
integrated basis, subject to the Commission's Computer III and ONA requirements as modified
or amended by this proceeding, or on a structurally separate basis.  If a BOC chooses to provide
intraLATA information services on a structurally separate basis, we seek comment on whether
we should permit the BOC to choose between a Computer II and an Act-mandated affiliate under
section 272 or section 274, or whether we should mandate one of these types of affiliates.   

                                   a.   Section 251 and Local Competition

     49.  Competition in the local exchange and exchange access markets is the best
safeguard against anticompetitive behavior.  BOCs are unable to engage successfully in
discrimination and cost misallocation to the extent that competing ISPs have alternate sources of
access to basic services.  Stated differently, when other telecommunications carriers, such as
interexchange carriers (IXCs) or cable service providers, compete with the BOCs in providing
basic services to ISPs, the BOCs are less able to engage successfully in discrimination and cost
misallocation because they risk losing business from their ISP customers for basic services to
these competing telecommunications carriers.  

     50.  As discussed above, the 1996 Act affirmatively promotes local competition. 
Sections 251 and 253, among other sections, are intended to eliminate entry barriers and foster
competition in the local exchange and exchange access markets.  Indeed, the market for local
exchange and exchange access services has begun to respond to some degree to the pro-
competitive mandates of the 1996 Act.  Some ISPs, for example, currently are obtaining basic
services that underlie their information services from competing providers of
telecommunications services that have entered into interconnection agreements with the BOCs
pursuant to section 251.  
    
     51.  We recognize that the BOCs remain the dominant providers of local exchange and
exchange access services in their in-region states, and thus continue to have the ability and
incentive to engage in anticompetitive behavior against competing ISPs.  On the other hand, the
movement toward local exchange and exchange access competition should, over time, decrease
and eventually eliminate the need for regulation of the BOCs to ensure that they do not engage in
access discrimination or cost misallocation of their basic service offerings.  The Commission
has previously concluded that the nonstructural safeguards established in Computer III could
combat such anticompetitive behavior as effectively as structural separation requirements, but in
a less costly way.  We thus tentatively conclude that the de-regulatory, pro-competitive
provisions of the 1996 Act, and the framework the 1996 Act set up for promoting local
competition, are consistent with, and provide additional support for, the continued application of
the Commission's current nonstructural safeguards regime for BOC provision of intraLATA
information services.  We seek comment on this tentative conclusion.

                                   b.   Structural Separation and the 1996 Act

     52.  In the Computer III Further Remand Notice, we sought comment on the issue of
whether some form of structural separation should be reimposed for the provision of information
services by the BOCs, and we discussed briefly the costs and benefits that the Commission
previously identified in granting structural relief to the BOCs.  In this section, we seek comment
on the extent to which the Act-mandated separation requirements may affect this cost-benefit
analysis.  
 
     53.  As noted above, the 1996 Act permits the BOCs to enter markets from which they
were previously restricted, allowing the BOCs to develop and market innovative new
technologies and information services.  In doing so, Congress in certain cases imposed structural
separation requirements on the BOCs.  Section 272, for example, allows the BOCs to provide
certain interLATA information services as well as in-region, interLATA telecommunications
services, and to engage in manufacturing activities, only through a structurally separate affiliate. 
Section 274 imposes structural separation requirements on BOC provision of intraLATA and
interLATA electronic publishing services.  Congress did not, however, mandate separation
requirements for BOC provision of other information services.

     54.  In the Non-Accounting Safeguards Order we recognized that section 272 on its
face does not require the BOCs to offer intraLATA information services through a separate
affiliate, and deferred to this proceeding the question of whether the Commission should exercise
its general rulemaking authority to do so.  We find it significant that Congress limited the
separate affiliate requirement in section 272 to BOC provision of most interLATA information
services, interLATA telecommunications services, and manufacturing, and in section 274 to
BOC provision of electronic publishing services.  We therefore tentatively conclude that
Congress' decision to impose structural separation requirements in sections 272 and 274, while
relevant to our cost-benefit analysis, does not in itself warrant a return to structural separation for
BOC provision of intraLATA information services not subject to those sections.  We seek
comment on this tentative conclusion. 

     55.  Congress's decision to mandate structural separation only for certain information
services does not necessarily foreclose the Commission from mandating or allowing structural
separation for other information services.  We recognize that, for example, the statutory separate
affiliate requirements may reduce the cost of returning to a structural separation regime for BOC
provision of intraLATA information services, given that the BOCs already are required to
establish at least one structurally separate affiliate in order to provide the services covered by
sections 272 and 274.  Some BOCs may find it more efficient to provide all of their
information services through a statutorily-mandated affiliate.  In addition, it may be in the public
interest for the Commission to prescribe a uniform set of regulations for BOC provision of both
intraLATA and interLATA information services, by requiring, for example, that BOCs provide
all information services through an affiliate that complies with the statute.  This approach would
eliminate the need to distinguish between intraLATA and interLATA information services for
purposes of regulation and, consequently, lower compliance and enforcement costs.  

     56.  On the other hand, mandatory structural separation would entail increased
transaction and production costs for the BOCs, as discussed above.  In addition, in the
Computer III Further Remand Notice we noted that all of the BOCs currently are offering some
information services on an integrated basis pursuant to CEI plans approved by the
Commission.  Thus, our cost-benefit analysis should take into account the costs today of
returning to structural separation.  These would include the personnel, operational, and other
changes the BOCs would have to undergo in order to reinstate a regime of structural separation,
and the service disruptions, lower service quality, reduced innovation, and higher user rates that
may result.  We must also consider the effect on the public of the potential delay in the
development of new technologies and information services by the BOCs that may result.  In
addition, once the separation requirements under sections 272 and 274 sunset, structural
separation for intraLATA information services based on the existence of the statutorily-mandated
affiliates would have to be reexamined.  

     57.  We also recognize the benefits of a flexible, regulatory framework that would
allow the BOCs, consistent with the public interest, to structure their operations as they see fit in
order to maximize efficiencies and thus provide greater benefits to consumers.  We note that,
under our current rules, a BOC may provide an intraLATA information service either on an
integrated basis pursuant to an approved CEI plan or on a structurally separated basis pursuant to
the Commission's Computer II rules.  SBC has argued that the BOCs continue to need this type
of flexibility to provide intraLATA information services either on an integrated basis, subject to
appropriate safeguards, or through a separate affiliate, because the most appropriate form of
regulation varies service-by-service, depending on the relative significance of cost considerations
and other factors.  Although the Commission may need to devote more resources to administer
and enforce multiple regulatory regimes, this approach would allow the BOCs to structure their
intraLATA information service offerings more in accordance with their business needs.  In
addition, such an approach may minimize the risk of service disruptions, since the BOCs would
not have to change the manner in which they are providing their current intraLATA information
service offerings.  

     58.  In addition to the factors cited by the Commission in the Computer III Phase I
Order, more recent events may affect the analysis of the relative costs and benefits of
structural and nonstructural safeguards.  In particular, we earlier discussed how our Price Caps
Fourth Report and Order eliminates the sharing mechanism from the price caps regime, thereby
reducing the BOCs' incentive to misallocate costs.  We also described previously how the local
competition provisions of the 1996 Act provide for alternate sources of access to basic services,
thereby diminishing the BOCs' ability to engage in anticompetitive behavior against competing
ISPs.      

     59.  In light of this analysis, we continue to believe it is preferable, as a matter of
public interest, to continue with the Commission's nonstructural safeguards regime rather than to
reimpose structural separation, notwithstanding the affiliate requirements of sections 272 and 274
of the Act.  We thus tentatively conclude that the BOCs should continue to be able to choose
whether to provide intraLATA information services either on an integrated basis, subject to the
Commission's Computer III and ONA requirements as modified or amended by this proceeding,
or pursuant to a separate affiliate.  We seek comment on this tentative conclusion.  In addition, if
a BOC chooses to provide intraLATA information services through a separate affiliate, we seek
comment on whether we should permit the BOC to choose between a Computer II and an Act-
mandated affiliate, or whether we should mandate one of these types of affiliates.  Finally, we
seek comment on how the recent SBC v. FCC decision in the United States District Court for the
Northern District of Texas affects this analysis.   

               C.   Comparably Efficient Interconnection (CEI) Plans

                         1.   Proposed Elimination of Current Requirements 

     60.  In the Interim Waiver Order adopted in response to the California III decision, the
Bureau allowed the BOCs to continue to provide existing enhanced services on an integrated
basis, provided that they filed CEI plans for those services.   In addition, the Bureau required
the BOCs to file CEI plans for new enhanced services they propose to offer, and to obtain the
Bureau's approval for these plans before beginning to provide service.  We concluded that the
partial vacation of the BOC Safeguards Order in California III reinstated the service-specific
CEI plan regime, augmented by implementation of ONA, until the Commission concluded its
remand proceedings.  BOCs were also required to comply with the requirements established in
their approved ONA plans, because we had previously determined that ONA requirements are
independent of the removal of structural separation requirements.

     61.  In this Further Notice, we tentatively conclude that we should eliminate the
requirement that BOCs file CEI plans and obtain Bureau approval for those plans prior to
providing new information services.  We note that CEI plans were always intended to be an
interim measure, designed to bridge the gap between the Commission's decision to lift structural
separation in the Computer III Phase I Order and the implementation of ONA.  While CEI plans
have been effective as interim safeguards, we tentatively conclude that they are not necessary
to protect against access discrimination once the BOCs are providing information services
pursuant to approved ONA plans, which they have been for several years.  ONA provides ISPs
an even greater level of protection against access discrimination than CEI.  Under ONA, not only
must the BOCs offer network services to competing ISPs in compliance with the nine CEI "equal
access" parameters, but the BOCs must also unbundle and tariff key network service elements
beyond those they use to provide their own enhanced services offerings.  BOCs are also
subject to ONA amendment requirements that constitute an additional safeguard against access
discrimination following the lifting of structural separation.
 
     62.  Further, under the 1996 Act, the BOCs are now subject to additional statutory
requirements that will help prevent access discrimination, including the section 251 unbundling
requirements and the network information disclosure requirements of section 251(c)(5).  These
statutory requirements all serve as further protections against access discrimination, both by
requiring the BOCs to open the local exchange market to competition, and by ensuring that the
BOCs publicly disclose on a timely basis information about changes in their basic network
services.  

     63.  Given the protections afforded by ONA and the 1996 Act, we believe that the
substantial administrative costs associated with BOC preparation, and agency review, of CEI
plans outweigh their utility as an additional safeguard against access discrimination.  Moreover,
the time and effort involved in the preparation and review of the CEI plans may delay the
introduction of new information services by the BOCs, without commensurate regulatory
benefits.  Such a result is contrary to one of the Commission's original purposes in adopting a
nonstructural safeguards regime, which was to promote and speed introduction of new
information services, benefiting the public by giving them access to innovative new
technologies.

     64.  For the reasons outlined above, we tentatively conclude that we should eliminate
the requirement that BOCs file CEI plans and obtain Bureau approval for those plans prior to
providing new information services.  We believe the significant burden imposed by these
requirements on the BOCs and the Commission outweighs their possible incremental benefit as
additional safeguards against access discrimination.  In this light, we tentatively conclude that
lifting the CEI plan requirement will further our statutory obligation to review and eliminate
regulations that are "no longer necessary in the public interest."  We seek comment on this
tentative conclusion and our supporting analysis.  Parties who disagree with this tentative
conclusion should address whether there are more streamlined procedures that could be adopted
as an alternative to the current CEI filing requirements.  

     65.    We recognize that, as part of our effort to reexamine our nonstructural
safeguards regime, we seek comment in this Further Notice on whether we should modify or
amend certain ONA requirements.  Because we base our tentative conclusion that we should
eliminate the CEI-plan filing requirement in part on the adequacy of ONA, we ask that parties
comment on how any of the modifications the Commission proposes in Part IV.D., or proposed
by commenters in response to our questions, may affect this tentative conclusion.  We also seek
comment on whether the requirements that the 1996 Act imposes on the BOCs, such as those
relating to section 251 unbundling and network information disclosure, are sufficient in
themselves to provide a basis for eliminating CEI plans.  

                         2.   Treatment of Services Provided Through 272/274 Affiliates

                                   a.   Section 272

     66.  In the Non-Accounting Safeguards Order, we noted that section 272 of the Act
imposes specific separate affiliate and nondiscrimination requirements on BOC provision of
"interLATA information services," but does not address BOC provision of intraLATA
information services.  We concluded that, pending the conclusion of the Computer III Further
Remand proceeding, BOCs may continue to provide intraLATA information services on an
integrated basis, in compliance with the Commission's nonstructural safeguards established in
Computer III and ONA.  

     67.  The Non-Accounting Safeguards Order also raised the related issue of whether a
BOC that provides all information services (both intraLATA and interLATA) through a section
272 separate affiliate satisfies the Commission's Computer II separate subsidiary requirements,
and therefore does not have to file a CEI plan for those services.  We noted that the record in
the Non-Accounting Safeguards Order was insufficient to make this determination, and that we
would examine this issue in the Computer III Further Remand proceeding.  

     68.  If we do not adopt our tentative conclusion in this proceeding to eliminate the CEI
plan filing requirement for the BOCs, we tentatively conclude that the BOCs should not have
to file CEI plans for information services that are offered through section 272 separate affiliates,
notwithstanding that section 272's requirements are not identical to the Commission's Computer
II requirements (all other applicable Computer III and ONA safeguards, however, as amended or
modified by this proceeding, would continue to apply).  We note that, to the extent certain or all
BOCs no longer have to provide interLATA services through a section 272 affiliate as a result of
the SBC v. FCC decision by the United States District Court for the Northern District of Texas,
then this tentative conclusion would not apply.  

     69.  We reach our tentative conclusion for several reasons.  First, we believe that the
concerns underlying the Commission's Computer II requirements regarding access discrimination
and cost misallocation are sufficiently addressed by the accounting and non-accounting
requirements set forth in section 272 and the Commission's orders implementing this section. 
Second, after a BOC receives authority under section 271 to provide interLATA services through
a section 272 affiliate, the BOC in many cases may want to provide a seamless information
service to customers that would combine both the inter- and intraLATA components of such
service.  For the Commission to require that the BOC also receive approval under a CEI plan for
the intraLATA component of such service is, in our view, unnecessary, and likely to delay the
provision of integrated services that would be beneficial to consumers.  We seek comment on
this tentative conclusion and supporting analysis.         

     70.  We also noted in the Non-Accounting Safeguards Order that other issues raised
regarding the interplay between the 1996 Act and the Commission's Computer III/ONA regime
would be addressed in the Computer III Further Remand proceeding.  These included whether: 
(1) the Commission should harmonize its regulatory treatment of intraLATA information
services provided by the BOCs with the section 272 requirements imposed by Congress on
interLATA information services; (2) the 1996 Act's CPNI, network disclosure,
nondiscrimination, and accounting provisions supersede various of the Commission's Computer
III nonstructural safeguards; and (3) section 251's interconnection and unbundling requirements
render the Commission's Computer III and ONA requirements unnecessary.  These issues are
either being addressed in this Further Notice or have been covered in other proceedings. 

                                   b.   Section 274

     71.  In the Telemessaging and Electronic Publishing Order, we concluded that the
Commission's Computer II, Computer III, and ONA requirements continue to govern the BOCs'
provision of intraLATA electronic publishing services.  We found, however, that the record
was insufficient to determine whether BOC provision of electronic publishing through a section
274 affiliate satisfied all the relevant requirements of Computer II, such that the BOC would not
have to file a CEI plan for that service.  We noted that we would consider that issue, as well as
other issues raised regarding the revision or elimination of the Computer III/ONA requirements,
in the Computer III Further Remand proceeding.  

     72.  If we do not adopt our tentative conclusion in this proceeding to eliminate the CEI
plan filing requirement for the BOCs, we tentatively conclude, as we do above for information
services that are provided through a section 272 affiliate, that BOCs should not have to file CEI
plans for electronic publishing services or other information services provided through their
section 274 affiliate (as noted above, however, all other applicable Computer III and ONA
safeguards, as amended or modified by this proceeding, would continue to apply).  As noted
above, to the extent certain or all BOCs no longer are subject to section 274 for their provision of
electronic publishing as a result of the SBC v. FCC decision by the United States District Court
for the Northern District of Texas, then this tentative conclusion would not apply.  

     73.  Again, we reach our tentative conclusion for several reasons.  First, we believe the
section 274 separation and nondiscrimination requirements, and the Commission's rules
implementing those requirements, are sufficient to address concerns regarding access
discrimination and misallocation of costs in general.  Second, given that Congress set forth
detailed rules in section 274 for the specific provision of electronic publishing services, we do
not believe the Commission should continue to require the BOCs to file, and the Commission to
approve, CEI plans before the BOCs may provide such services.  We seek comment on this
tentative conclusion and supporting analysis.  

                         3.   Treatment of Telemessaging and Alarm Monitoring Services

     74.  In the Telemessaging and Electronic Publishing Order and the Alarm Monitoring
Order, respectively, we concluded that the Commission's Computer II, Computer III, and ONA
requirements continue to govern the BOCs' provision of intraLATA telemessaging services
and alarm monitoring services.  Because neither section 260 nor section 275 imposes
separation requirements for the provision of intraLATA telemessaging services or alarm
monitoring services, respectively, BOCs may provide those services, subject both to other
restrictions in those sections, as applicable, as well as the Commission's current nonstructural
safeguards regime, as modified by the proposals that we may adopt in this proceeding.  

                         4.   Related Issues

     75.  If we adopt our tentative conclusion to eliminate the CEI plan filing requirement
for the BOCs, we seek comment on whether we should dismiss all CEI matters pending at that
time (including pending CEI plans, pending CEI plan amendments, and requests for CEI
waivers), on the condition that the BOCs must comply with any new or modified rules that may
be established as a result of this Further Notice.  We also seek comment on whether we should
require a BOC with CEI approval to continue to offer service under the CEI requirements.  To
the extent that parties involved in pending CEI matters raise issues other than those directly
related to the CEI requirements (e.g., whether the service for which the BOC is seeking CEI-plan
approval is a true information service, as opposed to a telecommunications service that should be
offered under tariff), we seek comment on how and in what forum those issues should be
addressed.         
 
     76.  We note that section 276 directs the Commission to prescribe a set of
nonstructural safeguards for BOC provision of payphone service, which must include, at a
minimum, the "nonstructural safeguards equal to those adopted in" the Computer III
proceeding.  In implementing section 276, the Commission required the BOCs, among other
things, to file CEI plans describing how they would comply with various nonstructural
safeguards.  The Bureau approved the BOCs' CEI plans to provide payphone service on April
15, 1997.  

     77.  We seek comment on whether the changes that may be made to the Commission's
Computer III and ONA rules as a result of this Further Notice should also apply to the
nonstructural safeguards regime established in the Payphone Order proceeding for BOC
provision of payphone service.  For example, to the extent that we adopt our tentative conclusion
to eliminate the CEI plan filing requirement, should we also relieve the BOCs from the
requirement of filing amendments to their CEI plans for payphone service?  How does this
comport with the statutory requirement in section 276?  We seek comment on these issues.

               D.   ONA and Other Nonstructural Safeguards

                         1.   ONA Unbundling Requirements

                                   a.   Introduction

     78.  The Commission's ONA unbundling requirements serve both to safeguard against
access discrimination and to promote competition and market efficiency in the information
services industry.  As described above, the Commission conditioned the permanent elimination
of the Computer II structural separation requirements imposed on the BOCs upon the
evolutionary implementation of ONA and other nonstructural safeguards.  The ONA
requirements, however, have a significance independent of whether they provide the basis for
lifting structural separation.  In 1990, during the course of the remand proceedings in response to
California I, the Commission required the BOCs to implement ONA regardless of whether ONA
provided the basis for elimination of structural separation.  As discussed below, the Commission
stated that "[a] major goal of ONA is to increase opportunities for ESPs to use the BOCs'
regulated networks in highly efficient ways, enabling ESPs to expand their markets for their
present services and develop new offerings as well, all to the benefit of consumers."  It was for
this reason that the Commission applied the ONA requirements to GTE in 1994.  

     79.  ONA is the overall design of a carrier's basic network services to permit all users
of the basic network, including the information services operations of the carrier and its
competitors, to interconnect to specific basic network functions and interfaces on an unbundled
and "equal access" basis.  The BOCs and GTE through ONA must unbundle key components
of their basic services and make them available under tariff, regardless of whether their
information services operations utilize the unbundled components.  Such unbundling ensures that
competitors of the carrier's information services operations can develop information services that
utilize the carrier's network on an economical and efficient basis. 

                                   b.   ONA Unbundling Requirements

     80.  In the Computer III Phase I Order we declined to adopt any specific network
architecture proposals for ONA and instead specified certain standards that carriers' ONA plans
must meet.  The unbundling standard for the BOCs required that:  (1) the BOCs' enhanced
services operations obtain unbundled network services pursuant to tariffed terms, conditions, and
rates available to all ISPs; (2) BOCs provide an initial set of basic service functions that could be
commonly used in the provision of information services to the extent technologically feasible;
(3) ISPs participate in developing the initial set of network services; (4) BOCs select the set of
network services based on the expected market demand for such elements, their utility as
perceived by information service competitors, and the technical and costing feasibility of such
unbundling; and (5) BOCs comply with CEI requirements in providing basic network services to
affiliated and unaffiliated ISPs.  In the BOC ONA Order that reviewed the initial BOC ONA
plans for compliance with the Commission's requirements, the Commission generally approved
the use of the "common ONA model" that described unbundled services BOCs would provide to
competing ISPs.  Under the common ONA model, ISPs obtain access to various unbundled
ONA services, termed Basic Service Elements (BSEs), through access links described as Basic
Service Arrangements (BSAs).  BSEs are used by ISPs to configure their information services. 
Other ONA elements include Complementary Network Services (CNSs), which are optional
unbundled basic service features (such as stutter dial tone) that an end user may obtain from
carriers in order to obtain access to or receive information services, and Ancillary Network
Services (ANSs), which are non-Title II services, such as billing and collection, that may be
useful to ISPs.  

     81.  The BOCs and GTE are also subject to the ONA amendment requirement.  Under
this requirement, if a subject carrier itself seeks to offer an information service that uses a new
BSE or otherwise uses different configurations of underlying basic services than those included
in its approved ONA plan, the carrier must amend its ONA plan at least ninety days before it
proposes to offer that information service.  The Commission must approve the amendment
before the subject carrier can use the new basic service for its own information services. 

     82.  In addition to the ONA services that BOCs and GTE currently provide, there are
mechanisms to help ISPs obtain the new ONA services they require to provide information
services.  As described below, when an ISP identifies a new network functionality that it wants to
use to provide an information service, it can request the service directly from the BOC or GTE
through a 120-day process specified in our rules, or it can request that the Network
Interconnection Interoperability Forum (NIIF) sponsored by the Alliance for
Telecommunications Industry Solutions (ATIS) consider the technical feasibility of the
service.

     83.  Under the Commission's 120-day request process, an ISP that requests a new
ONA basic service from the BOC or GTE must receive a response within 120 days regarding
whether the BOC or GTE will provide the service.  The BOC or GTE must give specific
reasons if it will not offer the service.  The BOC or GTE's evaluation of the ISP request is to be
based on the ONA selection criteria set forth in the original Phase I Order:  (1) market area
demand; (2) utility to ISPs as perceived by the ISPs themselves; (3) feasibility of offering the
service based on its cost; and (4) technical feasibility of offering the service.  If an ISP objects
to the BOC or GTE's response, it may seek redress from the Commission by filing a petition for
declaratory ruling.  

     84.  Additionally, ISPs can ask the NIIF for technical assistance in developing and
requesting new network services.  Upon request, the NIIF will establish a task force composed
of representatives from different industry sectors to evaluate the technical feasibility of the
service, and through a consensus process, make recommendations on how the service can be
implemented.  ISPs can then take the information to a specific BOC or GTE and request the
service under the 120-day process using the NIIF result to show that the request is technically
feasible. 

     85.  As part of the Commission's 1998 biennial review of regulations, we seek
comment on whether ONA has been and continues to be an effective means of providing ISPs
with access to the BOC/GTE unbundled network services they need to structure efficiently and
innovatively their information service offerings.  To the extent that commenters assert that ONA
is effective or ineffective, we request that they cite to specific instances to support their claims. 

     86.  In addition, we seek comment on whether the "common ONA model" through
which ISPs gain access to BSEs, BSAs, CNSs, and ANSs is adequate to provide ISPs with the
network functionalities they need.  If not, what specific changes to the ONA unbundling
framework should be made?  Some parties have argued that the common ONA model forces
ISPs to purchase unnecessary services or functionalities that are embedded within the BSEs,
BSAs, CNSs, and ANSs.  We seek comment on this argument.  In addressing these issues,
commenters should take note of our separate inquiry below regarding the impact of section 251
and its separate unbundling regime.  

     87.  We further seek comment on whether ISPs make use of the ONA framework to
acquire unbundled network services or whether they use other means to obtain such services in
order to provide their information service offerings.  Commenters that have used means other
than ONA to acquire or provide unbundled network services should identify those means, state
why ONA was not used, and discuss why the alternative approach was more effective and
efficient.  

     88.  In addition, we seek comment on whether the ONA 120-day request process
established to help ISPs obtain new ONA services has been effective.  We seek comment, from
ISPs in particular, regarding whether they have made use of the 120-day request process, and the
results from using that process.  If ISPs have not used the 120-day request process, we request
that they explain why they have not done so.  We further request that parties comment, with
specificity, on what, if anything, we should do to streamline the 120-day request process to make
it more useful.  In the alternative, we seek comment on whether the 120-day request process
should be eliminated, in light of the fact that the issues that must be resolved between the carrier
and the requesting ISP are technical and operational in nature, and may be most appropriately
addressed in an industry forum, such as the NIIF.  We also seek comment on whether the ONA
amendment process has been effective.

     89.  We further seek comment regarding the role of the NIIF in helping ISPs obtain
basic services from the BOCs and GTE.  We seek comment, from ISPs in particular, regarding
whether they have requested assistance from the NIIF in determining the technical feasibility of
offering particular network functionalities as new basic services, and if so, the results obtained. 
If ISPs have not done so, we request that they tell us why not.  We further seek comment on
whether we should continue to request that the NIIF perform the function of facilitating ISP
ONA requests or whether some other forum or industry group would be more appropriate.

     90.  Finally, we seek comment on whether and how the development of new
information services, including, for example, Internet services, should affect our analysis of the
effectiveness of the Commission's current ONA rules for ISPs.  As we noted in the Information
Service and Internet Access NOI, many of the Commission's existing rules have been designed
for traditional circuit-switched voice networks rather than the emerging packet-switched data
networks.  While the Information Service and Internet Access NOI sought comment, in
general, on identifying ways in which the Commission could facilitate the development of high-
bandwidth data networks while preserving efficient incentives for investment and innovation in
the underlying voice network, we seek comment in this Further Notice specifically on whether
and how the Commission should modify the Computer III and ONA rules in light of these
technological developments.

     91.  Specifically, we seek comment on how the Commission's Computer III or ONA
rules may impact the BOCs' incentive to invest in and deploy data network switching
technology.  For example, the Commission's existing ONA rules require the BOCs to unbundle
and separately tariff all basic services.  We have interpreted this rule to require a BOC to
unbundle and separately tariff a basic service used in the provision of an information service
provided by the BOC affiliate, even where the basic service is solely located in, and owned by,
the BOC affiliate, not the BOC.  This situation may arise, for example, when a frame relay
switch is located in, and owned by, the BOC affiliate rather than the BOC.  We seek comment
on the appropriate treatment of these types of services.

                                   c.   Effect of the 1996 Act

                                             (1)  Section 251 Unbundling

     92.  Section 251 of the Act requires incumbent LECs, including the BOCs and GTE,
to provide to requesting telecommunications carriers interconnection and access to unbundled
network elements at rates, terms, and conditions that are just, reasonable, and nondiscriminatory,
and to offer telecommunications services for resale.  The Act defines "telecommunications
carrier" as "any provider of telecommunications services, except that such term does not include
aggregators of telecommunications services (as defined in section 226)."  As we concluded in
the Local Competition Order, the term "telecommunications carrier" does not include ISPs that
do not also provide domestic or international telecommunications.  Thus, as discussed above,
companies that provide both information and telecommunications services are able to request
interconnection, access to unbundled network elements, and resale under section 251, but
companies that only provide information services ("pure ISPs") are not accorded such rights
under section 251.

     93.  Despite this limitation, there are several ways that pure ISPs may be able to obtain
benefits from section 251, as discussed in Part III.B above.  We recognize, however, that
section 251 provides a level of unbundling that pure ISPs do not receive under the Commission's
current ONA framework.  Unbundling under section 251 includes the physical facilities of the
network, together with the features, functions, and capabilities associated with those facilities. 
Section 251 also requires incumbent LECs to provide for the collocation at the LEC's premises of
equipment necessary for interconnection or access to unbundled network elements, under certain
conditions.  Unbundling under ONA, in contrast, emphasizes the unbundling of basic services,
not the substitution of underlying facilities in a carrier's network.  ONA unbundling also does
not mandate interconnection on carriers' premises of facilities owned by others.  These
differences may be due to the different policy goals that the two regimes were designed to
serve.  

     94.  As seen above, section 251 unbundling raises a number of issues relating to the
Commission's ONA framework.  In the Non-Accounting Safeguards Order, for example, some
parties stated that section 251's interconnection and unbundling requirements render the
Commission's Computer III and ONA requirements unnecessary.  A related issue is whether
the Commission, pursuant to our general rulemaking authority, should extend section 251-type
unbundling to "pure ISPs."

     95.  In this Further Notice, we seek comment on whether section 251, as currently
applied, obviates the need for ONA.  We ask commenters to analyze this issue with respect to
both pure ISPs as well as ISPs that are also telecommunications carriers.  For example, is ONA
unbundling still necessary for ISPs that are also telecommunications carriers for whom section
251 unbundling is available?  As for pure ISPs, does the fact that they can obtain the benefits of
section 251 by becoming telecommunications carriers, or by partnering with or obtaining basic
services from competitive telecommunications providers, render ONA unnecessary? 
Commenters should address whether ONA should still be available for pure ISPs or other ISPs in
areas where there may not be sufficient competition in the local exchange market.  

     96.  We also seek comment on whether it is in the public interest for the Commission
to extend section 251-type unbundling to pure ISPs.  Put differently, we seek comment
regarding whether, pursuant to our general rulemaking authority contained in section 201-205 of
the Act, and as exercised in the Computer III, ONA, and Expanded Interconnection proceedings,
we can and should extend some or all rights accorded by section 251 to requesting
telecommunications carriers to pure ISPs.  Commenters who contend that it is in the public
interest to extend section 251-type unbundling should address why it is necessary to do so, given
the alternative options pure ISPs have to obtain the benefits of section 251 unbundling, as well as
the unbundling rights ISPs currently enjoy under the Commission's existing ONA regime. 
Commenters should also address whether the extension of section 251-type unbundling to pure
ISPs would be inconsistent with section 251, which by its terms applies only to
telecommunications carriers.  Similarly, commenters should address whether section 251-type
unbundling is appropriate for pure ISPs, given the different purposes section 251 and ONA serve,
and the different approaches to unbundling they encompass.  Furthermore, commenters that
argue that we should extend the section 251 unbundling framework to pure ISPs should explain
what such a framework would include.  For example, commenters should address, among other
things, whether extending section 251-type unbundling rights to pure ISPs necessarily requires
the extension to pure ISPs of any obligations under section 251 or other Title II provisions. 
Commenters should also address whether extending section 251-type unbundling to pure ISPs
obviates the need for ONA.  

                                             (2)  InterLATA Information Services

     97.  As discussed above, we tentatively conclude in this Further Notice that the
Commission's nonstructural safeguard regime should continue to apply to BOC provision of
intraLATA information services.  Prior to the enactment of the 1996 Act, however, we did not
distinguish between intraLATA and interLATA information services, and we did not explicitly
apply our Computer III and ONA rules to BOC provision of interLATA information services
since the BOCs were prevented under the MFJ from providing interLATA services.  Section
272 of the 1996 Act, however, does distinguish between intraLATA and interLATA information
services by imposing separation and nondiscrimination requirements on BOC provision of
interLATA information services.  We seek comment, therefore, on whether the Commission's
ONA requirements, as modified or amended by this proceeding, should be interpreted as
encompassing BOC provision of interLATA information services.  We also seek comment on
whether it would be inconsistent with section 272 for the Commission to apply ONA
requirements to BOC provision of interLATA information services.  

     98.  In addressing this issue, we ask that commenters take note of the following policy
considerations.  As noted above, the Commission required the BOCs to implement ONA
regardless of whether ONA provided the basis for elimination of structural separation.  We
stated that ONA serves the public interest, not only by serving as a critical nonstructural
safeguard against anticompetitive behavior by the BOCs, but also by promoting the efficient use
of the network by ISPs, to the benefit of consumers.  On the other hand, section 272 already
sets forth the statutory requirements for BOC provision of interLATA information services and,
therefore, including such services within the Commission's ONA framework may be unnecessary
to protect the public interest.  Moreover, as discussed above, section 251 unbundling may obviate
ONA in some or all respects, including its application to BOC provision of interLATA
information services.  We also seek comment, to the extent commenters believe that ONA should
encompass BOC provision of interLATA information services, on how the Commission's current
ONA requirements, including ONA reporting requirements, may need to be changed or
supplemented, if at all, to take account of such services.

                         2.   ONA and Nondiscrimination Reporting Requirements

                              a.   Introduction 

     99.  In this section of the Notice, we examine the various reporting requirements
imposed on the BOCs and GTE by the Computer III and ONA regimes.  These reporting
requirements were originally intended as a safeguard, in that the BOCs and GTE must disclose
information that would allow detection of patterns of access discrimination.  In addition, certain
reporting requirements were intended to promote competition, by providing interested parties
(including ISPs and equipment manufacturers) with information about service introduction and
deployment by the subject carriers, which may assist such parties in structuring their own
operations. 

     100. We recognize, however, that a number of years have passed since certain of these
reporting requirements were imposed, and that some of the information we require to be
disclosed may no longer be useful, relevant, or related to either the safeguard or competition
promotion functions identified above.  Thus, as part of the Commission's 1998 biennial review of
regulations, we intend in this proceeding to reexamine each of the reporting obligations imposed
on the BOCs and GTE by the Computer III and ONA regimes, to determine whether any of these
requirements should be eliminated or modified, consistent with the 1996 Act.  We also seek
comment on what, if any, different or additional reporting requirements should be imposed to
safeguard against anticompetitive behavior by the BOCs and GTE and to promote competition in
the provision of information services.  In particular, we also seek comment on methods to
facilitate access to and use of this information by unaffiliated entities, including small entities.
  
     101. We set forth below the ONA reporting reporting requirements and make specific
inquiries regarding each requirement.  The following are general inquiries that apply to all ONA
reporting requirements.  We ask parties to respond to both the specific and general inquiries in
their comments on each ONA reporting requirement.  

          a.   Is the information reported necessary to or helpful in monitoring the compliance
     of the subject carriers with their unbundling and nondiscrimination obligations?  If not,
     why not?  Would other types of information be more useful for compliance monitoring or
     enforcement purposes?

          b.   Is this requirement duplicative?  In other words, does the Commission currently
     require other reports that disclose the same or substantially similar information, or serve
     the same purposes?  If so, how should the Commission streamline these requirements?

          c.   Do industry groups, such as ATIS and/or NIIF, collect and compile information
     that is duplicative of that required by the Commission?  If so, is that information readily
     available to interested parties?

          d.   Should we continue to require the subject carriers to file this report with the
     Commission both on paper and on disk, or should we adopt streamlined filing proposals
     similar to those set forth in the Further Notice of Proposed Rulemaking in the Non-
     Accounting Safeguards proceeding?  Specifically, should we require either:

                    i) a certification process whereby the subject carrier must maintain the required
          information in a standardized format, and file with the Commission an annual
          affidavit stating: (1) the information is so maintained; (2) the information will be
          updated in compliance with our rules; (3) the information will be maintained
          accurately; and (4) how the public will be able to access the information; or 

                    ii) electronic posting whereby the subject carriers must make the required
          information available on the Internet (for example, by posting it on their website)
          or through another similar electronic mechanism?

          e.   If we continue to maintain a paper filing requirement, is the information presented
     in a clear, comprehensible format?  If not, what modifications to the format would
     improve clarity and accessibility?

          f.   If we continue to maintain a paper filing requirement, should we alter the
     frequency with which we require this report to be filed?  If so, what alteration should be
     made, and what is the basis for that alteration?  In the alternative, if we impose a
     certification process or electronic posting requirement, how often should subject carriers
     be required to update the information they must maintain?  How must the subject carriers
     maintain historical data, and for what length of time?

     102. In conjunction with our inquiries elsewhere in this item, we seek to examine, and,
if possible, clarify the relationship between the ONA reporting requirements and the other
obligations imposed on the subject carriers by ONA.  For example we seek comment above on
whether we should modify or eliminate the ONA unbundling requirements.  To the extent that
parties argue that we should do so, we request that they comment upon the effect that such action
would have on the reporting obligations of the subject carriers.  It seems that if the subject
carriers were no longer required to unbundle and tariff ONA services, much of the information
we currently require to be disclosed in the annual and semi-annual ONA reports would cease to
exist.  Does this mean that all such reporting requirements should be eliminated?  Are there other
meaningful reporting requirements that should be imposed instead?

                              b.   Annual ONA Reports

     103. The BOCs and GTE are required to file annual ONA reports that include
information on: 1) annual projected deployment schedules for ONA service, by type of service
(BSA, BSE, CNS), in terms of percentage of access lines served system-wide and by market
area; 2) disposition of new ONA service requests from ISPs; 3) disposition of ONA service
requests that have previously been designated for further evaluation; 4) disposition of ONA
service requests that were previously deemed technically infeasible; 5) information on Signaling
System 7 (SS7), Integrated Services Digital Network (ISDN), and Intelligent Network (IN)
projected development in terms of percentage of access lines served system-wide and on a
market area basis; 6) new ONA services available through SS7, ISDN, and IN; 7) progress in
the IILC (now NIIF) on continuing activities implementing service-specific and long-term
uniformity issues; 8) progress in providing billing information including Billing Name and
Address (BNA), line-side Calling Number Identification (CNI), or possible CNI alternatives, and
call detail services to ISPs; 9) progress in developing and implementing Operation Support
Systems (OSS) services and ESP access to those services; 10) progress on the uniform provision
of OSS services; and 11) a list of BSEs used in the provision of BOC/GTE's own enhanced
services.  In addition, the BOCs are required to report annually on the unbundling of new
technologies arising from their own initiative, in response to requests by ISPs, or resulting from
requirements imposed by the Commission. 

     104. We believe that certain aspects of the annual reporting requirements may be
outdated and should be streamlined.  We seek comment, for example, on whether we should
continue to require the subject carriers to continue to report on projected deployment of ONA
services (item 1 above), particularly as this information does not appear to change appreciably
from year to year.  Should we instead require the subject carriers to make a one-time filing of a
5-year deployment schedule at the time a new ONA service is introduced?  In addition, should
we require the subject carriers to continue to report on the disposition of ONA service requests
from ISPs (items 2,3, and 4 above), despite evidence that the frequency of such requests has
declined appreciably since the initial implementation of ONA?

     105. We seek comment on whether we should continue to require the subject carriers
to report on deployment of SS7 (items 5 and 6), which has become available in most service
areas.  We further seek comment on whether we should continue to require the subject carriers to
report on the availability and deployment of ISDN, IN, and AIN services (items 5 and 6).  In
addition, we seek comment regarding whether the requirement that the BOCs report on "new
ONA services available through SS7, ISDN, and IN, and plans to provide these services" (item
6) overlaps so significantly with the requirement that they report on the unbundling of new
technologies that one of these requirements should be eliminated.

     106. In addition, we seek comment on whether, and to what extent, we should alter the
requirement that carriers report on progress in industry forums regarding uniformity issues. 
Currently, subject carriers are required to report on progress in the IILC on continuing activities
implementing service-specific and long-term uniformity issues (item 7).  As a preliminary
matter, we note that the functions that used to be performed by the IILC were transferred, as of
January 1, 1997, to the NIIF.  We tentatively conclude that, at a minimum, the ONA reporting
requirement should be updated to reflect this change.  We believe that the BOCs have agreed to
provide to the NIIF periodic updates regarding issues that have been resolved.  We seek
comment on the nature of such updates to the NIIF, including specifically what information the
BOCs provide.  We further seek comment regarding whether the information from such updates
is comprehensive enough, and sufficiently accessible to interested parties, to allow us to
eliminate the ONA reporting requirement covering progress of matters in the NIIF.  In the
alternative, we seek comment regarding whether there are other sources of information produced
by or for ATIS or the NIIF that may reasonably substitute for this ONA reporting requirement.

     107. We seek comment on whether we should continue to require the subject carriers
to report on progress in providing billing information and call detail services to ISPs (item 8). 
We seek comment on whether we should continue to require the subject carriers to report on
progress in developing, implementing, and providing access to Operation Support Systems
(OSS) services (items 9 and 10).  We believe it is important for such information to continue to
be publicly available.  We recognize, however, that such information may be more appropriately
provided pursuant to other statutory provisions.  For example, we issued a Public Notice on June
10, 1997, asking for comment on LCI's petition for expedited rulemaking to establish reporting
requirements, performance, and technical standards for OSS in the context of section 251 of the
Act.  We seek comment on the appropriate forum for collecting information about OSS and
whether continued reporting under Computer III is necessary in light of other pending
Commission proceedings.  We further seek comment on what, if any, changes we should make to
the ONA OSS reporting requirements, to better reflect the obligations with respect to OSS
imposed on carriers in the Local Competition Order. 
                    
                              c.   Semi-Annual ONA Reports 

     108. In addition to the annual ONA reports discussed above, the BOCs and GTE are
required to file semi-annual ONA reports.  These semi-annual reports include:  (1) a
consolidated nationwide matrix of ONA services and state and federal ONA tariffs;
(2) computer disks and printouts of data regarding state and federal tariffs; (3) a printed copy and
a diskette copy of the ONA Services User Guide; (4) updated information on 118 categories of
network capabilities requested by ISPs and how such requests were addressed, with details and
matrices; and 5) updated information on BOC responses to the requests and matrices.

     109. Considerable portions of the semi-annual reports filed by the BOCs appear to be
redundant, as each of the BOCs files identical information.  This generic information includes the
ONA service matrix and the Services Description section of the ONA Services User Guide, as
well as information on the 118 network capabilities originally requested by ISPs, and how the
BOCs collectively have responded to these requests.  Bell Communications Research, Inc.
(Bellcore) originated and, until its spin-off earlier this year, prepared these portions of the BOCs'
semi-annual reports; currently, an organization called the National Telecommunications Alliance
(NTA) has assumed this responsibility.  We see no benefit to continuing to require each of the
BOCs separately to file the generic portions of the semi-annual report, particularly as there
appear to be few changes in this information from year to year.  Thus, we tentatively conclude
that the BOCs should be permitted to make one consolidated filing (or posting) for all generic
information they currently submit in their semi-annual reports.  We seek comment on this
tentative conclusion.  We further seek comment on whether we should allow GTE to join in this
consolidated filing or posting (to the extent that this arrangement would be mutually agreeable to
the parties) with respect to the information it files that overlaps with that filed by the BOCs. 

     110. In addition, we seek comment on the frequency with which we require the subject
carriers to file the information contained in the semi-annual ONA reports.  In particular, we
inquire as to whether we should reduce the filing frequency, and restructure the semi-annual
reports to become part of the annual ONA reports filed by the subject carriers.  A reduction in
filing frequency would decrease the burden imposed on the subject carriers, without, we believe,
significantly affecting the quality or utility of the information supplied, much of which is either
generic or rather static in nature, or is available through other means (for example, in the state
and federal tariffs filed by the subject carriers).

     111. We also seek comment regarding whether certain information required in the
semi-annual reports overlaps with the information required in the annual reports.  For example,
in the annual ONA reports, the Commission requires the BOCs and GTE to supply information
on the disposition of several categories of ONA requests, whereas in the semi-annual reports,
the Commission requires the BOCs and GTE to supply information regarding how they have
responded to ISP requests for the existing 118 categories of network capabilities.  These
separate requirements seem to elicit similar, if not identical, information.  To the extent there is
overlap, we seek comment regarding whether these requirements may be simplified and
consolidated, or, in the alternative, whether either or both sets should be eliminated entirely.  We
also seek comment on other, similar, overlaps among the ONA reporting requirements, and what
we should do to eliminate the burdens or inefficiencies associated with them.

                                   d.   Nondiscrimination Reports
 
     112. The BOCs and GTE are also required to establish procedures to ensure that they
do not discriminate in their provision of ONA services, including the installation, maintenance,
and quality of such services, to unaffiliated ISPs and their customers.  For example, they must
establish and publish standard intervals for routine installation orders based on type and quantity
of services ordered, and follow these intervals in assigning due dates for installation, which are
applicable to orders placed by competing service providers as well as orders placed by their own
information services operations.  In addition, they must standardize their maintenance
procedures where possible, by assigning repair dates based on nondiscriminatory criteria (e.g.,
available work force and severity of problem), and handling trouble reports on a first-come, first-
served basis.

     113. In order to demonstrate compliance with the nondiscrimination requirements
outlined above, the BOCs and GTE must file quarterly nondiscrimination reports comparing the
timeliness of their installation and maintenance of ONA services for their own information
services operations versus the information services operations of their competitors.  If a BOC
or GTE demonstrates in its ONA plan that it lacks the ability to discriminate with respect to
installation and maintenance services, and files an annual affidavit to that effect, it may modify
its quarterly report to compare installation and maintenance services provided to its own
information services operations with services provided to a sampling of all customers.  In their
quarterly reports, the BOCs and GTE must include information on total orders, due dates missed,
and average intervals for a set of service categories specified by the Commission, following a
format specified by the Commission. 

     114. We tentatively conclude that the nondiscrimination obligations for provisioning
and performing maintenance activities established by Computer III continue to apply to the
BOCs and GTE.  We seek comment, however, on whether the current quarterly installation and
maintenance reports are an appropriate and effective mechanism for monitoring the BOCs' and
GTE's compliance with these nondiscrimination obligations.  Are there ways in which the
quarterly reports, and the accompanying annual affidavits, may be simplified, clarified, or
otherwise made more useful to the Commission and the interested public?  Along these lines, we
note that the Commission issued a Further Notice of Proposed Rulemaking in conjunction with
its Non-Accounting Safeguards Order, seeking comment on what types of reporting requirements
are necessary to implement the specific nondiscrimination requirement set forth in section
272(e)(1) of the Communications Act.  While we acknowledge that the nondiscrimination
obligations imposed on the BOCs by section 272(e)(1) differ from those imposed by Computer
III, we seek comment regarding whether the information required to demonstrate compliance
with both sets of nondiscrimination requirements is sufficiently similar that we should harmonize
the ONA nondiscrimination reporting requirements with the reporting requirements adopted in
response to the Further Notice of Proposed Rulemaking in the Non-Accounting Safeguards
proceeding.  We also seek comment on whether we should harmonize the ONA
nondiscrimination reporting requirements with reporting requirements being considered in other
proceedings, such as in the LCI OSS Petition.  

     115. We note that, like the BOCs, AT&T was originally required to file quarterly
nondiscrimination reports on the provision of installation and maintenance services to
unaffiliated providers of enhanced services.  The Commission modified and reduced these
reporting requirements in 1991 and in 1993.  In 1996, the Bureau eliminated the requirement
that AT&T file quarterly installation and maintenance nondiscrimination reports, as well as the
requirement that AT&T file an annual affidavit that its quarterly reports are true and that it has
not discriminated in providing installation and maintenance services.  

     116. The Bureau declined to eliminate the requirement that AT&T file a second
affidavit, which affirms that AT&T has followed the installation procedures in its ONA plan
and has not discriminated in the quality of network services provided to competing enhanced
service providers, deferring that determination to the instant proceeding.  We tentatively
conclude that we should no longer require AT&T to file this second affidavit because the level of
competition in the interexchange services market is an effective check on AT&T's ability to
discriminate in the quality of network services provided to competing ISPs.  This tentative
conclusion is consistent with our previous finding that the competitive nature of the
interexchange market provides an important assurance that access to those services will be open
to ISPs, and that much of the information of greatest use to ISPs is controlled by LECs such as
the BOCs, and not by interexchange carriers.  We also find that this tentative conclusion
comports with our statutory obligation to eliminate regulations that are no longer necessary due
to "meaningful economic competition" between providers of such service.  We seek comment
on this tentative conclusion.

                         3.   Other Nonstructural Safeguards

                                   a.   Network Information Disclosure Rules

     117. The Commission's network information disclosure rules seek to prevent
anticompetitive behavior by ensuring that ISPs and other interested parties can obtain timely
access to information affecting the interconnection of information services to the BOCs',
AT&T's, and other carriers' networks.  Prior to the 1996 Act, the rules set forth in the
Commission's Computer II and Computer III proceedings governed the disclosure of network
information.  Section 251(c)(5) of the Act requires incumbent LECs to "provide reasonable
public notice of changes in the information necessary for the transmission and routing of services
using that local exchange carrier's facilities or networks, as well as of any other changes that
would affect the interoperability of those facilities or networks."  The Commission recently
adopted network information disclosure requirements to implement section 251(c)(5) in the
Local Competition Second Report and Order.  Although we discussed our preexisting network
information disclosure requirements in conjunction with the requirements of section 251(c)(5) in
the Local Competition Second Report and Order, we did not address in that proceeding whether
our Computer II and Computer III network information disclosure requirements should continue
to apply independently of our section 251(c)(5) network information disclosure requirements. 
We address that issue in this proceeding as part of our 1998 biennial review of regulations, in an
effort to eliminate unnecessary and possibly conflicting requirements.

     118. The rules established pursuant to section 251(c)(5) in some respects appear to
duplicate and even exceed the rules established under Computer II and Computer III, while in
other respects they do not.  For example, section 251(c)(5) of the Act, and the Commission's
rules implementing that section, only apply to incumbent LECs, while some of the Computer
II network information disclosure requirements apply more broadly to "all carriers owning basic
transmission facilities."  We seek comment, therefore, on the extent to which the Commission
should retain its network information disclosure rules established in the Commission's Computer
II and Computer III proceedings in light of the disclosure requirements stemming from section
251(c)(5) of the 1996 Act.  As a starting point, we set forth in the following paragraphs a general
description of the current network disclosure requirements under Computer II, Computer III, and
section 251(c)(5), and then we ask parties to comment on whether, and why, specific
requirements should be retained or eliminated.  The following descriptions are not intended to be
an exhaustive list of every feature of the Commission's current network disclosure requirements. 
These descriptions are intended, rather, to serve as a basis for comparison by parties commenting
in this proceeding.  

     119. Computer II Network Disclosure Obligations.  

          a.   Application of the Network Disclosure Obligations.  The Computer II network
     information disclosure rules consist of two requirements:  (1) a disclosure obligation
     which depends on the existence of a Computer II separate subsidiary; and (2) a
     disclosure obligation that applies independent of whether the carrier has a Computer II
     separate subsidiary.  The Commission initially imposed both requirements on AT&T in
     the Computer II Final Decision.  The Commission extended disclosure requirement (2)
     in the Computer II Reconsideration Order to "all carriers owning basic transmission
     facilities" (hereinafter the "all-carrier" rule).  After divestiture, the Commission
     extended disclosure requirement (1) to the BOCs insofar as they are providing
     information services in accordance with the structural separation requirements of
     Computer II.  

          b.   Events Triggering the Public Notice Requirement.  The Computer II "all-carrier"
     rule is triggered by implementation of "change[s] . . . to the telecommunications network
     that would affect either intercarrier interconnection or the manner in which
     interconnected CPE must operate . . . ."  The Computer II separate affiliate disclosure
     obligation is triggered by any of three events:  (1) the BOC communicates the relevant
     network information directly to its Computer II separate affiliate; (2) such information is
     used by the BOC or a third party to develop services or products which reasonably can be
     expected to be marketed by the Computer II separate affiliate; or (3) the BOC engages in
     joint research and development with its Computer II separate affiliate, leading to the
     design or manufacture of any product that either affects the network interface or relies on
     a not-yet implemented interface.  

          c.   Timing of Public Notice.  Under Computer II, the disclosure obligation of the "all-
     carrier" rule must be met "in a timely manner and on a reasonable basis."  The
     Computer II separate affiliate network disclosure obligation requires that disclosure be
     made to information service competitors of the Computer II affiliate "at the same time"
     disclosure is made directly to the Computer II separate affiliate as described in item (1)
     above.  If the disclosure requirement is triggered by the events described in items (2)
     and (3) above, then disclosure must be made at the "make/buy" point, i.e., when the BOC
     or an affiliated company decides, in reliance on previously undisclosed information, to
     produce itself or to procure from a non-affiliated company any product, whether it be
     hardware or software, the design of which either affects the network interface or relies on
     the network interface.  

          d.   Types of Information To Be Disclosed.  The Computer II "all-carrier" rule
     encompasses "all information relating to network design . . . , insofar as such information
     affects . . . intercarrier interconnection . . . ."  For the separate affiliate network
     disclosure requirement, the information required to be disclosed consists of, "at a
     minimum, . . . any network information which is necessary to enable all [information]
     service . . . vendors to gain access to and utilize and to interact effectively with [the
     BOCs'] network services or capabilities, to the same extent that [the BOCs' Computer II
     separate affiliate] is able to use and interact with those network services or
     capabilities."  This requirement includes information concerning "network design,
     technical standards, interfaces, or generally, the manner in which interconnected . . .
     enhanced services will interoperate with [any of the BOCs'] network."  In addition to
     technical information, the information required includes marketing information, such as
     "commitments of the carrier with respect to the timing of introduction, pricing, and
     geographic availability of new network services or capabilities."  

          e.   How Public Notice Should Be Provided.  Under Computer II, carriers subject to
     the "all-carrier" rule must disclose in their tariffs or tariff support material either the
     relevant network information or a statement indicating where such information can be
     obtained, that will allow competitors to use network facilities in the same manner as the
     subject carrier.  The separate affiliate network disclosure obligation requires that the
     BOCs "file with the Commission, within seven calendar days of the date the disclosure
     obligation arises, a notice apprising the public that the disclosure has taken place and
     indicating in summary form the nature of the information which has been disclosed [to its
     Computer II separate affiliate], the identity of any source documents and where interested
     parties can obtain additional details."  Moreover, when a BOC "files a tariff for a new
     or changed network service where there has been a prior disclosure to or for the benefit of
     [the Computer II separate affiliate], the tariff support materials must list any disclosure
     notices previously filed with the Commission that are relevant to the tariffed offering."

     120. Computer III Network Disclosure Obligations.

          a.   Application of the Network Disclosure Obligations.  The Computer III network
     information disclosure rules initially were imposed on AT&T and the BOCs in the Phase
     I Order and Phase II Order.  The Commission later extended the Computer III network
     information disclosure rules and other nondiscrimination safeguards to GTE in the GTE
     ONA Order.  

          b.   Events Triggering the Public Notice Requirement.  The Computer III public
     notice requirement is triggered at the "make/buy" point; that is, when AT&T, any of the
     BOCs, or GTE "makes a decision to manufacture itself or to procure from an unaffiliated
     entity, any product the design of which affects or relies on the network interface."

          c.   Timing of Public Notice.  AT&T, the BOCs, and GTE must disclose the relevant
     information concerning planned network changes at two points in time.  First, they must
     disclose the relevant technical information at the "make/buy" point.  They are permitted,
     however, to condition this "make/buy" disclosure on the recipient's signing of a
     nondisclosure agreement, upon which the relevant technical information must be
     disclosed within 30 days.  Second, they must make public disclosure of the relevant
     technical information a minimum of twelve months before implementation of the change;
     however, if the planned change can be implemented between six and twelve months
     following the "make/buy" point, then public notice is permitted at the "make/buy" point,
     but at a minimum of six months before implementation.

          d.   Types of Information To Be Disclosed.  Under Computer III, the range of
     information encompassed by the network information disclosure requirements is adopted
     from, and identical to, the Computer II requirements.  Specifically, at the "make/buy"
     point, AT&T, the BOCs, and GTE must disclose that a network change or network
     service is under development.  The notice itself need not contain the full range of
     relevant network information, but it must describe the proposed network service with
     sufficient detail to convey what the new service is and what its capabilities are.  The
     notice must also indicate that technical information required for the development of
     compatible information services will be provided to any entity involved in the provision
     of information services and may indicate that such information will be made available
     only to such entities willing to enter into a nondisclosure agreement.  Once an entity
     has entered into a nondisclosure agreement, AT&T, the BOCs, or GTE must provide the
     full range of relevant information. 
  
          e.   How Public Notice Should Be Provided.  Under the Computer III rules, public
     notice is made through direct mailings, trade associations, or other reasonable means.

     121. Section 251(c)(5) Network Disclosure Obligations.

          a.   Application of the Network Disclosure Obligations.  These rules apply to all
     incumbent LECs, as the term is defined in section 251(h) of the Act.

          b.   Events Triggering the Public Notice Requirement.  The incumbent LEC makes a
     decision to implement a network change that either:  (1) affects "competing service
     providers' performance or ability to provide service; or (2) otherwise affects the ability of
     the incumbent LEC's and a competing service provider's facilities or network to connect,
     to exchange information, or to use the information exchanged."  Examples of network
     changes that would trigger the section 251(c)(5) public disclosure obligations include, but
     are not limited to, changes that affect (1) transmission, (2) signalling standards, (3) call
     routing, (4) network configuration, (5) logical elements, (6) electronic interfaces, (7) data
     elements, and (8) transactions that support ordering, provisioning, maintenance, and
     billing.  

          c.   Timing of Public Notice.  Incumbent LECs must disclose planned network
     changes at the "make/buy" point, but at least twelve months before implementation of
     the change.  If the planned change can be implemented within twelve months of the
     "make/buy" point, then public notice must be given at the "make/buy" point, but at least
     six months before implementation.  If the planned changes can be implemented within
     six months of the make/buy point, then the public notice may be provided less than six
     months before implementation, if additional requirements set forth in section 51.333 of
     the Commission's rules are met.

          d.   Types of Information To Be Disclosed.  Under the Commission's regulations,
     incumbent LECs are required to disclose, at a minimum, "complete information about
     network design, technical standards and planned changes to the network."  Public
     notice of planned network changes, at a minimum, shall consist of: (1) the carrier's name
     and address; (2) the name and telephone number of a contact person who can supply
     additional information regarding the planned changes; (3) the implementation date of the
     planned changes; (4) the location(s) at which the changes will occur; (5) a description of
     the type of changes planned (including, but not limited to, references to technical
     specifications, protocols, and standards regarding transmission, signalling, routing, and
     facility assignment as well as references to technical standards that would be applicable
     to any new technologies or equipment, or that may otherwise affect interconnection); and
     (6) a description of the reasonably foreseeable impact of the planned changes.

          e.   How Public Notice Should Be Provided.  Network disclosure may be made either: 
     (1) by filing public notice with the Commission in accordance with section 51.329 of the
     Commission's rules; or (2) providing public notice through industry fora, industry
     publications, or on the incumbent LEC's own publicly accessible Internet sites, as well as
     a certification filed with the Commission in accordance with section 51.329 of the
     Commission's rules.  

     122. We tentatively conclude that the Commission's rules established pursuant to
section 251(c)(5) for incumbent LECs should supersede the Commission's previous network
information disclosure rules established in Computer III.  We also tentatively conclude that the
Commission's network disclosure rules established in Computer II should continue to apply --
specifically, the Computer II separate affiliate disclosure rule should continue to apply to any
BOC that operates a Computer II subsidiary, and the all-carrier rule should continue to apply to
all carriers owning basic transmission facilities.  We reach our tentative conclusion regarding the
Computer III network disclosure rules since, in our view, the 1996 Act disclosure rules for
incumbent LECs are as comprehensive, if not more so, than the Commission's Computer III
disclosure rules.  Parties who disagree with this view should explain why all or some aspects of
the Commission's Computer III disclosure rules are still needed for incumbent LECs in light of
the rules established pursuant to section 251(c)(5) of the Act.  

     123. We recognize, however, that some BOCs may still be providing certain
intraLATA information services through a Computer II subsidiary, rather than on an integrated
basis under the Commission's Computer III rules.  We tentatively conclude, therefore, that the
Computer II separate subsidiary disclosure rule should continue to apply in such cases because,
for instance, it encompasses marketing information which is not included within the scope of
information to be disclosed under section 251(c)(5) and it requires disclosure under a more
stringent timetable than that required under section 251(c)(5).  We also tentatively conclude
that the all-carrier rule should continue to apply to all carriers owning basic transmission
facilities, since it is broader in certain respects than section 251(c)(5).  First, it applies to all
carriers, whereas section 251(c)(5) just applies to incumbent LECs.  In addition, the all-carrier
rule requires, among other things, the disclosure of network changes that affect end users' CPE,
whereas our rules interpreting section 251(c)(5) only require the disclosure of information that
affects "competing service providers."  We seek comment on these tentative conclusions and
analyses.          

                                   b.   Customer Proprietary Network Information (CPNI)

     124. The Commission first established its CPNI rules in the Computer II Final
Decision in 1980 to encourage AT&T, the BOCs, and GTE to develop and market efficient,
integrated combinations of information and basic services without the marketing restrictions
imposed by structural separation, while protecting the competitive interests of information
service competitors.  While the CPNI rules are an integral part of the Commission's current
nonstructural regulatory framework for the provision of information services by AT&T, the
BOCs, and GTE, we defer consideration of all CPNI issues relating to our Computer II and
Computer III rules to our CPNI rulemaking proceeding.  

     125. Section 702 of the 1996 Act, which added a new section 222 to the
Communications Act of 1934, as amended, sets forth requirements for use of CPNI by
telecommunications carriers, including the BOCs.  Although the requirements of section 222
were effective upon enactment of the 1996 Act, we issued a CPNI Notice on May 17, 1996,
which sought comment on, among other things, what regulations we should adopt to implement
section 222.  We stated in the CPNI Notice that the CPNI requirements the Commission
previously established in the Computer II and Computer III proceedings remain in effect pending
the outcome of the rulemaking, to the extent they do not conflict with section 222.  The CPNI
proceeding will address whether these pre-existing requirements should be retained, eliminated,
extended, or modified in light of the Act.  

     126. Under the Computer II structural separation requirements, AT&T, the BOCs, and
GTE were prohibited from jointly marketing their basic services with the enhanced services
provided through their separate affiliate.  Under the Computer III nonstructural safeguards
regime, AT&T, the BOCs, and GTE were permitted to engage in joint marketing of basic and
enhanced services subject to restrictions on their use of CPNI.  In the BOC Safeguards Order,
the Commission strengthened the CPNI rules by requiring that, for customers with more than
twenty lines, BOC personnel involved in marketing enhanced services obtain written
authorization from the customer before gaining access to its CPNI.  

     127. On March 6, 1992, the Association of Telemessaging Services International, Inc.
(ATSI) filed a petition for reconsideration of the BOC Safeguards Order in CC Docket No. 90-
623, the Computer III Remand proceeding.  ATSI asked the Commission to modify the BOC
Safeguards Order by:  (1) prohibiting joint marketing of basic and information services; (2)
extending the prior authorization requirement for CPNI to all users, regardless of size; and (3)
ensuring that users who restrict access to their CPNI continue to receive nondiscriminatory
treatment and an adequate level of service.  On May 17, 1996, the Commission issued an order
dismissing issues (2) and (3) as moot because of the passage of the Telecommunications Act of
1996 and our commencement of a new proceeding to address the obligations of
telecommunications carriers with respect to CPNI in light of the new statute.  The order also
noted that issue (1) remained to be addressed by the Commission.  ATSI filed a motion to
withdraw its petition for reconsideration in CC Docket No. 90-623 and to incorporate its
petition into the Commission's Computer III Further Remand proceeding in CC Docket No. 95-
20, as well as other proceedings, on December 10, 1996.  On May 14, 1997, the Common
Carrier Bureau partially granted the ATSI Motion by agreeing to address in this proceeding
whether joint marketing of basic services and information services by the BOCs should be
prohibited.

     128. We therefore seek comment on the issue raised in the ATSI Petition:  whether, to
the extent the Commission continues to allow the BOCs to provide information services subject
to a nonstructural safeguards regime, the BOCs should be prohibited from jointly marketing
basic services and information services when these services are provided on an intraLATA basis. 
To the extent parties support the view that the term "telecommunications service" in the Act
encompasses the same set of services as the term "basic service" did under the Commission's
previous rules, parties should discuss the issue raised in the ATSI petition in terms of whether
joint marketing should be allowed between telecommunications services and information
services.  As noted in the ATSI Order, we do not address this question with respect to interLATA
information services, since under section 272 of the Act BOCs must provide interLATA
information services pursuant to a section 272 affiliate and subject to the joint marketing
provisions in that section.  Also, under section 274, BOCs providing electronic publishing,
whether on an interLATA or intraLATA basis, must do so pursuant to a section 274 affiliate and
subject to the joint marketing rules in that section.

     129. In its petition, ATSI argues that joint marketing of basic services and information
services harms consumers and diminishes overall competition in the information services market. 
ATSI alleges that the BOCs have abused the Commission's joint marketing rules by:  (1) routing
calls to subscribers of competing voice messaging providers to the BOC's own voice messaging
service instead; (2) soliciting customers of competing voice messaging providers who contact the
BOCs to request other BOC services; (3) providing customers with misleading and disparaging
information about the voice messaging services offered by competing providers; and (4)
engaging in other unfair practices.  ATSI therefore requests that the Commission prohibit the
BOCs from using the same personnel and facilities to market basic services and information
services.  We seek comment on these issues.  We also seek comment on the costs and operational
efficiencies or inefficiencies of allowing the BOCs to provide intraLATA information services
on an integrated basis, but requiring different personnel and facilities to market basic services
and information services.

                    V.  JURISDICTIONAL ISSUES

     130. Our authority, pursuant to section 2(a) of the Communications Act, to establish,
enforce, modify, or eliminate a regime of safeguards for the provision of information services by
the BOCs and GTE is well settled.  In addition, the scope of our authority to preempt
inconsistent regulation on the part of the states has been established by the Commission in the
previous Computer III orders and has been affirmed on appeal.

     131. In the Computer III Phase I Order, the Commission preempted:  (1) all state
structural separation requirements applicable to the provision of enhanced services by AT&T and
the BOCs; and (2) all state nonstructural safeguards applicable to AT&T and the BOCs that were
inconsistent with federal safeguards.  The California I court vacated these preemption actions,
on the ground that the Commission had not adequately justified imposing them.  In response to
the California I remand, the Commission narrowed the scope of federal preemption to cover
only:  (1) state requirements for structural separation of facilities and personnel used to provide
the intrastate portion of jurisdictionally mixed enhanced services; (2) state CPNI rules
requiring prior authorization that is not required by federal regulation; and (3) state network
disclosure rules that require initial disclosure at a time different than the federal rules.  The
Commission reasoned that such state requirements would thwart or impede the nonstructural
safeguards pursuant to which the BOCs may provide interstate enhanced services, and the federal
goals such safeguards were intended to achieve.  The California III court upheld the
Commission's narrowly tailored preemption, stating that the Commission had met its burden of
demonstrating that it was preempting only state regulations that would negate valid federal
regulatory goals.

     132. Thus, we believe that the proposals we make in the current Further Notice, and the
options upon which we seek comment, fall within the scope of our authority previously
established in the context of this proceeding, as outlined above. To the extent that our proposals
go beyond our recognized preemption authority, we ask that commenters identify those proposals
and comment on our authority to adopt them.

                     VI.  PROCEDURAL MATTERS

               A.   Ex Parte Presentations

     133. This matter shall be treated as a "permit-but-disclose" proceeding in accordance
with the Commission's revised ex parte rules, which became effective June 2, 1997. 
See Amendment of 47 C.F.R.  1.1200 et seq. Concerning Ex Parte Presentations in Commission
Proceedings, GC Docket No. 95-21, Report and Order, 12 FCC Rcd 7348, 7356-57,  27 (citing
47 C.F.R.  1.1204(b)(1)) (1997).  Persons making oral ex parte presentations are reminded that
memoranda summarizing the presentations must contain summaries of the substance of the
presentations 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.  See 47 C.F.R.
 1.1206(b)(2), as revised.  Other rules pertaining to oral and written presentations are set forth in
Section 1.1206(b) as well.  

          B.   Initial Paperwork Reduction Act Analysis

     134. This Further Notice contains either a proposed or modified information collection. 
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 Further Notice, 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 Further Notice; OMB comments are due 60 days from the date of publication
of this Further Notice 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.  

     C.   Initial Regulatory Flexibility Certification

     135. The Regulatory Flexibility Act (RFA) requires that an initial regulatory
flexibility analysis be prepared for notice-and-comment rulemaking proceedings, unless the
agency certifies that "the rule will not, if promulgated, have a significant economic impact on a
substantial number of small entities."  The RFA generally defines "small entity" as having the
same meaning as the terms "small business," "small organization," and "small governmental
jurisdiction."  In addition, the term "small business" has the same meaning as the term "small
business concern" under the Small Business Act.  A small business concern is one which:  (1)
is independently owned and operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the Small Business Administration (SBA).  

     136. This Further Notice pertains to the Bell Operating Companies (BOCs), each of
which is an affiliate of a Regional Holding Company (RHC), as well as to GTE and AT&T. 
Neither the Commission nor SBA has developed a definition of "small entity" specifically
applicable to the BOCs, GTE, or AT&T.  The closest definition under SBA rules is that for
establishments providing "Telephone Communications, Except Radiotelephone," which is
Standard Industrial Classification (SIC) code 4813.  Under this definition, a small entity is one
employing no more than 1,500 persons.  We note that each BOC is dominant in its field of
operation and all of the BOCs as well as GTE and AT&T have more than 1,500 employees.  We
therefore certify that this Further Notice will not have a significant economic impact on a
substantial number of small entities.  The Commission's Office of Public Affairs, Reference
Operations Division, will send a copy of this Further Notice, including this certification, to the
Chief Counsel for Advocacy of the Small Business Administration.  A copy will also be
published in the Federal Register.  

          D.   Comment Filing Procedures

     137. Pursuant to applicable procedures set forth in Sections 1.415 and 1.419 of the
Commission's rules, 47 C.F.R.  1.415, 1.419, interested parties may file comments on or
before March 27, 1998, and reply comments on or before April 23, 1998.  To file formally in this
proceeding, you must file an original and six copies of all comments, reply comments, and
supporting comments.  If you want each Commissioner to receive a personal copy of your
comments, you must file an original and eleven copies.  Comments and reply comments should
be sent to Office of the Secretary, Federal Communications Commission, 1919 M Street, N.W.,
Room 222, Washington, D.C., 20554, with a copy to Janice Myles of the Common Carrier
Bureau, 1919 M Street, N.W., Room 544, Washington, D.C., 20554.  Parties should also file one
copy of any documents filed in this docket with the Commission's copy contractor, International
Transcription Services, Inc., 1231 20th Street, N.W., Washington, D.C., 20036.  Comments and
reply comments will be available for public inspection during regular business hours in the FCC
Reference Center, 1919 M Street, N.W., Room 239, Washington, D.C., 20554.

     138. Comments and reply comments must include a short and concise summary of the
substantive arguments raised in the pleading.  Comments and reply comments 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 reply comments.  All parties are encouraged to utilize a table of contents,
regardless of the length of their submission. 

     139. Parties are also asked to submit comments and reply comments on diskette.  Such
diskette submissions would be in addition to and not a substitute for the formal filing
requirements addressed above.  Parties submitting diskettes should submit them to Janice Myles
of the Common Carrier Bureau, 1919 M Street, N.W., Room 544, Washington, D.C., 20554. 
Such a submission should be on a 3.5 inch diskette formatted in an IBM compatible form using
MS DOS 5.0 and WordPerfect 5.1 software.  The diskette should be submitted in "read only"
mode.  The diskette should be clearly labeled with the party's name, proceeding, type of pleading
(comment or reply comments) and date of submission.  The diskette should be accompanied by a
cover letter.

     140. You may also file informal comments or an exact copy of your formal comments
electronically via the Internet at <http://www.fcc.gov/e-file/> or via e-mail
<computer3@comments.fcc.gov>.  Only one copy of electronically-filed comments must be
submitted.  You must put the docket number of this proceeding in the subject line if you are
using e-mail (CC Docket No. 95-20), or in the body of the text if by Internet.  You must note
whether an electronic submission is an exact copy of formal comments on the subject line.  You
also must include your full name and Postal Service mailing address in your submission.

                      VII.  ORDERING CLAUSES

     141. Accordingly, IT IS ORDERED that, pursuant to Sections 1, 2, 4, 10, 11, 201-205,
251, 271, 272, and 274-276,  of the Communications Act of 1934, as amended, 47 U.S.C. 
151, 152, 154, 160, 161, 201-205, 251, 271, 272, and 274-276, a FURTHER NOTICE OF
PROPOSED RULEMAKING IS ADOPTED.

     142. IT IS FURTHER ORDERED that the Commission's Office of Public Affairs,
Reference Operations Division, SHALL SEND a copy of this FURTHER NOTICE OF
PROPOSED RULEMAKING, including the Initial Regulatory Flexibility Certification, to the
Chief Counsel for Advocacy of the Small Business Administration, in accordance with the
Regulatory Flexibility Act, see 5 U.S.C.  605(b).


                         FEDERAL COMMUNICATIONS COMMISSION



                         Magalie Roman Salas
                         Secretary   Separate Statement of Commissioner Harold W. Furchtgott-Roth

Computer III Further Remand Proceedings: Bell Operating Company Provision of
                       Enhanced Services
                              and
1998 Biennial Regulatory Review -- Review of Computer III and ONA Safeguards and
                          Requirements

             Further Notice of Proposed Rulemaking
                                
                                
     I support adoption of this Further Notice of Proposed Rulemaking.  I question, however,
whether the FCC is prepared to meet its statutory obligation to review all of its regulations in
1998.
     
     Contrary to the captioning of this Further NPRM (and at least one other item that the staff
has presented to the Commission for decision), we may be neglecting the express directives of a
terse but important provision of the Telecommunications Act of 1996.  In this provision, codified
as Section 11 of the Communications Act, Congress directed the FCC to conduct, beginning in
1998, a biennial review of "all regulations issued under [the Act] in effect at the time of the
review that apply to the operations or activities of any provider of telecommunications service"
and determine whether any of these regulations are "no longer necessary in the public interest as
the result of meaningful economic competition between providers of such service."  47 U.S.C.
Section 161 (emphasis added).  Section 11 also requires that the FCC "repeal or modify any
regulation it determines to be no longer necessary in the public interest."

     Clearly, Section 11 has two components: a policy against unnecessary regulations and a
procedure to find and remove all such regulations every two years.  In this Further NPRM, the
Commission fully addresses only the policy component of Section 11.

     Although the Commission thus appears to have fulfilled its duty to implement the policy
of Section 11 in the context of this particular proceeding, I am concerned that -- because of this
item's caption and the many references to Section 11 throughout the text -- we may be leaving
the misimpression that we also are addressing the procedural requirements of Section 11.  To my
knowledge, the FCC has no plans to review affirmatively all regulations that apply to the
operations or activities of any provider of telecommunications service and to make specific
findings as to their continued necessity in light of current market conditions.  Indeed, the
comprehensive and systematic review of all FCC regulations required under Section 11 certainly
would take many months to complete, yet we have not published a specific schedule to ensure
completion of this task in 1998.

     Nor has the Commission issued general principles to guide our "public interest" analysis
and decision making process across the wide range of FCC regulations.  I believe that, in
addition to the direction given us within the law, the public interest determinations we eventually
make pursuant to Section 11 should be made based on a straightforward analysis:  regulations are
in the public interest only if their benefits significantly outweigh their costs.  We have not yet
adopted any such guidance.

     It is unfortunate that this public discussion of our responsibilities under Section 11 has
first surfaced in the context of a seemingly unrelated action in the decade-old Computer III
proceedings.  In my view, however, we should not let this or any other such limited Commission
analysis and decision making (or even the sum of such limited actions) be mistaken for complete
compliance with Section 11 as envisioned by Congress.


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