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                                   Before the
                Federal Communications Commission
                      Washington, D.C. 20554
                                                  
In the Matter of                   )
                              )
Billed Party Preference for             )    CC Docket No. 92-77
InterLATA 0+ Calls                 )         

      SECOND REPORT AND ORDER AND ORDER ON RECONSIDERATION

   Adopted:  January 29, 1998           Released:  January 29, 1998

By the Commission:  Commissioner Tristani issuing a statement


                        TABLE OF CONTENTS
     
                                                              Paragraph No. 

I.   INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . 1

II.  BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . 4

III. ADDITIONAL ORAL BRANDING. . . . . . . . . . . . . . . . . . . .10

IV.  FCC RATE BENCHMARK OR PRICE REGULATION. . . . . . . . . . . . .29

V.   BILLED PARTY PREFERENCE . . . . . . . . . . . . . . . . . . . .35

     VI.  FORBEARANCE FROM APPLYING SECTION 226 TARIFF FILING 
     REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .39

VII. PETITIONS FOR RECONSIDERATION OF THE 1992 PHASE I ORDER 
      (0+  PUBLIC DOMAIN PROPOSAL) . . . . . . . . . . . . . . . . .44

VIII.     INTRASTATE OPERATOR SERVICES . . . . . . . . . . . . . . .52

IX.  0+ CALLS BY PRISON INMATES. . . . . . . . . . . . . . . . . . .56

X.   PROCEDURAL MATTERS

     A.   Final Regulatory Flexibility Analysis. . . . . . . . . . .62

     B.   Final Paperwork Reduction Act of 1995 Regulatory Analysis. . . . . .87

XI.  CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . .92

XII. ORDERING CLAUSES. . . . . . . . . . . . . . . . . . . . . . . .93

Appendix A

     Rule Amendments

Appendix B

     Parties Commenting

Appendix C

     Comment Summary


                        I.  INTRODUCTION
                                
     1.   In this Second Report and Order and Order on Reconsideration, we address the
problem of widespread consumer dissatisfaction concerning high charges by many operator services
providers (OSPs) for calls from public phones and other aggregator locations such as payphones,
hotels, hospitals, and educational institutions.   Today, callers at such locations who dial "0" followed
by an interexchange number typically do not know what rates the particular OSP will be charging. 
We amend our rules to require OSPs to disclose orally to away-from-home callers how to obtain the
total cost of a call, before the call is connected.  This rule makes it easier for such callers using
operator services to obtain immediately the cost of the call, prior to the call being completed.  Under
the current rules, to obtain rate information, a 0+ caller generally has to dial a separate number to
reach the OSP and inquire about the OSP's rates.  This action should eliminate the surprise that many
consumers encounter upon being billed for an operator services call.  Further, requiring that OSPs
divulge this information without the consumer having to dial a separate telephone number more
readily enables consumers to obtain valuable information necessary in making the decision whether
to have that OSP carry the call at the identified rates, or to use another carrier.  

     2.   As discussed below, we believe that adoption of this rule will result in better informed
consumers, foster a more competitive marketplace, and better serve the public interest than if we
were to establish price controls or rate benchmarks.  We also decline to implement a billed party
preference (BPP) approach to the problem of high rates.  We also deny petitions for reconsideration
of our Phase I Order in this proceeding, where we declined to implement a fourth alternative to the
problem, namely, a 0+ in the public domain approach, in which OSPs would be entitled to access the
calling card validation databases of all carriers.  

     3.   In this order we also conclude that we should not, at this time, either waive or forebear
from enforcing the requirement that OSPs file informational tariffs pursuant to Section 226 of the
Communications Act.  We amend our rules, however, to increase the usefulness of informational
tariffs by requiring that such tariffs include specific rates expressed in dollars and cents as well as
applicable per-call aggregator surcharges or other per-call fees, if any, that are collected from
consumers.   
     

                         II.  BACKGROUND

     4.   This Commission has long been concerned about consumer dissatisfaction over high
charges and certain practices of many OSPs for calls from public phones at away-from-home
aggregator locations.  In 1990, Congress responded to such consumer concerns by providing the
Commission and consumers with additional tools to address abusive practices, through the passage
of the Telephone Operator Consumer Services Improvement Act of 1990 (TOCSIA or Section 226
of the Communications Act.)  Under TOCSIA, an aggregator must, among other things, allow
consumers the option of using an OSP of their choice by dialing an 800 or other number to reach that
OSP, rather than having to use the particular OSP the aggregator has selected as its preferred or
presubscribed interexchange carrier (PIC) for long-distance calls.  Further, under TOCSIA, OSPs
are required to file and maintain tariffs informing consumers of, not only their interstate charges, but
also any applicable premises-imposed fee (PIF) or aggregator surcharge collected by the OSP or
permitted in an OSP's contracts with aggregators.  

     5.    The Commission initiated Phase I of the instant proceeding in May, 1992 to examine
alleged competitive inequities arising from AT&T's issuance of its proprietary card and short term
proposals by many of AT&T's competitors to restrict the use of proprietary carrier cards with 0+
access.  At the same time, we also initiated an investigation of long term issues related to certain
interexchange carrier (IXC) calling card practices, including a BPP routing system for all 0+
interLATA calls (Phase II).  In November, 1992, the Commission released a Report and Order with
respect to Phase I of this proceeding, declining to adopt a "0+ in the public domain" proposal or other
alternative interim remedies proffered by AT&T's competitors.  In Phase II, we are addressing, on
a generic basis, the continuing complaints and concerns over the high level of charges billed
consumers by many OSPs.   

     6.   On February 8, 1996, the Telecommunications Act of 1996 (1996 Act) was enacted. 
The goal of the 1996 Act is 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."  The 1996
Act requires that the Commission forbear from applying any provision of the Communications Act,
or any of the Commission's regulations, to a telecommunications carrier or telecommunications
service, or class thereof, if the Commission makes certain specified findings with respect to such
provisions or regulations.  On June 6, 1996, the Commission released a Second Further Notice of
Proposed Rulemaking in the instant proceeding seeking comment on whether, under the 1996 Act,
we should forbear from applying the informational tariff filing requirements of Section 226. The
Commission also sought comment on whether to require all OSPs to disclose their rates on all 0+
calls.  Alternatively, the Commission sought comment on a tentative conclusion that we should: (1)
establish benchmarks for OSPs' consumer rates and associated charges that reflect what consumers
expect to pay and (2) require OSPs that charge rates and/or allow related PIFs whose total is greater
than a given percentage above a composite of the 0+ rates charged by the three largest interstate,
interexchange carriers to disclose the applicable charges for the call to consumers orally before
connecting a call.  Further, with respect to collect calls initiated by prison inmates, we sought
comment on whether the public interest would be better served by some alternative to BPP. 

     7.   In the OSP Reform Notice, we noted that OSPs generally compete with each other 
to receive 0+ traffic by offering commissions to payphone or premises owners on all 0+ calls from
a public phone.  In exchange for this consideration, the premises owners agree to designate the OSP
as the "presubscribed" IXC or PIC serving their payphones.  Many OSPs using this strategy agree
to pay very high commissions to both premises owners and sales agents who sign up those premises
owners and claim, as a consequence, they must assess very high usage charges to consumers placing
calls from payphones.  While this process has generated added revenues for the premises owners and
sales agents, it forces callers to pay exceptionally high rates.  As a result, some callers began to use
access codes, such as 800 numbers, to reach their preferred, lower-priced OSPs and to avoid the
payphone's presubscribed OSP.   Because payphone owners and other aggregators did not earn any
commissions on these so-called "dial around" calls, many aggregators blocked the use of access codes
from their phones. 

     8.   As noted above, Congress enacted TOCSIA in 1990, which directed the Commission
to promulgate regulations to "protect consumers from unfair and deceptive practices relating to their
use of operator services to place interstate telephone calls . . . [and  to] ensure that consumers have
the opportunity to make informed choices in making such calls." Among the regulations that we
have issued pursuant to that mandate is a requirement that payphone providers and other aggregators
permit callers to use 10XXX, 1-800, and 950 access codes to reach their carrier of choice.    

     9.   Branding requirements that the Commission adopted in response to TOCSIA currently
require an OSP to "[i]dentify itself, audibly and distinctly, to the consumer at the beginning of each
telephone call and before the consumer incurs any charge for the call."  This identification is
intended to notify consumers of the identity of the presubscribed OSP before they purchase service
from that OSP.  Consumer education initiatives by the industry, government, and the media appear
to have helped produce a favorable downward trend over recent years in the number of complaints
received by the Commission about high OSP rates. Nevertheless, more than five years after enactment
of TOCSIA, the high rates of many OSPs and surcharges imposed by aggregators continue to be a
concern.  In 1995, the second largest category of complaints processed by the Commission's
Common Carrier Bureau consisted of complaints directed against OSPs, and the vast majority of
these concerned rates and charges that consumers thought were excessive.  In 1996, the
Commission processed 4,132 written complaints about the level of  interstate rates and services of
OSPs.  Accordingly, we examine in the next sections what additional steps we can and should take
to foster greater competition by OSPs.

     
                  III.  ADDITIONAL ORAL BRANDING

A.   Background

     10.  In our OSP Reform Notice, we sought comment on the benefits and costs associated
with imposing a price-disclosure requirement on all 0+ calls.  We noted that while consumers
generally are informed about the prices that they will be charged for the individual 1+ calls that they
make from their homes, they may not be aware that 0+ calls from outside the home may be more
expensive than such 1+ calls.  We asked commenters to evaluate whether the benefits of requiring
disclosure of the price for each 0+ call before a call is completed, including calls priced at levels that
consumers expect, would exceed the costs of such disclosure.  We indicated that such a requirement
would further a pro-competitive, pro-consumer environment and obviate Commission regulation of
particular nondominant carriers' prices.

B.   Comments

     11.  Many commenters agree with our observation that the problem of consumers often
being billed charges much higher than expected stems from a lack of adequate information for callers
to make an informed choice.  Several commenters attribute this problem to a  misconception among
many consumers that if they use a LEC calling card to charge the call, the call will be handled by that
LEC or at least at rates comparable to those charged by their residential or business presubscribed
carrier or the LEC's rates.  In fact, these calls are typically billed at the presubscribed OSP's rates
and the aggregator's surcharge.  Consumers, relying on their mistaken impression, however, do not
discover their error until they receive bills for their calls some time later.

     12.  The commenters disagree on whether a new price disclosure rule would be in the
public interest.  Several commenters contend that a universal rate disclosure requirement will only
operate to increase the price of  0+ calls and burden an entire industry with additional, unnecessary
costs.   Some argue that to the extent that current rules may be insufficient to protect consumers, the
challenge is primarily in the area of consumer education.  Others contend that a universal rate
requirement will distress consumers that expect a payphone call to be connected quickly without
unnecessary delay.  One commenter states that it has  no current technology in place to quote rates
and that there is no mechanized system for real-time quotation for 0+ calls. 

     13.  Other commenters assert that the Commission's proposal to impose a requirement on
all OSPs to disclose orally their rates to consumers when a call is placed could immediately address
many of the concerns prompting the consideration of BPP and at a much lower cost to consumers
and carriers.   CompTel proposes that, before a customer may incur any charges for any interstate
0+calls from an aggregator location, the presubscribed carrier serving that aggregator phone be
required to provide an audible disclosure immediately after its carrier brand.  Such disclosure would
inform the customer how to obtain a rate quote without having to re-dial a second number.  A
number of state commissions and the Attorneys General support adoption of rules requiring universal
rate disclosure to the paying party, believing that option would be administratively simpler, more
informative, and fairer than a benchmark system, and lead to more competitive pricing.  

C.   Discussion
     
     14.  Insofar as ultimate consumers are concerned, we disagree with suggestions that the
Commission should adopt regulations requiring OSPs to provide consumers with less, rather than
more, information about the prices of their services and any related per call surcharge that an OSP
permits in order to be selected by an aggregator to be its PIC.   As noted previously, OSPs generally
compete to receive 0+ traffic by offering commissions to payphone or premises owners, or allowing
surcharges to be placed, on all 0+ calls from a public phone in exchange for being chosen by the
premises owners as the PIC serving their phones at that aggregator location.  The North Dakota
Commission, Sprint, and other commenters correctly note that competition between OSPs in this
segment of the market for aggregator customers historically has driven prices to consumers up, rather
than down, in order to finance such commissions and gain  0+ business.   
     15.  We cannot find that existing measures that are designed to protect consumers against
excessive prices for 0+ payphone calls are adequate.  Although current statutory dial-around,
branding and posting requirements, the Commission's implementing rules, industry print, radio and
television advertisements, other industry, governmental and media consumer education initiatives,
marketplace competition, and the Commission's complaint and enforcement procedures provide
important assistance to consumers, the large number of complaints concerning OSP rates we continue
to receive indicates that these measures are not sufficient.  Accordingly, we disagree with those
commenters who contend that no additional rules are necessary at this time.  As the New York State
Consumer Protection Board (NYSCPB) observed, current branding and posting requirements are
insufficient notification to prevent consumer surprise and dissatisfaction because they provide no
indication of what consumers will be charged for 0+ calls from an aggregator site.  We agree with
its view that the high rate of complaints and inquiries, at both the federal and state levels, regarding
excessive OSP charges demonstrates that stronger consumer safeguards are needed.   Some
commenters rely on the Commission's findings and conclusions in its Final TOCSIA Report to
support their claims that the market is sufficiently competitive and that all that is needed are targeted
ad hoc enforcement proceedings or further consumer educational initiatives, not new rules.   The
Commission there found that informed consumer choice "is the best means of ensuring that the rates
consumers pay for interstate operator service calls are just and reasonable."  We concluded that,
especially because of the availability and growing use of the dial-around option by consumers, market
forces were securing rates for consumers that, "overall, are just and reasonable."  Accordingly, we
found that "conditions in the operator services marketplace are such that we need not initiate a further
proceeding to prescribe regulations concerning rates for operator services at this time."  Despite
these conclusions regarding the operator services marketplace as a whole, the Commission noted that
some OSPs "still charge rates that are substantially above the industry mean and these rates may
warrant further action by the Commission." 

     16.  Based on our experience following release of the Final TOCSIA Report, we conclude
that, although many OSPs compete for the business of aggregators, such competition in this segment
of the interstate, domestic interexchange market has not ensured that OSP charges and aggregator
surcharges are not excessive insofar as ultimate consumers are concerned.  Indeed, ACTEL, a
payphone service provider (PSP) and OSP operating throughout New Jersey, readily conceded, that
in the absence of adequate compensation for all dial-around and toll-free subscriber 800 and 888 calls,
the rates for operator-assisted calls placed from its public pay telephones have been "too high."
Also, additional consumer educational initiatives, while necessary and appropriate to further
consumers' awareness of their options and enable them to make an informed or better informed
choice, have proven insufficient, and are unlikely to be sufficient, in and of themselves, to protect
thousands of consumers who have not availed themselves of dial-around options.  Nor has our overall
experience with targeted ad hoc rate proceedings proven to be an efficient and effective means of
ensuring just and reasonable charges in the OSP marketplace.

     17.  Under the rules adopted herein, before a 0+ interstate, domestic, interexchange  call
from an aggregator location may be connected by an OSP, the OSP must orally advise the caller how
to proceed to receive a rate quote, such as by pressing the # key or some other key or keys, but no
more than two, or by simply staying on the line.  This message must precede any further oral
information advising the caller what to do to complete the call, such as to enter the caller's calling
card number.  Thus, under our rule, OSPs may require affirmative action by the consumer in order
to receive a rate quote.  The rule applies to all calls from payphone or other aggregator locations,
including those from store-and-forward payphones or "smart" telephones.  Potential OSP customers,
after hearing an OSP's message, may waive their right to obtain specific rate quotes for the call they
wish to make by choosing not to press the key specified in the OSP's message to receive such
information or by hanging up.  Therefore, it is quite unlikely that all calls would entail costs
associated with the intervention of a live operator.  Further, the additional time for consumers to
make 0+ calls and for OSPs' call set-up process for such calls should not be significant, given the brief
language that OSPs are required to add following their audible identification brand.  Just as now,
consumers may bypass their right to receive rate quotes by proceeding to enter their credit card
number.  And OSPs may proceed with call set-up at the same time that the oral message required by
our rules is being delivered.  Of course, as currently mandated by TOCSIA and our rules, OSPs must
continue to afford consumers a reasonable opportunity to terminate the telephone call at no charge
before the call is connected.  OSPs may proceed with call set-up whether they require callers either
to act affirmatively to receive rate quotes or merely to remain on the line to receive such quotes.   We
conclude that the information disclosure requirements adopted herein are sufficient to enable
consumers to make informed business decisions in the marketplace.  Such disclosure also is in accord
with the dual purpose and policy objectives of TOCSIA, i.e., (1) "[protecting] consumers from unfair
and deceptive practices relating to their use of operator services to place interstate telephone calls;"
and (2) providing sufficient information to "ensure that consumers have the opportunity to make
informed choices in making such calls." This disclosure requirement will better ensure that
consumers do not unintentionally use carriers that charge unexpectedly high rates for interstate calls,
or use such carriers only because they are unaware that they have other options.  We conclude that
the rules adopted herein will serve to place downward pressure on prices charged in excess of
competitive rates, and could save consumers part, if not all, of a previously estimated quarter of a
billion dollars per year.  

     18.  The proper allocation of resources in our free enterprise system requires that consumer
decisions be intelligent and well informed.  In a competitive market, people will tend to search for
the cheapest product or service when other factors are comparable.  Accurate price information at
the point of purchase is therefore important for commercial choices in a market economy.  Especially,
as here, when an OSP may not have established long-term relationships with potential customers, the
absence of price information at the point of purchase inhibits competition from driving prices down
and requires consumers, provided that they are so inclined, to spend more time to find the best or a
lower price.  OSP and aggregator practices that are designed to keep, or have the effect of keeping,
callers ignorant of all applicable charges for a 0+ call from that particular aggregator location
facilitates undue manipulation of consumers' choices in this segment of the interstate, domestic
interexchange market. 

     19.  We agree with the assessments of the Attorneys General and other commenters that
rules requiring universal rate disclosure to the paying party would be administratively simpler, more
informative, and fairer than our benchmark proposal and that "a complete and accurate universal rate
disclosure requirement will increase consumer awareness and lead to more competitive pricing." 
In further implementation of our responsibilities under TOCSIA "to ensure that consumers have the
opportunity to make informed choices in making [interstate operator services telephone] calls," we
shall require all OSPs to make additional oral disclosure at the point of purchase of 0+ calls.  This will
better enable consumers to be aware of, and have the option of, exercising their legal rights.  We
believe consumers need to have sufficient information, prior to being charged for an interstate call,
to be fully aware of their right to know the cost of a 0+ call, including any applicable PIF or
aggregator surcharge, and of their right to obtain rate quotes of the applicable OSP charges for the
initial rate period and each subsequent rate period.  Consistent with the intent of Congress when it
enacted TOCSIA, we conclude that the price quoted for the call must include either the cost of the
specific applicable surcharge, or the maximum surcharge that could be billed at that aggregator
location.  We believe that these additional up-front oral disclosures will prove to be a more effective
and efficient means of providing consumers the information they need to make fully informed
decisions regarding the choice of an OSP than (a) various other messages that have been proposed
by some commentators or (b) requiring carriers that are not bound by our accounting and cost
allocation rules to file cost data in support of their charges.

     20.  Several commenters, including Sprint, oppose adoption of a universal prior price
disclosure requirement to address the problem of high OSP charges and related PIFs.  These
commenters maintain that such a requirement will lead to increased costs and delayed call
completion.     Sprint continues to maintain that "the only way to mitigate, if not eliminate, the
market power of premises owners is to require the implementation of [BPP]."  No one has denied,
however, that to implement BPP would entail a considerable period of time and even greater costs. 
The cost of implementing BPP has been estimated at around a billion dollars, whereas the estimated
costs of implementing the oral disclosure requirement are much less and will accomplish many of the
same objectives.  Insofar as delayed call completion is concerned, the California Commission has
concluded, on the basis of its experience from its 900 proceedings, that "price disclosure prior to call
completion will not create an unacceptable delay to consumers." Pacific Telesis disagrees with the
California Commission, contending that, because 900 rates are postalized and the disclosure is on the
terminating line of the call, "the disclosures involved are so dissimilar as to be irrelevant."  Pacific
Telesis does not explain, however, why the disclosure apparatus for 0+ calls from a particular
aggregator site could not be sited on a particular originating, rather than terminating, number or line. 
It also fails to take into account that, as market segments become more competitive, current industry
trends are toward postalized or flat rates, irrespective of such factors as mileage, time of day, and
other specifics of a call.   
     21.  Further, requiring OSPs to disclose price information about their services does not
infringe on their First Amendment commercial speech rights.  The United States Supreme Court has
stated that when the government "regulates commercial messages to protect consumers from
misleading, deceptive, or aggressive sales practices, or requires the disclosure of beneficial consumer
information, the purpose of its regulation is consistent with the reasons for according constitutional
protection to commercial speech and therefore justifies less than strict review."  In commercial
speech cases, the Supreme Court has used a four-prong analysis:

                    At the outset, we must determine whether the expression is protected
          by the First Amendment.  For commercial speech to come within that
          provision, it at least must concern lawful activity and not be
          misleading.  Next, we ask whether the asserted governmental interest
          is substantial.  If both inquires yield positive answers, we must
          determine whether the regulation directly advances the governmental
          interest asserted, and whether it is not more extensive than is
          necessary to serve that interest.

     22.  Requiring OSPs to disclose the price of a 0+ call does not compel them to make
misleading or confusing commercial speech, contrary to a commenter's suggestion, and does not
contravene their First Amendment rights.  The Commission previously has imposed a similar
requirement to disclose rates on providers of 900 service. No common carriers, including OSPs,
may lawfully provide interstate telecommunications service, except at rates that are just and
reasonable.  Assuming, arguendo, that an OSP's charges and any applicable PIF associated with an
interstate 0+ call are neither unreasonable nor misleading, then a governmental requirement that the
OSP must disclose such charges at the point of purchase, i.e., mandating commercial speech that is
not misleading concerning lawful activity, is not inconsistent with the first part of the four-prong
analysis.  
     
     23.  With respect to the second prong of the analysis, the rules adopted herein will directly
advance a substantial governmental interest, i.e., protecting consumers from unfair and deceptive
practices or possible rate gouging.  We have received thousands of complaints annually over the past
several years, directly from consumers, or from Congressional offices, alleging that callers from
payphone and other aggregator locations have been billed excessive rates and charges.  These
represent the third largest category of complaints that our Common Carrier Bureau has processed
over recent years.  With respect to the third prong of the analysis, our new rules are tailored to
advance directly "the asserted governmental interest" in this proceeding and are not more extensive
than what we believe is necessary to serve that interest.  For example, we do not require OSPs
automatically to disclose the rate for every call.  Instead, we require such disclosure only upon
affirmative request of the caller.   Indeed, we believe other regulatory alternatives we have considered
would not advance as well our goals of fostering a more fully competitive OSP marketplace and
ensuring that away-from-home callers have sufficient information at the point of purchase to make
an informed decision whether or not to place a call through a particular OSP.  Such alternative
regulatory options we considered include: mandating BPP; prohibiting PIFs; conducting a rulemaking
to prescribe appropriate accounting, cost allocation, and cost support rules with respect to charges
of nondominant carriers; prescribing caps on charges of OSPs and aggregators; establishing
benchmark rates; and engaging in other price regulation of nondominant carriers' retail charges.  As
we discussed above, each of these options would have been more burdensome, and possibly less
effective, than what is necessary to serve the public interest. 

     24.  MCI erroneously maintains that OSPs should not be required to include PIFs in any
rate disclosure required by Commission rule because PIFs are not part of the carrier's tariffed rate. 
To the contrary, all OSPs, including MCI or its OSP affiliate, are required currently under TOCSIA
to include PIFs in their Section 226 informational tariffs.  Only PIFs that an OSP has specified or
permitted in its PIC agreement with a particular aggregator must be reflected in such tariffs.   Our
information disclosure rules similarly require a nondominant OSP to disclose only such aggregator
surcharges and PIFs, if any, that it has permitted in the applicable PIC agreement with an aggregator.

     25.  The rules adopted herein provide OSPs and potential OSP competitors a level playing
field in that they apply equally to all OSPs and, unlike benchmark proposals based on the rates of
AT&T, MCI, and Sprint, do not establish two classes of OSP competitors (i.e., "the Big Three" and
all smaller carriers).  Accordingly, we need not address contentions that proposed benchmark policies
and rules based on such classes are arbitrary, discriminatory and, if adopted, would deny smaller
carriers "equal protection" of the law in contravention of their Fifth Amendment rights.

     26.  We are cognizant of the remarks of those who have commented that exact rate
disclosure is technically infeasible to implement for store-and-forward payphones, and would
necessitate the forced retirement of existing equipment.  Other commenters, such as GTE, assert
that, while it may be possible to enhance mechanized equipment to quote exact rates prior to the call,
this likely would require significant capital outlays and take several years lead time to accomplish. 
In our 1991 order implementing TOCSIA, we stated that, "with regard to automated technology only,
the provision of rate and other information via the use of a separate toll-free number is a reasonable
method of compliance with [Section 64.703(a) of our rules]."  We cautioned, however, that "as
technology is developed that eliminated the necessity for a separate number, the use of that number
should also be eliminated."  OSPs have had more than six years to adapt to, and come into full
compliance with, our rules that implemented TOCSIA in 1991.  Under such rules, OSPs currently
must provide oral rate quotes to prospective customers on request.   The rules, as amended herein,
require that such rate quotes be furnished at no charge to the caller and without the caller having to
hang up and dial a separate number to obtain them.  We also stated that "any rates quoted by an OSP
must be exact rather than approximate."  In computing the price of any given 0+ call that OSPs
disclose mechanically under Section 64.703(a), as amended herein, OSPs may, at their option, use
the maximum cost, including any aggregator surcharge, for the initial and additional minutes, in lieu
of using the actual rates, including any surcharges, for the call.  We decline, however, to adopt
proposals that would afford OSPs the additional flexibility to quote average charges that the caller
could be billed.   We agree with the views expressed by some commenters that consumers could
easily be misled by an average rate disclosure as to the level of the applicable charges for the
particular call they wish to make.
     
     27.  We deny requests to exempt currently embedded store-and-forward equipment, even
when such "smart" telephones are not capable of being retrofitted to comply with the new disclosure
rules.  The record does not provide a sufficient basis to justify such a broad exemption from our rules.
We shall, however, allow 15 months after the effective date of our rules before such embedded
equipment must be modified or replaced.  That should provide more than sufficient time for parties
to come into compliance with the rules.  In particular, we are prepared to consider waiver requests
on a specific factual showing of good cause.  Such showing should specify, for example, the number
of embedded phones for which waiver is sought, whether significant numbers of complaints emanate
for calls from such phones, and whether the pay phone provider is willing to offer other meaningful
efforts to increase consumer awareness of their options.  Intellicall, Inc., a provider of "smart" pay
telephones to the customer-owned pay telephone service industry, has requested that its
ULTRATEL store-and-forward payphones be required only to advise callers how to obtain rate
quotes and to be exempt from the requirement to provide such quotes without callers having to dial
a second number.  Intellicall, Inc. states that its ULTRATEL payphones can be retrofitted within
four to six months to provide verbal instructions advising callers on how to obtain a rate quote on
each call by hanging up and dialing two digits, i.e., *0 (star-zero).  We deny such request.   It is
within an OSP's discretion what rate information it will disclose and how it will do so, not the
decision of an equipment provider.  Although Intellicall, Inc.'s subsidiary company, Intellicall
Operator Services, Inc., provides network-based operator and prepaid services throughout the United
States from aggregator locations, the request before us is on behalf of the equipment manufacturer,
not its OSP subsidiary.  Moreover, while it appears that Intellicall, Inc. has sold over 200,000 pay
telephones for use in forty-six states, of which over 60,000 use store-and-forward technology, its
request fails to specify how many of its payphones cannot be retrofitted to comply with the rules
adopted herein and otherwise lacks the specificity necessary to justify a blanket exemption from the
rate disclosure requirement.  We have determined that disclosure of rate information at the point of
purchase will better enable consumers to make informed decisions and also further competition in the
OSP marketplace.  Intellicall, Inc. has not made a sufficient showing of good cause to warrant
exempting calls from any of its payphones at aggregator locations from the requirement that OSPs,
including its subsidiary OSP, disclose the cost thereof if requested by prospective customers.  

     28.  In summary, OSPs' informational tariffs, our open entry policies, and current
competition in the OSP marketplace have not been sufficient to ensure that the charges for all OSP
calls are just and reasonable.  The price of an interstate 0+ call from an aggregator location is
generally higher, and, in some cases, substantially higher, than consumers pay for 0+ calls from their
regular home or business location.  Consumers making such away-from-home calls often do not have
any long-term business relationship or familiarity with the presubscribed OSP that the aggregator has
selected to provide operator services at its site.  The policies and oral information disclosure rules we
adopt herein require OSPs to provide accurate information about the price of their services to
consumers, particularly prospective new customers whom they have never served, if callers exercise
their right to receive a rate quote.  The rules require OSPs to disclose to consumers the true cost of
placing a call through them, including any applicable aggregator surcharge, or the maximum possible
such charge, that they permit.  Such surcharges are a principal, if not the principal, reason for
consumer complaints about OSP rates and charges.  The rules provide transient callers with the
information necessary to maximize their awareness of their options and to make informed decisions
with respect to payphone calls.  The rules, thus, are not only pro-consumer, but also pro-competitive
in furthering marketplace decisions based on options available to an informed consumer. 


           IV.  FCC RATE BENCHMARK OR PRICE REGULATION

A.   Background

     29.  In the OSP Reform Notice, we invited comment on our tentative conclusion that we
should require OSPs to disclose rates when they exceed consumers' expectations.  To achieve this,
we tentatively concluded that OSPs that charge rates, or allow related PIFs, whose total is greater
than a given percentage above a composite of the 0+ rates charged by the three largest IXCs be
required to disclose the cost of the call orally to consumers, before connecting the call.  We also
sought suggestions for alternative disclosure requirements that would more effectively and efficiently
provide consumers with the information that they need to make fully informed decisions regarding
the choice of an OSP.  

B.   Discussion

     30.  For reasons set forth below, we decline to adopt benchmark rules.  Instead, as
previously discussed, we are requiring OSPs to disclose to consumers orally how to obtain rate
quotes or the price of a call to a specific terminating location, to enable them to make a more
informed decision at the point of purchase.  This course of action will best serve the dual objectives
of TOCSIA, further our goal of fostering a more fully competitive marketplace for operator services
from payphones and other aggregator locations, help ensure a level playing field for all OSP
competitors, and better serve the public interest than would the use of benchmarks as tentatively
proposed in the OSP Reform Notice.    

      31. Commenters were divided in terms of support for the use of benchmarks and whether
such benchmarks should be based upon consumer expectations and tied to the rates of the three
largest carriers (e.g., based on some percentage of the average of those rates or some set flat increase
over such rates).  After considering the alternatives to benchmarks and examining the record before
us, we agree with those commenters who believe that benchmarks would not be the best alternative
for addressing the problem.  We believe that the imposition of price controls or benchmarks upon the
entire industry, in order to curtail rate gouging by some carriers and aggregators, would be overly
regulatory and could even stifle rate competition (e.g., if it results in carriers migrating their rates to
the benchmark, or only slightly below it). 

     32.  In addition, commenters submit that many consumers would not expect OSP charges
and aggregator surcharges at even the levels that would be allowed under CompTel's benchmark
proposal of 115% of the weighted average of the largest three carriers' rates.   Such charges are
perceived as excessive not only by some consumers, but public officials, regulators, and, according
to the state Attorneys General, even many OSPs.  We also agree with commenters that establishing
benchmarks based on the average of rates of the three largest IXCs or their OSP affiliates, could
arguably constitute a denial of the equal protection of the law to all other OSPs. 

     33.  Moreover, even if benchmarks were not based on a separate class of carriers, setting
benchmarks at the level initially proposed by CompTel could be anti-competitive and anti-consumer. 
If such presumed reasonable or "safe harbor" benchmarks were adopted, we believe those OSPs
whose rates currently are below those levels would have an incentive to increase their rates to those
levels.   Also, it could be argued that express or implied Commission forbearance from regulating
tariffed rates that did not exceed the levels proposed by CompTel, constitutes federal agency approval
of collusive price-fixing by OSP competitors. 

     34.  Accordingly, we are persuaded by the comments of those opposed to our benchmark
proposal that such a price regulatory approach is not the best answer to the problem of consumers
being billed unexpectedly high charges for 0+ services.  The anomalies in this segment of the
interstate telecommunications market are directly attributable to consumers lacking sufficient
information of the cost of service at the point of purchase.   We believe that the oral disclosure
requirements that we adopt today will help to ensure that consumers have the information they need
to make informed decisions concerning whether they wish to make a 0+ call through a particular
carrier or to place the call through one of hundreds of other OSPs competing in this market.  We
therefore find that the oral disclosure requirement adopted above will not only more readily achieve
our goal of protecting consumers, but by providing consumers with access to information necessary
to make informed choices, also accomplishes this goal in a manner more consistent with the pro-
competitive goals of the 1996 Act. 


                   V.  BILLED PARTY PREFERENCE    

A.   Background

     35.  Under BPP, operator-assisted long-distance traffic would be carried automatically by
the OSP preselected by the party being billed for the call.   This would be done by permitting a
person signing up for a calling card to select the OSP that would carry that customer's interstate
payphone traffic whenever that customer used the calling card.  The network would be able to
identify that OSP by checking a database listing the chosen OSP associated with each calling card. 
Based on the comments filed by parties in 1993, the Commission estimated that the cost of
implementing BPP would be on the order of $420 million in amortized annual costs.  This is based
on an estimate of LEC costs of $1.1 billion in non-recurring costs (including approximately $500
million for end office software) plus $60 million in recurring costs (most of which would be due to
increased expenses for training and employing operators), and recurring OSP costs of about $35
million per year.  Given the estimated cost of BPP, the Commission sought proposals for less costly
alternatives. We stated that we would mandate BPP only if its benefits outweighed its costs, and
those benefits could not be achieved through alternative, less costly, means.  Two years later, we
noted that, while the record indicated that the cost of BPP "would likely be quite substantial," local
number portability was mandated by the 1996 Act and we intended to give further consideration to
BPP as number portability developed.  We remarked that "[i]f local exchange carriers are required
to install the facilities needed to perform database queries for number portability purposes for each
call, the incremental cost to query the database for the customer's preferred OSP might well be less
than the incremental benefits that BPP would provide." 

B.   Discussion

     36.   We decline to adopt BPP.  As detailed in Appendix C, only a few parties continue to
support BPP.  Moreover, there is no convincing evidence that the benefits of BPP outweigh  its
costs, and that those benefits can not be achieved through alternative, less costly, means.  Thus,
we decline to require this expensive change to the network as a means of reducing customer
dissatisfaction with OSP rates.  Rather, the increased consumer disclosures required by this Order will
meet our objectives, including protecting consumers, and fostering rate competition, in a less
burdensome manner.  

     37.  In the OSP Reform Notice, we noted that the 1996 Act mandates local number
portability and that we intended to give further consideration to BPP as number portability developed.
We requested comment on our suggestion that "[i]f local exchange carriers are required, thus to
install the facilities needed to perform database queries for number portability purposes for each call,
the incremental cost to query the database for the customer's preferred OSP might well be less than
the incremental benefits that BPP would provide."  Based on the updated record, we cannot
conclude that the implementation of local number portability will have this effect.  In the absence of
firm data that shows a favorable cost/benefit ratio, we are not 
willing to mandate BPP, and the proponents have not provided us with such data.    No one has
challenged the LECs' assertions that implementation of number portability will not render BPP more
economically feasible to implement.  The fact that local number portability [LNP] databases will
not exist in all areas also militates against reliance on LNP as a basis for mandatory BPP. 
Moreover, as some commenters argue, the increased advertisement and use of dial-around will yield
the same result as BPP at no cost to upgrade the network.   We are cognizant of assertions that to
continue to leave open the possibility of BPP as a possible long-term solution to the problem of high
OSP rates is harming OSPs in the capital markets.  We also agree that it would be unwise to
implement BPP in the inmate calling environment, given the need for special security measures
there.  

     38.  Equally as important, and as discussed in detail in the previous sections, we find that
the oral price disclosure requirement will achieve the same benefits, at significantly less cost, and in
a manner consistent with the pro-competitive goals of the 1996 Act.  Accordingly, we decline to
adopt BPP to redress the problem of high rates of OSPs and providers of operator services to prison
inmate phones.

     
    VI.  FORBEARANCE FROM APPLYING SECTION 226 TARIFF FILING 
            REQUIREMENTS

A.   Background

     39.  Under the 1996 Act, we must forbear from applying any regulation or provision of the
Communications Act if we determine that such forbearance is consistent with the statutory criteria
listed in Section 10(a) therein.  In our OSP Reform Notice, we sought comment on whether we
should forbear from applying Section 226 tariff filing requirements to nondominant interexchange
OSPs if they either provide an audible disclosure of the applicable rate and charges prior to
connecting any interstate 0+  call from a payphone location, or certify that they will not charge more
than FCC-established benchmarks for such calls.   We noted that TOCSIA authorizes us to waive the
requirement for informational tariffs if we determine that such tariffs no longer are necessary to: (1)
protect consumers from unfair and deceptive practices relating to their use of operator services to
place interstate telephone calls; and (2) ensure that consumers have the opportunity to make informed
choices in making such calls.  We tentatively concluded that a requirement that OSPs disclose the
specific price of a call to the consumer before connecting a call would better protect consumers from
unexpectedly high charges than the filing of "informational" tariffs, which are effective without prior
notice and provide very limited protection at the time of purchase.   Based on this analysis, we
sought comment on whether the most effective long-term solution for protecting consumers is to
provide them with a mechanism for exercising choice, such as by entering into a long-term
relationship with carriers, by having an audible brand stating the price of any call before the call is
connected, or additional branding stating the price of any call that would exceed benchmarks that we
might establish.

     40.  We also sought comment on whether price information at the point of purchase, rather
than the availability of pricing and other material information from the public tariffs of rivals, is more
likely to allow consumers to exercise rational purchasing decisions, encourage OSPs to initiate price
reductions and other competitive programs, and impose market-based discipline on abusive OSPs.

B.   Comments

     41.  The commenters disagree on whether we should forbear from applying the  Section
226 tariff filing requirement.  Some support a complete detariffing policy and assert that
informational tariffs are not necessary to protect consumers against unfair or deceptive practices. 
Others urge us to make the finding specified in that section for waiving such requirement.   AT&T
maintains that the Commission should apply the same tariff forbearance rules to its operator services
as it applies to its other interstate services.   Another commenter supporting forbearance with regard
to the requirement to file informational tariffs asserts that OSPs have misinformed consumers about
the purpose of informational tariffs.

     42.  Other commenters are opposed to complete detariffing, believing that informational
tariffs ensure that OSP charges and practices are just and reasonable and are an important consumer
safeguard.   Some commenters contend that it is premature to remove the tariff filing requirement and
that informational tariffs are needed as a tripwire to enable the Commission to determine whether
further investigation is necessary. 
     
C.   Discussion          

     43.  We are not prepared to conclude at this time that Section 226 informational tariffs no
longer are necessary to protect consumers and that we should either waive or forbear from requiring
such tariffs.  We continue to receive thousands of consumer complaints each year about OSP rates
and related aggregator surcharges or PIFs.  We amend our rules to increase the usefulness of
informational tariffs by requiring that such tariffs include specific rates expressed in dollars and cents
as well as applicable per-call aggregator surcharges or other per-call fees, if any, that are collected
from consumers.   The continued filing of these tariffs will allow the Commission to monitor OSPs'
rates and any related surcharges after the rules adopted herein become effective.  We will revisit
whether informational tariffs by nondominant carriers still are needed if our rules achieve the
anticipated results.  We conclude that requiring OSPs to disclose how to obtain the price of a call to
prospective customers at the point of purchase, in addition to the availability of pricing and other
material information from the public tariffs of rivals, will allow consumers to exercise rational
purchasing decisions, encourage OSPs to initiate price reductions and other competitive programs,
and impose market-based discipline on OSPs.   Under TOCSIA, the rates and related surcharges or
fees in OSPs' informational tariffs may be changed without prior notice to consumers or to this
Commission.  As noted above, we have authority to waive the statutory requirement for such tariffs
if we determine that our rules adequately protect consumers from unfair and deceptive practices and
ensure their opportunity to make informed choices in making 0+ calls from payphones or other
aggregator sites such that tariffs are unnecessary.  
     
          
  VII.  PETITIONS FOR RECONSIDERATION OF THE 1992 PHASE I ORDER
                   (0+  PUBLIC DOMAIN PROPOSAL)

A.   Background

     44.  In 1992, the Commission considered the need to address competitive problems
resulting from the use of AT&T proprietary calling cards with the 0+ form of access.  Although
the Commission planned to examine a wide range of issues related to the OSP market segment, we
decided to take immediate action in response to parties' concerns and proposals.  MCI first
proposed restriction of proprietary IXC cards with 0+ access in April 1991.  MCI then proposed
that the Commission should mandate 0+ dialing as being in the "public domain," so that all carriers
issuing calling cards with instructions to use 0+ as the access method would be required to permit
access by other OSPs to billing and validation information for these cards, so that other OSPs would
be able to handle and bill for 0+ calls by such card holders.  Under that proposal, carriers that
wished to issue proprietary cards, in other words, not make billing and validation information
available to other OSPs, would be required to establish an 800 or 950 access method instead of using
0+.  In addition, MCI advocated that the Commission require that any OSP completing a calling
card call using 0+ access, where feasible, not charge more than the applicable rates of the carrier
issuing the card, so that consumers would not be assessed unexpectedly high rates.  This concept
was ultimately termed the "0+ Public Domain" proposal.
   
     45.  The Commission received expressions of concern that the 0+ public domain proposal
could undermine AT&T's card issuer identification (CIID) cards, which in 1992 were used by more
than 20 million people.  Conversely, some of AT&T's competitors claimed that their inability to
accept calls made with these cards seriously handicapped them in the operator services
marketplace.  In taking certain steps to protect consumers and mitigate competitive problems that
resulted from the use of proprietary IXC calling cards with 0+ access, the Commission released its
Phase I Order.

     46.  In its Phase I Order, the Commission considered the competitive problems resulting
from the use of AT&T proprietary calling cards with the 0+ form of access in the presubscription
environment, wherein an OSP other than AT&T could be the presubscribed OSP for aggregator
phones.  The Commission considered arguments which urged that adoption of a system of 0+
access for calling cards with open validation databases was essential to preserving a competitive
market segment for operator services.  The Commission also considered arguments that the 0+
public domain proposal would create confusion and inconvenience for IXC customers.  Consistent
with its paramount concern for consumer welfare, and in order to mitigate the competitive problems
that result from the use of proprietary IXC calling cards with 0+ access, the Commission required
AT&T to change its practices by revising its access instructions to card holders.  Specifically, the
Commission directed AT&T to (1) educate its cardholders to check payphone notices and to use 0+
access only at public phones identified as presubscribed to AT&T; (2) provide clear and accurate
access code dialing instructions on every proprietary card issued; and (3) make its 800 access code
number easier to use.  The Commission found that consumer education was the interim remedy best
suited to the immediate consumer and competitive concerns caused by AT&T's dialing instructions,
and declined to adopt the 0+ public domain proposal or other alternative interim remedies proffered
by AT&T's competitors.  Eight parties (petitioners) filed petitions for reconsideration of that
decision.

     47.  Petitioners advance various arguments in support of their requests: the Commission
failed to take appropriate action to eliminate anti-competitive problems posed by the CIID
program; the Commission's promise to consider BPP as a solution was inappropriate in light of
"immediate competitive problem(s);" the Commission failed to recognize that the CIID card is not
a common proprietary IXC card; the Commission acquiesced to AT&T's "threat" that it would
require access codes for its cardholders, thereby perpetuating a "monopolistic" environment; the
CIID card is not truly proprietary; and the Commission's actions are inconsistent with its requirement
of nondiscriminatory access to LEC validation data. Thus, petitioners argue, the Commission
should adopt the 0+ public domain proposal and require AT&T to open its billing and validation
database.  In this section, we address these issues and conclude that the petitions for reconsideration
should be denied.

B.   Discussion

     48.  As an initial matter, we conclude that petitioners restate arguments that they
previously raised and which the Commission fully considered in reaching its Phase I Order. Because
petitioners have offered no new facts or legal arguments in support of their petitions, as discussed
below, we find no basis to reconsider the Commission's decision not to adopt the 0+ Public Domain
proposal in the Phase I Order.   We also note that AT&T has been dropping its calling card billing
agreements with LECs, reportedly as part of its strategy to handle all calls on its own network rather
than sharing billing information with LECs.  AT&T's cancellation of its billing agreements with
LECs has rendered, or in the foreseeable future should render, petitioners' concerns in this regard
largely moot.  Thus, we deny the petitions for reconsideration of the Phase I Order.

     49.  LDDS argues that because AT&T permits shared access to its CIID card database by
"virtually any company that jointly provided long distance service with AT&T prior to divestiture,"
the Commission was incorrect in considering the database to be proprietary.  LDDS maintains that
AT&T should be required to permit access to its database by all other carriers, not just LECs.  This
argument, however, ignores the fact that AT&T nonetheless exercises control over access to its
database.  Nothing in the record suggests that any entity other than AT&T has control over its CIID
card validation database.  The fact that AT&T chooses to share access to its database with certain
other carriers (e.g., LECs) does not mean that it has relinquished dominion over the database or that
the card is not proprietary to AT&T's system.  The Commission did consider the option of requiring
AT&T to open its card validation database to all carriers.  The Commission noted, however, that
AT&T clearly stated that it would not open its database for its competitors' use and would implement
a system of strict access code calling.  The Commission found that to force this result would not
serve the public interest.

     50.  In its Phase I Order, the Commission attempted to address the issues of consumer
costs and a competitive OSP calling environment through the remedy of a mandated consumer
education program. CompTel asserts that "the record shows that the instance of misdirected
attempts by MCI or Sprint proprietary card holders is negligible because these carriers educate their
customers to use the card in conjunction with an access code."  The Commission adopted the
consumer education requirement, finding that any costs to AT&T of carrying out this remedy were
far outweighed by the gains in consumer convenience and competition.  The Commission further
noted that "[i]f AT&T educates all of its customers to check public phone signage before dialing, and
to dial 0+ only where AT&T is identified as the presubscribed carrier, its competitors should receive
significantly fewer misdirected calls."  Some petitioners argue that the Commission should order
an alternative remedy such as the recall and reissuance of 25 million AT&T CIID cards.  We
believe, however, that such a remedy would be even less effective because it would create even
greater customer confusion and market disturbances than existed prior to the Commission's consumer
education order.  The Commission's mandated customer education program attempts to reduce the
instances of unbillable CIID calls while not unreasonably disturbing the dialing habits of AT&T
cardholders.  This remedy is less burdensome and more consistent with the public interest than the
proposed recall and reissuance of all AT&T CIID cards.  The Commission's choice of a narrowly
tailored remedy has proven effective, in light of a four-year period in which consumers have used the
CIID card in accord with AT&T's new instructions and hundreds of OSPs continue to operate in
this market segment.

     51.  In October 1995, the Commission took note of the competitive concerns, including
AT&T's use of its proprietary CIID card, that petitioners had raised more than three years earlier
when they sought reconsideration of the Commission's Phase I Order.  In AT&T Reclassification
Order, the Commission found that AT&T's competitive position in the provision of calling card and
other operator services had not created market power in the overall interstate, domestic,
interexchange telecommunications market.  The Commission noted that because of requirements
adopted in the Phase I Order in the instant proceeding, AT&T no longer marketed its proprietary card
using a 0+ message to gain a competitive advantage with public phone presubscriptions. The
Commission further noted that, by 1992, MCI and Sprint, together, had issued over 32 million
proprietary cards.  The Commission stated that it, "has closely monitored operator services in
recent years, and [that] the primary problems that we have observed in this market segment have not
involved AT&T" and that ". . . to the extent that there are problems in this market segment, they
do not appear attributable to AT&T." 

               VIII.  INTRASTATE OPERATOR SERVICES

A.   Background

     52.  We note that with respect to operator service providers that compete with LECs to
provide operator services from aggregator locations, state regulation has varied from prohibiting
competitive operator services altogether (no longer permissible under Section 253 of the
Communications Act) to allowing such services on an unregulated basis.  More than thirty states
regulate long-distance charges for intrastate calls made through OSPs.   Illinois, for example,
permits a surcharge of no more than $2.50 and requires that per-minute rates be no higher than those
of the dominant provider. 

B.    Comments

     53.  Although we did not invite comment on this issue, NARUC and the NYCPB request
that we make clear that states are not precluded from adopting greater safeguards or more stringent
rules regarding OSP services and aggregator practices with regard to intrastate operator services than
those that we have adopted herein for interstate services. The Ohio Commission, which supports
adoption of oral disclosure rules as suggested by the Colorado Commission staff, urges that,
regardless of our decision regarding additional oral branding requirements, "any posting requirements,
either mandated by the FCC or by the individual states, be maintained."  Other state regulatory
agencies similarly oppose adoption of any rules that would preclude states from adopting more
safeguards or more stringent rules regarding OSPs and providers of operator services to correctional
institutions. Such state agencies assert that OSPs and providers of operator services to correctional
institutions should be prohibited from charging rates in excess of absolute rate caps on all operator
service calls and, if they are not, that any oral information required to be given by OSPs be provided
audibly and distinctly, in both English, and in the predominant second language, if any, of the
residents of the wire center served by the aggregator's telephone.  In addition, the oral information
should also provide the consumer with directions how to reach and use a carrier whose rates are less
than FCC established benchmarks.  The agencies suggest adoption of a rule that would not require
customers to pay any charges that exceeded any FCC established price cap or benchmark if the
required notice had not been given.  The Florida Commission is concerned that the use of
forbearance authority to eliminate interstate tariff requirements might have repercussions at the state
level. 

C.   Discussion

     54.  While we continue to receive many complaints about high rates for 0+ calls involving
both interstate and intrastate services from payphones, the policies and rules adopted herein are
applicable only to interstate services.  As requested by NARUC and the NYCPB, we clarify that
the states are not precluded from adopting greater safeguards or more stringent rules regarding OSP
services and aggregator practices with regard to intrastate operator services than those that we have
adopted herein for interstate services.  Any such state statute, regulation, or legal requirement,
however, may not violate Section 253 (a) of the Communications Act, must not be preempted
under Section 276(c) of the Communications Act, and must not contravene any other provision of
the Communications Act, or any Commission regulation or order.   We stress that we are adopting
minimum requirements that are not intended to preempt state requirements or safeguards.  We note,
for example, that the New York State Department of Public Service (NYDPS), which urged this
Commission to set benchmarks for OSPs' interstate rates, has rules that: 

          allow the tariffs of operator services providers [which are required to be filed by the
     New York State Public Service Commission] to take effect unless the maximum rates
     charged by such providers exceed the highest rates authorized by the commission for
     a local exchange telephone corporation or a dominant interexchange telephone
     corporation in the state for similar kinds of operator assisted telephone calls.  

     55.  The policies and rules we adopt herein do not preclude, for example, state actions that
prohibit aggregator surcharges or other PIFs for intrastate calls, or that cap OSP rates and related
PIFs, such as the rate cap in Florida tied to AT&T's rates that the Florida Commission  adopted
and the Pennsylvania Commission's proposed $1.00 cap on location surcharges on intrastate OSP
calls in Pennsylvania. As requested by Citizens United for Rehabilitation of Errants (C.U.R.E.) with
regard to intrastate rates for collect calls from prisons, we also make clear that our action herein
similarly does not preempt state rate caps that may be lower than any rate benchmark proposals for
interstate operator services considered, but not adopted in this proceeding.  We note, however, that
some commenters believe that interstate telecommunications services ratepayers should subsidize
providers of operator services whose intrastate operator service rates and surcharges have been
capped by a state at a level that is alleged to be "unfair" or which precludes recovery of the carrier's
alleged "reasonable" costs and profit. Any such subsidy or cross-subsidization would inhibit
competition at the intrastate level, contrary to our policies encouraging competition in all
telecommunications markets.  We are unaware of any public policy reason why users of interstate
operator services should be required to subsidize users of intrastate operator services.

          
                 IX.  0+ CALLS BY PRISON INMATES

A.   Background

     56.  In our OSP Reform Notice, we considered calls from inmate-only telephones in
prisons, jails and other correctional or similar institutions (hereinafter prisons) separately from 0+
calls from aggregator locations for two primary reasons.    

          First, neither TOCSIA nor our rules require telephones for use only by prison inmates
     to be unblocked.  Thus, callers from these facilities are generally unable to select the
     carrier of their choice; ordinarily they are limited to the carrier selected by the prison. 
     A disclosure requirement can not directly aid such callers.  Second, prisons often
     install and maintain security equipment for a number of legitimate reasons involving
     security and other government prerogatives. Given that prisons would likely seek to
     recover the cost of any equipment employed for legitimate security reasons, we would
     expect that competitive prices for inmate-only telephone calls from prisons could be
     higher than the rates of calls from ordinary locations.  The record in this proceeding
     indicates, however, that at least one prison carrier, Gateway, has stated that it is
     willing and able to provide calls from prisons as well as the standard security
     equipment at rates comparable to those charged by AT&T, MCI and other large
     carriers. 

We invited comment on whether the public interest would be better served by some remedy other
than BPP for prison inmate calling, including requiring oral full price disclosure to the called party
before connecting the inmate call.

B.   Discussion     

     57.  We are persuaded by comments of the United States Attorney General, other federal
officials, and nearly all who have commented on this issue that implementation of BPP for outgoing
calls by prison inmates should not be adopted.  With regard to such calls, it has generally been the
practice of prison authorities at both the federal and state levels, including state political subdivisions,
to grant an outbound calling monopoly to a single IXC serving the particular prison.  This approach
appears to recognize the special security requirements applicable to inmate calls.  Moreover, requiring
BPP for inmate calls in the absence of BPP for 0+ calls might place the cost of implementation on the
recipient of such calls, thus exacerbating the problem of high-cost calls.  Finally, as the Florida
Commission noted, prisons may allow inmates to place calls to pre-approved 800 numbers of their
families and legal counsel, or, as the Florida Commission has done, allow them to use pre-paid debit
cards.  Such options would exert downward pressure on high interstate rates for 0+ calls from
inmate phones, diminish the ability of a prison and its PIC to set supracompetitive rates, and thus
lessen or obviate the need for further federal regulations concerning 0+ rates in this submarket.  

     58.    The Commission has concluded that the definition of aggregator "does not apply to
correctional institutions in situations in which they provide inmate-only phones."  It does not
necessarily follow, however, that we should not adopt consumer protection rules similar to those
applicable to providers of 0+ service at aggregator locations.  The Commission continues to receive
complaints about inmate service providers' practices that result in excessive charges being collected
from consumers for interstate collect calls.  

     59.  For the reasons set forth in Section IV above, however, we decline to establish price
benchmarks or rate caps.  Although, prison authorities have considerable power to ensure that rates
are just and reasonable by virtue of the monopoly contracts they confer, they also have the power and
the incentive to contract with OSPs that will give them the largest revenues from inmate phones.  If
we set caps or benchmarks, carriers would have little incentive to contract to offer services at a lower
rate.  Rather, because rates must be filed with the Commission and must conform to the just and
reasonable requirements of Section 201 of the Act, we believe that it is more efficient and less
intrusive to proceed on a case-by-case basis, should the rules we adopt herein not lead to reasonable
rates for calls from inmate phones.  

     60.  Although we do not require BPP or benchmarks, we do agree with commenters that
consumers, in this case the recipients of collect calls from inmates, require additional safeguards to
avoid being charged excessive rates from a monopoly provider.  We conclude, therefore,  that we
should require all providers of operator services from inmate-only telephones to identify orally
themselves to the party to be billed for any interstate call and orally disclose to such party how,
without having to dial a separate number, it may obtain the charge for the first minute of the call and
the charge for additional minutes, prior to billing for any interstate call from such a telephone.  Just
as OSPs may give the party to be billed for an interstate call the option to by-pass receiving such rate
information, providers of operator services for interstate calls initiated by a prison inmate similarly
may give the party to be billed the option to by-pass receiving rate information.  Even if, arguendo,
restrictions on all dial-around calls can still be justified for inmate-only telephones, rules requiring
providers to identify orally themselves to both parties to a collect call and to disclose to the party to
be billed how to obtain specific rate information without charge, can eliminate some of the abusive
practices that have led to complaints. Specifically, the billed party can decide whether to accept the
call and can limit the length of the call. 

     61.  Finally, just as it would be contrary to our policies encouraging competition in all
telecommunication markets to have intrastate operator services from aggregator locations subsidized
by interstate service ratepayers, it would similarly be an undue burden on interstate commerce to
have costs of providing intrastate service to prison inmates cross-subsidized by interstate service
ratepayers.   We note that most calls by prison inmates appear to be intrastate rather than interstate. 
 


                     X.   PROCEDURAL MATTERS

A.   Final Regulatory Flexibility Analysis

     62.  As required by the Regulatory Flexibility Act (RFA), an Initial Regulatory Flexibility
Analysis (IRFA) was incorporated in the OSP Reform Notice.  The Commission sought written
public comments on the proposals in the OSP Reform Notice, including on the IRFA.  The
Commission's Final Regulatory Flexibility Analysis (FRFA) in this Order conforms to the RFA, as
amended by the Contract With America Advancement Act of 1996 (CWAAA), Pub. L. No. 104-121,
110 Stat. 847 (1996). The Commission is issuing this Order to protect consumers from excessive
charges in connection with interstate 0+ operator services for payphone and prison inmate calls by
ensuring that they are aware of their right to ascertain the specific cost for such calls so that they may
hang up before incurring any charge that they believe is excessive.

1.   Need for and Objectives of this Report and Order and the Rules Adopted Herein

     63.  In the 1996 Act, Congress sought to establish "a pro-competitive, de-regulatory
national policy framework" for the United States telecommunications industry.  One of the principal
goals of the telephony provisions of the 1996 Act is promoting increased competition in all
telecommunications markets, including those that are already open to competition, particularly long-
distance services markets.

     64.  In this Second Report and Order, we adopt rules requiring carriers to orally disclose
to consumers how to obtain the cost of operator services for interstate calls from aggregator locations
and from prison inmate-only telephones.   The objective of the rules adopted in this Order is to
implement as quickly and effectively as possible the national telecommunications policies embodied
in the 1996 Act and to promote the development of competitive, deregulated markets envisioned by
Congress.  In doing so, we are mindful of the balance that Congress struck between this goal of
bringing the benefits of competition to all consumers and its concern for the impact of the 1996 Act
on small business entities.

2.   Summary of Significant Issues Raised by the Public Comments in Response to the IRFA

     65.  In the OSP Reform Notice, the Commission performed an IRFA.  In the IRFA, the
Commission found that the rules it proposed to adopt in this proceeding may have an impact on small
business entities as defined by section 601(3) of the RFA.  In addition, the IRFA solicited comment
on alternatives to the proposed rules that would minimize the impact on small entities consistent with
the objectives of this proceeding.

3.   Comments on the IRFA

     66.  Only one comment specifically addressed the Commission's IRFA.  ACTA, a national
trade association representing interexchange carriers, strongly supports adoption of a price disclosure
requirement for all 0+ calls to provide consumers with the information necessary to make informed
choices, thus doing away with the need for alternative proposals setting benchmark rates to trigger
oral disclosure requirements.  ACTA asserts that adoption of the alternative benchmark proposal
would lead to anti-competitive and discriminatory results and therefore does not comply with the
RFA.

     67.  In support thereof, ACTA asserts: that basing benchmarks on the rates of the three
largest IXCs (the Big Three) is unsound because it ignores greater underlying costs borne by smaller
carriers and economic disparities which exist between the Big Three carriers and all other OSPs;  that
the Big Three may recover their costs through cross-subsidization and arbitrary cost allocations that
are possible because of their multi-market operations, whereas small providers can only recover their
costs directly through rates charged consumers;  that because all or most small carriers will be
required to make oral disclosures, the public will be conditioned to associate small providers with
excessive rates;  that OSPs will be forced to charge rates below the Big Three and below their own
costs, plus a reasonable profit, to get consumers to use their services; that the benchmark proposal
thus has a confiscatory effect; and, accordingly, the already competitively disadvantaged smaller OSPs
will not be able to sustain themselves in the marketplace, contrary to broad general policies seeking
greater participation by smaller companies in competing in the OSP market, and the more specific
policy that the Commission must apply in its RFA analysis.

     68.   Further, ACTA contends that proposed benchmark rate elements such as time of day
and distance do not affect underlying costs, are contrary to the industry's growing reliance on
nationwide flat rates, and are inappropriate and unduly burdensome on small businesses.  Moreover,
ACTA contends that the list of characteristics proposed by the Commission does not take into
account actual costs necessary to compete in the OSP marketplace such as PIFs and commissions,
further skewing the competitive environment adversely to small businesses.  According to ACTA, a
benchmark margin of two to three times that of the Big Three benchmark carriers is needed to cover
differences in underlying costs, not the 15 percent margin on which the Commission sought comment. 
ACTA also contends that the proposed benchmark methodology provides the benchmark carriers
with the opportunity to engage in anti-competitive conduct and predatory pricing.

     69.  Although not specifically filing an IRFA analysis, other commenters oppose adoption
of rules that would unduly burden small businesses.   Cleartel/ConQuest assert, arguendo, that even
if a rate benchmark could be justified on the basis of consumer expectations, any standard disclosure
that only applies to the smaller OSPs, and not to the three largest, would be arbitrary and
discriminatory, would place an uneven burden on smaller OSPs, and would stigmatize all carriers
other than the big three for the traveling public.  NTCA asserts that industry-wide mandated BPP
deployment is not economically feasible and would adversely affect small and rural LECs.  

4.   Discussion

     70.  We agree with ACTA's views in regard to our IRFA and have concluded that the
minimum rules adopted herein are necessary to protect consumers and will not unduly burden small
OSPs or other small business entities.  Such rules will aid consumers, including small business entities,
avoid incurring excessive charges for 0+ operator services. The rules also provide OSPs and potential
OSP competitors, including small business firms, a level playing field in that they apply equally to all
OSPs, and, unlike benchmark proposals, do not discriminate against smaller OSP companies. 
Further, we are terminating our inquiry into BPP as urged by NTCA on behalf of small and rural
LECs.  Moreover, as urged by many commenters, including small business entities, we have not
adopted various benchmark proposals or other price control rules set forth in this proceeding.   Based
on the record in this proceeding, we conclude that, contrary to the initial tentative conclusion in OSP
Reform Notice, for the Commission to engage in price regulation of OSPs' rates, including benchmark
regulation, would involve micro-managing the rates of nondominant carriers, including hundreds of
small business companies. Such regulation would be the antithesis of the deregulatory thrust of the
Regulatory Flexibility Act and the 1996 Act. 

5.   Description and Estimates of the Number of Small Entities to Which the Rules Will
Apply

     71.  The rules adopted require that hundreds of nondominant interexchange carriers
implement certain information disclosure procedures regarding their rates, and any related fees of 
the owners of the premises where the telephone instrument is located.   Small entities may feel some
economic impact in additional message production, recording costs, and equipment retrofitting or
replacement costs due to the policies and rules adopted.  Small providers of operator services also
may experience greater live operator costs initially until automated terminal equipment and network
systems are modified to replace the need for intervention of live operators.

     72.  For the purposes of this analysis, we examine the relevant definition of "small entity"
or "small business" and apply this definition to identify those entities that may be affected by the rules
adopted in this Second Report and Order. The RFA defines a "small business" to be the same as a
"small business concern" under the Small Business Act, 15 U.S.C.  632, unless the Commission has
developed one or more definitions that are appropriate to its activities.  A "small business concern"
is one that:  (1) is independently owned and operated; (2) is not dominant in its field of operation; and
(3) meets any additional criteria established by the Small Business Administration (the SBA).  The
SBA has defined a small business for Standard Industrial Classification (SIC) category 4813
(Telephone Communications, Except Radiotelephone) to be small entities when they have fewer than
1,500 employees.  We first discuss generally the total number of telephone companies falling within
this SIC category.  Then, we refine further those estimates and discuss the number of carriers falling
within relevant subcategories.

     73.  Total Number of Telephone Companies Affected.   The United States Bureau of the
Census ("the Census Bureau") reports that, at the end of 1992, there were 3,497 firms engaged in
providing telephone services, as defined therein, for at least one year.  This number contains a
variety of different categories of carriers, including local exchange carriers, interexchange carriers,
competitive access providers, cellular carriers, operator service providers, pay telephone operators,
personal communications service (PCS) providers, covered specialized mobile radio (SMR)
providers, and resellers.  It seems certain that some of those 3,497 telephone service firms may not
qualify as small entities, small interexchange carriers, or resellers of interexchange services, because
they are not "independently owned and operated."  For example, a PCS provider that is affiliated
with an interexchange carrier having more than 1,500 employees would not meet the definition of a
small business.  It seems reasonable to conclude, therefore, that fewer than 3,497 telephone service
firms are small entity telephone service firms that may be affected by this Order.

     74.  Wireline Carriers and Service Providers.  The SBA has developed a definition of small
entities for telecommunications companies other than radiotelephone (wireless) companies
(Telephone Communications, Except Radiotelephone).  The Census Bureau reports that there were
2,321 such telephone companies in operation for at least one year at the end of 1992. According
to the SBA's definition, a small business telephone company other than a radiotelephone company is
one employing fewer than 1,500 persons.  All but 26 of the 2,321 non-radiotelephone companies
listed by the Census Bureau, 2,295 companies were reported to have fewer than 1,000 employees. 
Thus,  even if all 26 of those companies had more than 1500 employees, there would still be 2,295
non-radiotelephone companies that might qualify as small entities based on these employment
statistics.  Because it seems certain, however, that some of these carriers are not independently owned
and operated, this figure necessarily overstates the actual number of  non-radiotelephone companies
that would qualify as "small business concerns" under the SBA's definition.  Consequently, we
estimate using this methodology that there are fewer than 2,295 small entity telephone
communications companies (other than radiotelephone companies) that may be affected by the
decisions and rules adopted in this Order.

     75.  Interexchange Carriers.  Neither the Commission nor the SBA has developed a
definition of small entities specifically applicable to providers of interexchange services (IXCs).  The
closest applicable definition under SBA rules is for telephone communications companies other than
radiotelephone (wireless) companies.  The most reliable source of information regarding the number
of interexchange carriers nationwide of which we are aware appears to be the data that the
Commission collects annually in connection with the TRS Worksheet.  According to our most recent
data, 130 companies reported that they were engaged in the provision of interexchange services. 
Although it seems certain that some of these carriers are not independently owned and operated, or
have more than 1,500 employees, we are unable at this time to estimate with greater precision the
number of interexchange carriers that would qualify as small business concerns under SBA's
definition.  Consequently, we estimate that there are fewer than 130 small entity interexchange
carriers that may be affected by the decisions and rules adopted in this Order. 

     76.  Resellers.  Neither the Commission nor SBA has developed a definition of small
entities specifically applicable to resellers.  The closest applicable definition under SBA rules is for
all telephone communications companies.  The most reliable source of information regarding the
number of resellers nationwide of which we are aware appears to be the data that we collect annually
in connection with the TRS Worksheet.  According to our most recent data, 260 companies reported
that they were engaged in the resale of telephone services.  Although it seems certain that some of
these carriers are not independently owned and operated, or have more than 1,500 employees, we
are unable at this time to estimate with greater precision the number of resellers that would qualify
as small business concerns under SBA's definition.  Consequently, we estimate that there are fewer
than 260 small entity resellers that may be affected by the decisions and rules adopted in this Order.

     77.  Operator Service Providers. Carriers engaged in providing interstate operator services
from aggregator locations (OSPs) currently are required under Section 226 of the Communications
Act to file and maintain informational tariffs at the Commission.  The number of such tariffs on file
thus appears to be the most reliable source of information of which we are aware regarding the
number of OSPs nationwide, including small business concerns, that will be affected by decisions and
rules adopted in this Order.  As of August 19, 1997, approximately 630 carriers had informational
tariffs on file at the Commission.  Although it seems certain that some of these carriers are not
independently owned and operated, or have more than 1,500 employees, we are unable at this time
to estimate with greater precision the number of OSPs that would qualify as small business concerns
under SBA's definition.  Consequently, we estimate that there are fewer than 630 small entity OSPs
that may be affected by the decisions and rules adopted in this Order.  

     78.  Local Exchange Carriers.  Consistent with our prior practice, we shall continue to
exclude small incumbent providers of local exchange services (LECs) from the definition of "small
entity" and "small business concerns" for the purpose of this FRFA.  Because any small incumbent
LECs that may be subject to these rules are either dominant in their field of operations or are not
independently owned and operated, consistent with our prior practice, they are excluded from the
definition of "small entity" and "small business concerns."  Accordingly, our use of the terms "small
entities" and "small businesses" does not encompass small incumbent LECs.  Out of an abundance
of caution, however, for regulatory flexibility analysis purposes, we will consider small incumbent
LECs within this analysis and use the term "small incumbent LECs" to refer to any incumbent LECs
that arguably might be defined by the  SBA as "small business concerns."   
     79.  Neither the Commission nor the SBA has developed a definition of small LECs.  The
closest applicable definition under SBA rules is for telephone communications companies other than
radiotelephone (wireless) companies (SIC 4813) (Telephone Communications, Except
Radiotelephone) as previously detailed above.  Our alternative method for estimation utilizes the data
that we collect annually in connection with the TRS Worksheet.  This data provides us with the most
reliable source of information of which we are aware regarding the number of LECs nationwide. 
According to our most recent data, 1,347 companies reported that they were engaged in the provision
of local exchange services.  Although it seems certain that some of these carriers are not
independently owned and operated, or have more than 1,500 employees, we are unable at this time
to estimate with greater precision the number of incumbent LECs that would qualify as small business
concerns under SBA's definition.  Consequently, we estimate that there are fewer than 1,347 small
LECs (including small incumbent LECs) that may be affected by the rules adopted in this Order.

     80.  In addition, the rules adopted in this Order may affect companies that analyze
information contained in OSPs' tariffs.  The SBA has not developed a definition of small entities
specifically applicable to companies that analyze tariff information.  The closest applicable definition
under SBA rules is for Information Retrieval Services (SIC Category 7375).  The Census Bureau
reports that, at the end of 1992, there were approximately 618 such firms classified as small
entities.  This number contains a variety of different types of companies, only some of which
analyze tariff information.  We are unable at this time to estimate with greater precision the number
of such companies and those that would qualify as small business concerns under SBA's definition. 
Consequently, we estimate that there are fewer than 618 such small entity companies that may be
affected by the decisions and rules adopted in this Order.

6.   Description of Projected Reporting, Recordkeeping, and Other Compliance
Requirements 

     81.  The rules adopted require carriers to disclose audibly to consumers how to obtain the
price of a call before it is connected.   In this section of the FRFA, we analyze the projected reporting,
recordkeeping, and other compliance requirements that may apply to small entities as a result of this
Order.  As a part of this discussion, we mention some of the types of skills that will be needed to
meet the new requirements.  

     82.  Nondominant interexchange carriers, including small nondominant interexchange
carriers, will be required to provide oral information to away-from-home callers, advising them how
to obtain the cost of an interstate 0+ call, and similarly to disclose to the party to be billed for collect
calls from telephones set aside for use by prison inmates how to obtain the cost of the call before they
could be billed for such calls.  This change in the manner of conducting their business may require the
use of technical, operational, accounting, billing, and legal skills. 

7.   Significant Alternatives and Steps Taken to Minimize Significant Economic Impact on
a Substantial Number of Small Entities Consistent with Stated Objectives
  
     83.  In this section, we describe the steps taken to minimize the economic impact of our
decisions on small entities and small incumbent IXCs, including the significant alternatives considered
and rejected.  To the extent that any statement contained in this FRFA is perceived as creating
ambiguity with respect to our rules or statements made in preceding sections of this Order, the rules
and statements set forth in those preceding sections shall be controlling.
     
     84.  We believe that our action requiring carriers to orally disclose how to obtain the price
of their interstate 0+ operator services up front at the point of purchase will facilitate the development
of increased competition in the interstate, domestic, interexchange market, thereby benefitting all
consumers, some of which are small business entities.   Specifically, we find that the rules adopted
herein with respect to interstate, domestic, interexchange 0+ services will enhance competition among
OSPs, promote competitive market conditions, and achieve other objectives that are in the public
interest, including establishing market conditions that more closely resemble an unregulated
environment.   The decision not to require detariffing of OSP informational tariffs will also allow
businesses, including small business entities, that audit and analyze information contained in tariffs
to continue. 

     85.  We have rejected several alternatives to the additional oral disclosure requirements
and rules adopted herein, including proposals (1) to establish a costly billed party preference system
for 0+ calls from aggregator and prison locations; (2) to micro-manage nondominant carriers' prices
for such calls, including proposals to cap rates, establish annual FCC benchmarks, and to require cost
justification for rates that exceed such benchmarks; (3) requiring oral warnings to prospective
consumers comparing a carrier's rates with lower rates of the largest carriers; and (4) mandating 0+
in the public domain. Rejection of these alternatives helps to ensure that small carriers will not be
unnecessarily burdened.  The rules adopted herein are applicable only to limited interexchange 0+
calls from payphones, or other aggregator locations, and from inmate phones in correctional
institutions.  They are not applicable to international calls, intrastate calls, and interstate 0+ calls made
by callers from their regular home or business.  The rules also are inapplicable to calls that are
initiated by dialing an access code prefix, such as 10333 or 1-800-877-8000, whereby callers may
circumvent placing the call through the long-distance carrier that is presubscribed for that line.

8.   Report to Congress

     86.  The Commission shall send a copy of this Final Regulatory Flexibility Act Analysis,
along with this Second Report and Order, in a report to Congress pursuant to the Small Business
Regulatory Enforcement Fairness Act of 1996, 5 U.S.C.  801(a)(1)(A).  A copy of this FRFA will
also be published in the Federal Register.


B.   Final Paperwork Reduction Act of 1995 Regulatory Analysis

     87.  This Second Report and Order contains a modified information collection.  As
required by the Paperwork Reduction Act of 1995, Pub. L. No. 104-13, the OSP Reform Notice
invited the general public and the Office of Management and Budget (OMB) to comment on
proposed changes to the Commission's information collection requirements contained therein.  The
changes to our information collection requirements on which we sought comment in the OSP Reform
Notice included:  (1) the elimination of tariff filings by nondominant interexchange carriers for
interstate, domestic, interexchange operator services from aggregator locations; and (2) requiring
such carriers to disclose the cost of a call to consumers if the call was made using that carrier. 

     88.   On September 8, 1996, OMB approved, with comments, the proposed changes to
our information collection requirements contained in OSP Reform Notice, in accordance with  the
Paperwork Reduction Act.   OMB asked us to address whether the consumer would not be better
served by requiring all OSPs to inform the caller of the cost of the call "regardless of any
benchmark."  Because we have concluded that we should adopt a disclosure requirement applicable
to all OSPs, and not a disclosure rule based on benchmark rates, concerns that OMB expressed in
this regard have been met or rendered moot. 

     89.  OMB also stated that we should calculate and include, as a cost burden, the cost of
installing the systems that will inform the consumer of the cost of a call   Although we  invited
comment on the costs and benefits of requiring all OSPs to disclose their rates on all 0+  calls from
aggregator locations, the cost information we received was generally quite  conclusionary rather than
specific in nature.   The specific cost data filed by some parties vary.  Intellicall states that its
ULTRATEL store-and-forward payphones have no internal memory left to accommodate additional
functionalities, let alone voluminous rate structures [and] cannot be retrofitted . . . to increase their
memory capacity."  With respect to its new generation ASTRATEL store-and-forward payphones,
Intellicall estimates that "it would cost approximately $200,000 and would require between eight and
fourteen months, barring unforeseen circumstances to, among other things, develop, test, and  debug 
the computer software necessary to install the rate structures into the payphone memory, and  import 
the rate structures into the payphone memory."  GTE states that "[m]echanized equipment could
possibly be enhanced to quote rates prior to the call connection, but this would require significant
capital outlays and would involve several years lead time to accomplish."  GTE further states that
its "current mechanized equipment (costing approximately $22 million in 1993) would most likely
require a complete replacement for such a modification."  MCI  estimates that it would cost an
additional $0.40 per call if all calls have to be sent to a live operator in the near term.  Sprint
estimates that the labor cost of a rate disclosure would approximate $0.35 per call.  U S WEST
estimates that to mechanize a system that "would allow for a data base dip for every 0+/- call" would
add about $0.50 to each call.  Thus, specific cost data of record is sparse and cost estimates of
those who have commented vary considerably.   

     90.  The new rules adopted herein require OSPs to orally advise consumers of their current
right to obtain rate quotes at the time of purchase on interstate, domestic, interexchange 0+ calls.  
The rules are inapplicable to  0- calls.   Further, we are not requiring real time rate quotes on every
0+ call, only when callers request such price information at the time of purchase.  Most if not all who
have commented agree with our conclusion that the cost of installing the systems necessary to
implement the rules adopted herein should prove to be much less than the foregoing estimates and
much less than the estimated one billion dollar cost of implementing an alternative billed party
preference routing system for OSP interstate calls. 

     91.  In this Order, we adopt certain changes to our information collection requirements on
which we sought comment in the OSP Reform Notice.  Specifically, we have adopted rules governing
the filing of informational tariffs by OSPs for their interstate, domestic, interexchange 0+ services. 
Implementation of these requirements will be subject to approval by OMB as prescribed by the
Paperwork Reduction Act.

                                 
                        XI.  CONCLUSION

     92.  We conclude that we should amend our rules to require OSPs to provide additional
oral information to away-from-home callers, disclosing the cost of a call, including any aggregator
surcharge for a 0+ interstate call from that aggregator location, before such a call is connected, at the
consumer's option whether to receive such cost information.  We also amend our rules to require
carriers providing interstate service to prison inmates to orally disclose their identity to the party to
be billed for such calls and, if such party elects to receive rate quotes for the call, to orally disclose
the charges for the call before connecting the call.  Finally, we deny petitions for reconsideration of
the Phase I Order in this proceeding and terminate this proceeding.

                     XII.  ORDERING CLAUSES

     93.  Accordingly, IT IS ORDERED, pursuant to Sections 1, 4(i), 4(j), 10, 201-205,  215,
218, 226, and 254 of the Communications Act of 1934, as amended, 47 U.S.C.  151, 154(i),
154(j), 160, 201-205, 215, 218, 226, 254, that the policies, rules, and requirements set forth herein
ARE ADOPTED.

     94.  IT IS FURTHER ORDERED that 47 C.F.R. Part 64, Subpart G IS AMENDED  as
set forth in Appendix A, effective July 1, 1998, except that the effectiveness of Section 64.703(a)(4)
and Section 64.710 is stayed with respect to embedded store-and-forward telephone equipment until
fifteen months thereafter.  

     95.  IT IS FURTHER ORDERED that the request by Intellicall, Inc., filed March 21,
1997, seeking exemption of its ULTRATEL payphones from the rules adopted herein IS DENIED.

     96.  IT IS FURTHER ORDERED that the petitions for reconsideration of the
Commission's Phase I Order in this docket, filed by Competitive Telecommunications Association,
International Telecharge Incorporated, LDDS Communications, Inc., MCI Telecommunications
Corp., PhoneTel Technologies, Inc., Polar Communications Corporation, Southwestern Bell
Telephone Company, and Value-Added Communications ARE DENIED.
     
     97.  IT IS FURTHER ORDERED that the Office of Public Affairs, Reference Operations
Division, shall mail a copy of this Report and Order to the Chief Counsel for Advocacy of the Small
Business Administration, in accordance with section 603(a) of the Regulatory Flexibility Act, 5
U.S.C.  603(a)(1981).  The Secretary shall cause a summary of this Order to appear in the Federal
Register.

                              FEDERAL COMMUNICATIONS COMMISSION


                              Magalie Roman Salas
                              Secretary                                
                           APPENDIX A
                                
                        Rule Amendments
                                
                 PART 64 - MISCELLANEOUS RULES
                   RELATING TO COMMON CARRIERS

            Part 64 of Title 47 of the Code of Federal Regulations is amended as follows:

           1.  The authority citation for Part 64 continues to read as follows:

           AUTHORITY: Sec. 4, 48 Stat. 1066, as amended; 47 U.S.C. 154, unless otherwise noted. 
Interpret or apply secs. 201, 218, 226, 228, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 201, 218, 226, 228,
unless otherwise noted.

           2.  Part 64, Subpart G, Section 64.703 is amended by removing the word "and" at the end
of subsection (a)(2) and the period at the end of subsection (a)(3)(iii), and by adding a semicolon and the word
"and" at the end of subsection (a)(3)(iii), and by adding the following new subsection after  subsection (a)(3): 


           (4) Disclose, audibly and distinctly to the consumer, at no charge and before connecting any
interstate, domestic, interexchange  0+ call,  how to obtain the total cost of the call, including any aggregator
surcharge, or the maximum possible total cost of the call, including any aggregator surcharge, before providing
further oral advice to the consumer on how to proceed to make the call.  The oral disclosure required in this
subsection shall instruct consumers that they may obtain applicable rate and surcharge quotations either, at
the option of the provider of operator services, by dialing no more than two digits or by remaining on the line.


           3. Part 64, Subpart G, is further amended by adding the following  Section 64.709:

            64.709   Informational tariffs. 

           (a) Informational tariffs filed pursuant to 47 U.S.C.  226(h)(1)(A) shall contain specific
rates expressed in dollars and cents for each interstate operator service of the carrier and shall also contain
applicable per call aggregator surcharges or other per call fees, if any, collected from consumers by the carrier
or any other entity.

           (b) Per call fees, if any, billed on behalf of aggregators or others, shall be specified in
informational tariffs in dollars and cents.

           (c) In order to remove all doubt as to their proper application, all informational tariffs must
contain clear and explicit explanatory statements regarding the rates, i.e., the tariffed price per unit of service,
and the regulations governing the offering of service in that tariff.
           
           (d) Informational tariffs shall be accompanied by a cover letter, addressed to the Secretary
of the Commission, explaining the purpose of the filing. 

             (1) The original of the cover letter shall be submitted to the Secretary without  attachments,
along with FCC Form 159, and the appropriate fee to the Mellon Bank, Pittsburgh, Pennsylvania.  

              (2) Copies of the cover letter and the attachments shall be submitted to the Secretary's
Office, the Commission's contractor for public records duplication, and the Chief, Tariff and Price Analysis
Branch, Competitive Pricing Division.
                              
           (e) Any changes to the tariff shall be submitted under a new cover letter with a complete copy
of the tariff, including changes.

             (1)  Changes to a tariff shall be explained in the cover letter but need not be symbolized on
the tariff pages.

             (2) Revised tariffs shall be filed pursuant to the procedures specified in this section.

           4.  Part 64, Subpart G, is further amended by adding the following new Section 64.710:

 64.710   Operator services for prison inmate phones

           (a) Each provider of inmate operator services shall:

            (1) Identify itself, audibly and distinctly, to the consumer before connecting any interstate,
domestic, interexchange telephone call and disclose    
           immediately thereafter how the consumer may obtain rate quotations, by dialing no more than
two digits or remaining on the line,  for the first minute of the call and for additional minutes, before providing
further oral advice to the consumer how to proceed to make the call;

            (2) Permit the consumer to terminate the telephone call at no charge before the call is
connected; and

            (3) Disclose immediately to the consumer, upon request and at no charge to the consumer--

                (i) The methods by which its rates or charges for the call will be collected; 
                           and 

               (ii) The methods by which complaints concerning such rates, charges or 
                                        
                                                               collection practices will be resolved.

           (b)  As used in this subpart:

            (1) Consumer means the party to be billed for any interstate, domestic, interexchange 0+
call from an inmate telephone;

            (2) Inmate telephone means a telephone instrument set aside by authorities of a prison or
other correctional institution for use by inmates.

            (3) Inmate operator services means any interstate telecommunications service initiated from
an inmate telephone that includes, as a component, any automatic or live assistance to a consumer to arrange
for billing or completion, or both, of an interstate telephone call through a method other than:

              (i) Automatic completion with billing to the telephone from which the call 
                                                                                          originated;
or
 
                       (ii) Completion through an access code used by the consumer, with billing                            
                        to an account previously established with the carrier by the consumer;

            (4) Provider of inmate operator services means any common carrier that provides 
outbound interstate, domestic, interexchange operator services from inmate telephones.

                            APPENDIX B

Parties Filing Comments 

Actel, Inc. (ACTEL)

America's Carriers Telecommunication Association (ACTA)

American Friends Service Committee (AFSC)

American Network Exchange, Inc. (AMNEX)                
                                        
           

American Public Communications Council (APCC)          
                              

Ameritech

AT&T Corp. (AT&T)

Bell Atlantic Telephone Companies, BellSouth Corporation, and NYNEX Telephone Companies (Bell
Atlantic/BellSouth/NYNEX)

People of the State of California and the Public Utilities Commission of the State of California (California
Commission)                                            
           

Citizens United for Rehabilitation of Errants (C.U.R.E.)

Cleartel Communications, Inc. and ConQuest Operator Services Corp. (Cleartel/ConQuest)   

Communications Central Inc. (CCI)                      
                                        
                                        

Competitive Telecommunications Association (CompTel)   
                                        

Consolidated Communications Public Services Inc. (CCPS)

Gateway Technologies, Inc. (Gateway)                   
                                        
                              

GTE Service Corporation (GTE)           
                                        
                                        

Hotel Communications, Inc. (HCI)                       
                                        
                                        

Inmate Calling Services Providers Coalition (Coalition)     
                                        
           

Intellicall Companies (Intellicall)                    
                                        
                                        

InVision Telecom, Inc.  (InVision)                     
                                        
                                        

MCI Telecommunications Corporation (MCI)                    
                                        
           

National Association of Attorneys General (the Attorneys General)

National Association of Regulatory Utility Commissioners (NARUC)

National Telephone Cooperative Association (NTCA)      
                                        
           

New Jersey Payphone Association (NJPA)                 
                                        
                              

New York State Consumer Protection Board (NYSCPB)

New York State Department of Public Service (NYDPS)    
                                        
           

North Dakota Public Service Commission (North Dakota Commission)

Office of the Ohio Consumers' Counsel (OCC)                 
                                        
                                        

Oncor Communications, Inc. (Oncor)

One Call Communications, Inc. d/b/a Opticom (Opticom)  
                                        
           

Operator Service Company (OSC)                         
                                        
                                        

Pacific Telesis Group (Pacific Telesis)

Public Utilities Commission of Ohio (Ohio Commission)

Southwestern Bell Telephone Company (SWBT)                  
                                        
           

Sprint Corporation (Sprint)             
                                        
                                        
           

Telecommunications Resellers Association (TRA)         
                                        
                              

U.S. Long Distance, Inc. (USLD)

U.S. Osiris Corporation (USOC)                         
                                        
                                        

U S WEST, Inc. (U S WEST)               
                                        
                                        

Virginia State Corporation Commission Staff (Virginia Commission)

Parties Filing Reply Comments

APCC       

AT&T

Bell Atlantic/BellSouth/NYNEX

CCI

CompTel

C.U.R.E.

Digital Network Services, Inc. (DNSI)

Gateway

GTE

Coalition

Intellicall, Inc., Intellicall Operator Services, Inc., Network Operator Services, Inc. (Companies)

InVision

State of Maine Public Utilities Commission, State of Montana Public Service Commission, New Mexico
State Corporation Commission, State of Vermont Department of Public Service

MCI

NTCA

OCC

Oncor

Pacific Telesis

Peoples Telephone Company, Inc. (Peoples)

Sprint

SWBT

TRA

Teltrust Communications Services, Inc. (Teltrust)

U S WEST


Commenters Filing Late or Ex Parte  (Not inclusive)
AT&T

Competitive Telecommunications Association (CompTel)

Martha Dickerson

Richard Foley

Gateway Technologies, Inc. (Gateway)

Inmate Calling Services Providers Coaltion (Coalition)

Intellicall, Inc. (Intellilcall)

Omniphone, Inc.
                                
State of California Department of General Services, Telecommunications Division

State of California Department of Corrections


Parties Filing Comments or Reply Comments Pursuant to October 10, 1996 Public Notice

AMMEX

APPC

AT&T

Bell Atlantic,BellSouth,NYNEX

Consolidated Communications Operator Services, Inc. (CCOS)

California Commission

Coalition

CompTel

Intellicall

InVision

Metropolitan Airports Authority (Airports Authority)

MCI

Oncor

Opticom

Pacific Telesis

Peoples 

PIC, Inc.

Sprint

SWBT

Teltrust

USLD

USOC

U S WEST


Petitioners Filing for Reconsideration of  Phase I Order:

CompTel

International Telecharge Incorporated (ITI)

LDDS Communications, Inc. (LDDS)

MCI 

PhoneTel Technologies, Inc.  (PhoneTel)

Polar Communications Corporation (Polar)

SWBT

Value-Added Communications (VAC)


Oppositions or Comments re Petitions for Reconsideration:

AT&T's Opposition filed March 11, 1993

APPC Comments filed March 19, 1993

Intellicall Comments  filed March 19, 1993

LinkUSA Corporation  Comments filed March 19, 1993

Opticom Comments filed March 22, 1993

Sprint Opposition filed March 19, 1993

SWBT Comments filed March 10, 1993


Other responsive pleadings:

APPC Reply filed March 30, 1993

AT&T Reply  filed March 29, 1993

Capital Network System, Inc. (CNS) Reply to AT&T's Opposition to Petitions for 
           Reconsideration, filed Apr. 1, 1993

CompTel Reply filed March 29, 1993

LDDS Reply filed March 29, 1993

MCI Reply filed April 1, 1993

PhoneTel Reply filed March. 29, 1993                                 
                            APPENDIX C

                         COMMENT SUMMARY


A.  COMMENTS ON ADDITIONAL ORAL BRANDING

Commenters Opposed to Universal Oral Rate Branding

     1.   AT&T, MCI, and Sprint maintain that the largest OSPs should not have to pay additional
costs, and their customers should not have to bear unnecessary delays, merely because some OSPs charge
prices for 0+ calls that are higher than those of the largest carriers.  AT&T states that no current technology
enables OSPs to provide automatic rate information on all 0+ calls from payphones and other aggregator
locations and that the use of live operators as an alternative would cause substantial post-dial delays, degrading
service for consumers.   AT&T also contends that such a requirement would increase costs for operator time
and systems and require OSPs to pay substantial increased access charges, and thus a rate information
requirement on all 0+ calls would require consumers to pay more for a less satisfactory service.  MCI asserts
that, in order to disclose the rates for a call, "[a]ll calls may have to be sent to a live operator, in the near term"
and estimates that this would cost an additional $0.40 per call.  Noting that all providers of operator services
currently must disclose their rates on request under Section 64.703(a)(3) of the Commission's Rules, MCI
maintains that the proposed rule would significantly increase the burden on OSPs, without significantly
improving the protection afforded consumers under the current rule, and that the proposed requirement is not
needed.   If the Commission chooses to adopt a requirement for rate information, MCI maintains that offering
the choice of getting a quote by pressing one of the keys on the telephone key pad "is more convenient to
customers and less expensive to provide than other announcement alternatives."  According to MCI, "giving
call-specific quotes on all calls would require expensive development and high continuing costs (e.g. access
charges) and would not provide commensurate consumer benefits." 

     2.   Other commenters similarly contend that a universal rate disclosure requirement would
"penalize the service quality of the good actors in the industry who already are charging rates that are in line
with consumer expectations."  They assert that such a requirement will only operate to increase the price of
0+ calls and burden an entire industry with "additional, totally unnecessary" costs, and that such a "total
industry/total market" approach to the problem of price-gouging "is simply not in the public interest." 

     3.   GTE maintains that current Operator Service System (OSS) call rating systems cannot "rate
quote the specific calls in question" and that none of the 0+ calls of its domestic telephone companies handled
on a mechanized basis (about 80%) or on a typical operator-handled basis are currently rated by the OSS. 
GTE further maintains that, while it may be possible to enhance mechanized equipment to quote rates prior to
the call, this likely would require significant capital outlays and take several years lead time to accomplish; and
that its current mechanized equipment (costing approximately $22 million in 1993) would most likely require
a complete replacement for such a modification.   GTE asserts that for calls handled by an operator, the
average work time per call to determine and quote cost prior to call completion would likely double, increasing
the operator surcharge per call accordingly; and that for both mechanized and operator-handled 0+ calls,
quoting the call cost to consumers would significantly increase call holding time and necessitate additional
trunking facilities. GTE further maintains that, because call costs would have to be quoted to the billed party,
the process would be further complicated, requiring additional equipment for processing mechanized calls and
additional operators, operator positions and building space for operator-handled calls.  GTE believes most
other OSPs would report similar situations when assessing their equipment for enhancement to quote such call
costs and that there would be little or no public benefit if these costs were mandated to all OSPs.   If
disclosure of rate information is required, quoting rates for maximum or average duration might have no
relation to the call being placed and thus would distort the customer's perspective.  Accordingly, GTE maintains
that any mandated disclosures should quote the rate for the first minute and additional minutes, not average
rates.

     4.   The Metropolitan Washington Airports Authority (Airports Authority) states that the problem
of excessive payphone charges does not exist at Washington National and Dulles airports because it "has not
and would not accept a bid for payphone services at rates that exceed established industry norms."  The
Airports Authority maintains that a system of on-demand call rating would serve, in most cases, merely to make
payphone service less convenient and less efficient at both airports.  The view of the New York State
Consumer Protection Board (NYSCPB) is that establishing benchmarks at levels no higher than the highest
rates charged by AT&T, MCI and Sprint is preferable to requiring companies charging competitive rates to
automatically disclose such prices to all consumers.

     5.   Intellicall asserts that the significant associated costs and administrative burdens imposed upon
the manufacturers and payphone providers "strongly militate against imposing any specific granular
requirement on these entities." According to Intellicall, in addition to being operationally burdensome and
costly, universal rate disclosure is impractical and technically infeasible.  Intellicall asserts that the costs of
implementing a mandatory, real-time exact audible rate disclosure requirement would be prohibitive with
respect to both store-and-forward and network-based payphones.  If the Commission should require some
form of rate disclosure, Intellicall urges a less granular approach, e.g., quoting the maximum rate (initial and
additional periods) for a particular destination class of calls, which alternative is more readily implementable
from a technical perspective and would avoid stranding investment in store-and-forward pay telephones. 
Intellicall's view, however, is that "given the wide variation in rates for different call types and the prevalence
of distance-sensitive rates, it would be impossible to provide an 'average'or 'maximum' quote that is both
accurate and informative to the caller."  In addition, Intellicall asserts that such information "would have to
be provided on every call -- including 0+ intraLATA and  0+ local calls -- which could be even more
misleading to callers."

     6.   American Public Communications Counsel (APCC) states that "[m]anufacturers indicate that
providing a complete set of rate tables for operator assisted calls within each payphone would place such huge
demands on available memory capacity that the cost of such an implementation at store-and-forward payphones
would be prohibitive for new payphones as well as for the installed base." Pacific Telesis agrees with "the
near unanimous view that currently no technology exists that would provide on demand call rating
information."  MCI concurs in this assessment and states that "[t]he only current method of providing
information on demand is through a live operator."

     7.   US WEST maintains that, to the extent that the current rules may be insufficient to protect
consumers, the challenge is primarily in the area of consumer education, not further regulatory mandates. U
S WEST opposes the imposition of mandatory rate disclosures on all 0+ calls and maintains that "[t]he
Commission should deal with malcreants in this market . . . through enforcement activities." U S WEST
maintains that any mandate that ubiquitous rate information disclosures be made of every 0+ call from any
aggregator station is not supported by general market demand, logic, or sound public policy theory and asserts
that carriers should not be expected to expend substantial sums of money to remedy persistent consumer "head
in the sand" behavior.  If, the Commission adopts rules requiring ubiquitous rate disclosure messages, U S
WEST asserts that such messages should be required to do no more than provide the consumer the opportunity
to stay on the line to secure rate information; that the particular presentation of the rate information should be
left up to the OSP providing the service; that this model is capable of fairly easy implementation, access and
use, and represents the most targeted model and, thus, "the model most in the public interest."  If a caller was
not interested in rate quotes, the caller could bypass receiving any rate information by proceeding with the call
through either an automated or live process.

     8.   AMNEX contends that "given the costs and complexity associated with implementing per call
pricing announcements," the Commission's proposal "is not practical."  AMNEX, echoing the comments of
other parties, asserts that "[t]he Commission's proposal would require the creation and maintenance of a very
expensive, very large, dedicated database processor" that would require daily updating to account for rate
changes, although such a database does not currently exist.  BA/BS/NYNEX contend that "[t]here is no
indication that consumers want per-call price disclosure or that they would view it as an improvement to
existing 0+ call services."

     9.   The IPTA contends that any rate disclosure on operator service calls would have to apply to
all operator service calls, including 10XXX, 950, and 1-800 access code calls, and not solely presubscribed
0+ calls.  The IPTA further argues that because OSPs would be unable to distinguish between an access code
call and a 0+ call, the imposition of a mandated rate quote on 0+ calls would require OSPs to state the
applicable rate on every call, increase call setup time, and provide unnecessary information to callers that dial
access code operator service calls. InVision Telecom, Inc. (InVision) states that it "does not believe that it
would be in the public interest to force consumers to listen to a price disclosure they have no desire to hear." 
InVision further contends that, "[s]pecifically, in the inmate environment consumers typically receive multiple
calls from the same inmate, making a rate quote preceding each call repetitive and unnecessary."

     10.  A number of commenters allege that a significant barrier to the imposition of an oral rate
branding requirement is the dialing delay.  Peoples argues that "[a]ny requirement for mandatory price
disclosure of prices that already are in line with consumer expectations, prior to connecting these calls, will
only cause greater distress for the consumer that expects a payphone call to be connected quickly without any
unnecessary delay."  AMNEX argues that the necessary development of a database which would contain
various call rates would "add from ten to fifteen seconds to the duration of the call, which would tie up trunks
longer, increase access costs and require a higher number of trunks to serve the same number of calls."  Oncor
argues, that it is "highly unlikely that OSP rate disclosures could be provided in a manner which would increase
call completion time by only 1.5 to 3 seconds."

     11.  In response to the Common Carrier Bureau's request for further comment on whether there
are any industries in which price disclosure to consumers at the point of purchase is not the normal practice,
Sprint, BA/BS/NYNEX, and MCI cite the electric, gas, and water utility services as applicable examples. 
Sprint further cites the examples of auto and appliance repair shops and grocery stores which use scanners to
register sales.  Citing provisions of TOCSIA, Oncor states that none of the referenced industries is "subject
to more comprehensive requirements to ensure consumers' rights to price information at the time of service than
the interstate 0+ calling industry."

     12.  With respect to the Bureau's inquiry regarding whether there are any telecommunications
markets outside of the U.S. that already make use of price disclosure prior to call completion, the majority of
parties either declined to answer this question, or were unaware of any instances of price disclosure prior to
call completion.  BA/BS/NYNEX state that "as far as we have been able to determine . . . there are no
communications markets that use price disclosure prior to completion of 0+ calls."  U S WEST does
acknowledge that there are "smart payphones [which] contain a type of device that allows callers making
certain types of calls (i.e.; cash or telephone debit cards) to know that the monetary value of their cash deposit
or debit card is being used up."  U S WEST argues that this type of technology is present in other markets,
including the United Kingdom, and that beyond these technological innovations, it is unaware of any additional
technologies supporting on-demand call rating information.  Southwestern Bell Telephone Company (SWBT)
contends that although "[i]f a customer calls the operator and requests a rate, the technology is in place within
SWBT to quote the SWBT rate for any call within the serving area . . . there is no mechanized system for real-
time quotation for 0+ calls."

     13.  APCC contends that, "[i]f the Commission decides to impose a rate-disclosure-on demand
requirement on all 0+ calls, regardless of the applicable rate, then those [payphone service providers] that
provide store-and-forward operator services could incur crippling cost burdens."  APCC suggests that the
Commission should mitigate the financial impact of universal rate disclosure, through the adoption of a
requirement for disclosure on demand rather than automatic disclosure of rates. Teltrust Communications
Services, Inc. (Teltrust) agrees with this assertion, arguing that its switch vendor, "has stated that
implementation of real-time audible rate disclosure would require a major software upgrade," which would
"result in significant cost to Teltrust and other carriers."  Other commenters agree, that, especially with
respect to "store-and-forward payphones", rate disclosures would be technically infeasible and necessitate
forced retirement of existing equipment.  USOC contends that its "embedded base equipment at hotel locations
is not capable of providing rates on a real-time basis. . . [i]n order to implement real-time rate quotes on all
calls, site equipment would have to be changed completely."  Intellicall requests that its ULTRATEL store-
and-forward payphones be exempted from a proposed requirement that rate quotes be provided to callers,
without their having to re-dial a second number, asserting that such payphones lack sufficient internal memory
to be retrofitted to do so.
     
Commenters Supporting Universal Oral Rate Branding

     14.  Opticom asserts that the Commission's proposal to impose a requirement on all OSPs to
disclose orally their rates to consumers when a call is placed could immediately address many of the concerns
prompting the consideration of BPP and at a much lower cost to consumers and carriers. Moreover,
according, to Opticom, the costs associated with a disclosure requirement would be minimal and most OSPs
already have the technology to allow for full disclosure when a call is made and prior to the time charges are
incurred.  Opticom asserts that: the concept of cost is fundamental to a healthy marketplace; access to cost
information prior to purchase is expected by members of the consuming public; and that there are two
technological systems currently capable of providing on-demand cost information to consumers purchasing
operator services. Opticom states that it currently uses voice file technology to brand its operator service
calls; that such technology would not require the purchase of any new hardware or software but that various
voice files would have to be developed for each on-demand rate at an approximate cost of $500 per voice file;
that such technology could be developed and implemented in less than 7 months but that most OSPs have rating
complexities, such as mileage or time of day sensitivity, that exceed such technology's capabilities.  Opticom
also identified a second type of technology system which it states is "fairly mature and well suited for the
purpose of  providing on-demand call rating information," i.e., voice annunciators or text-to-speech converters,
the same technology used for annunciating numbers at the end of a directory assistance call. Opticom
estimates that it would take approximately two people working between eight and eighteen months or "two man
years" to develop the necessary software. Opticom asserts that both types of rating systems thus can be
implemented timely and at a reasonable cost to OSPs.  Moreover, according to Opticom, on-demand call
rating would create only a minimal delay in call processing, approximately 12 seconds, and the technology
could be developed to allow consumers to voluntarily bypass this rate information.  For these reasons,
Opticom concludes, the Commission should adopt regulations requiring OSPs to provide on-demand rate
information prior to call completion.

     15.  In its response to the Bureau's Public Notice, CompTel recommends that the Commission
adopt an alternative audible disclosure requirement that it now proposes instead of the disclosure described in
OSP Reform Notice.  CompTel asserts that its proposed disclosure requirement would not only be helpful to
consumers but avoid what it regards as "the legal pitfalls of the Commission's proposal." Specifically,
CompTel now proposes that, before a customer may incur any charges for any interstate 0+ calls from an
aggregator location, the presubscribed carrier serving that aggregator phone be required to provide an audible
disclosure immediately after its carrier brand.  Under CompTel's proposal, the customer would be instructed
to press a key, e.g., the # key, to obtain a rate quote or assistance.  Alternatively, at the option of the OSP,
customers would be advised that they need only remain on the line to obtain rate quotes or assistance.  Under
CompTel's proposal, an OSP would not be permitted to require a caller to re-dial a second number to obtain
a quote of its rates.    According to CompTel,  the disclosure should be substantially in one of the following
forms:

Option 1
BONG: "Thank you for using _____________ .  For assistance or a rate quote, please press the  ___ key.  To
complete your call, please enter your calling card number now."

Option 2
BONG: "Thank you for using _____________ .   For assistance or a rate quote, please stay on the line.  To
complete your call, please enter your calling card number now." 

     16.  Because the disclosure it proposes is simple, direct, and consistent on each call, CompTel
claims carriers could implement it with minimal expense, integrating it with the audible brand they already are
required to provide.  CompTel contends that the overwhelming majority of OSPs would be able to provide
the message it proposes if they were given the option of choosing among four methods for callers to obtain a
rate quote, i.e, (1) "time out" (stay on the line) to a live operator, (2) press "0", (3) press "#", or (4) press "*X"
where X is a specified digit on the keypad.
     
     17.  The National Association of Attorneys General (the Attorneys General) support adoption of
rules requiring universal rate disclosure to the paying party, believing that option "would be administratively
simpler, more informative, and fair" than a benchmark system, and that "a complete and accurate universal
rate disclosure requirement will increase consumer awareness and lead to more competitive pricing."  

     18.  The People of the State of California and the Public Utilities Commission of the State of
California (the California Commission) argues that "disclosure on all calls will better serve to reduce customer
confusion." The California Commission, which strongly advocates BPP as the preferred solution to OSP
pricing abuses, supports price disclosure by OSPs for all 0+ calls "because, in the interim, the full disclosure
alternative would appear to provide many of the benefits of BPP at little, if any, cost to consumers."  It asserts
that disclosure of OSP rates prior to the customer's use of the service is "a reasonable minimal protection,"
which should be afforded the OSP customer, and "believes that this expedient safeguard will significantly deter
pricing abuses, and may result in a substantially lowered level of consumer complaints."  The California
Commission favors disclosure of both the initial minute rate, including any operator or other surcharges, and
subsequent minute rates, but not an averaged rate.  

     19.  The North Dakota Public Service Commission (North Dakota Commission) favors the oral
disclosure of rates on all OSP calls over any benchmark approach because it "will contribute to a better
consumer awareness of OSP pricing practices" which in turn "will enhance customers' ability to make true
choices."   The North Dakota Commission states that, in its experience, operator service providers will
increase their rates "to meet the competition" and that in such an environment, it does not believe the alternative
benchmark proposal will have the intended result of motivating providers to keep rates low.  In addition, it
believes "the benchmark alternative will be harder for companies to implement, harder for the FCC to enforce,
and harder for customers to understand." 

     20.  In lieu of the imposition of a benchmark system, USLD "implores that any branding
requirement . . . be imposed in a non-discriminatory manner, ubiquitously across all carriers regardless of their
individual end user rates."   Oncor reiterates its previously stated position that if the Commission orders rate
disclosures, the requirements "should be applicable to all providers of 0+ services, and should not be keyed to
some arbitrarily established rate 'cap' or rate 'benchmark' set by the Commission . . . ."

     21.  The Attorneys General express their support for universal rate disclosure, arguing "[t]he most
obvious benefit of universal rate disclosure is that OSPs charging outrageous rates will no longer be able to
surprise customers with a staggering bill weeks or months after the call in question.  Rather, consumers, after
hearing the rate disclosure, will be able to decide whether to incur the quoted cost or to access another
provider." 

     22.  Omniphone, in response to the Bureau's requests for further information contends that "[a]ll
 smart technology  manufactured by Omniphone today has the ability to provide on-demand rate quotes to the
calling party on all 0+ and 1+ calls . . .  this includes public payphones and inmate phones."  Omniphone
states that, in response to TOCSIA, it developed software that enabled its public payphone technology to
provide accurate rate quotes for the specific call in question, "upon request, to the calling party for coin, calling
card, and collect calls."  Omniphone argues that "the smart technology used by that coin payphone could just
as easily quote 0+ rates if they do not now."

     23.  The Pennsylvania Commission recommends, among other things, that OSPs be required to
disclose, immediately following their oral identification brand, the specific aggregator surcharge for calls
handled by that OSP.    The Pennsylvania Commission contends that a disclosure requirement for 0+
calls could eliminate prices charged in excess of competitive rates and should save consumers
money.  The Pennsylvania Commission, in addition to supporting oral rate disclosure, also
recommends that the Attorneys General's proposed disclosure requirement be modified to include the
amount of the surcharge over and above the underlying carrier's rates that the end user will be
assessed.  The Pennsylvania Commission argues that, "it would be more useful to the customer to
know exactly what the surcharge will be on the call than to just know in general that they may be
charged at a rate higher than that charged by their regular carrier." 


B.  COMMENTS ON RATE BENCHMARK OR PRICE REGULATION

Commenters in Favor of Proposed FCC Rate Benchmark Rules
     
     24.  Ameritech submits in its comments "that undoubtedly there should be such
benchmarking, and that the three largest IXCs are the best yardstick."  Ameritech claims that "each
of those carriers, [AT&T, MCI, & Sprint] besides providing operator services at aggregator
locations, also serves a vast base of non-aggregator (i.e., ordinary residence and business)
locations."  Ameritech asserts that the three largest IXCs have operated in a competitive
environment and serve as "something of a benchmark for the same carriers' rates that apply at
aggregator telephones."  Ameritech further asserts that "specialized carriers who only serve
aggregators have never been in a ballot campaign competing directly for the presubscription choices
of end users so their charges never had to face the rigors of competition."  Accordingly, Ameritech
maintains that, "[s]ince those carriers thus have no internal competitively-established benchmark
against which their aggregator rates can be compared, it is entirely appropriate, in the interests of
protecting consumers, to compare their aggregator rates to the benchmark rates of AT&T, MCI, or 
Sprint, which long have had to stand against competitive challenge."

     25.  The  IPTA argues that the Commission should use its authority to adopt rate
benchmarks " which are tied to the Commission's actions taken in the Payphone Compensation
Order." The IPTA argues that "[a]fter the Commission eliminates the subsidies to local exchange
carrier payphone  providers (as required by Section 276 of the Telecommunications Act of 1996),
and after the Commissions [sic] sets a fair rate of compensation (which at a minimum exceeds costs)
for access code calls and subscriber 1-800 calls, then the Commission could set rate caps which are
acceptable to consumers."

     26.  Sprint  states that "[a]s a corporation that participates in both tiers of the market,
Sprint fully supports the benchmark concept proposed" by the Commission.  It agrees that "[t]he
requirement to disclose rates that exceed the benchmark level will create a powerful inducement to
moderate the changes in the high-rate tier of the market."
     
     27.  Certain commenters argue that a benchmark rate system has merit, subject to certain
modifications.  The Virginia Commission proposes that benchmark rates be established utilizing "the
AT&T dominant carrier tariff rate schedule, plus a flat increase (as opposed to a percentage increase)
of, say, $.50 per call."  The Virginia Commission argues that such an approach would be simple
to administer and would "meet the FCC objective of reflecting consumers' expectations."  Sprint
supports a benchmark rate of 115% of the weighted average operator service charges imposed by
Sprint, AT&T and MCI.   Sprint further contends that there "is no demonstrated need to impose
the benchmark and disclosure requirements on 0+ calls made from business and residential phones." 
U S WEST suggests that "the benchmark or rate ceiling should be as targeted and remedial as
possible, focusing on those rates/prices where it is predictable that consumer complaints will be
generated."  US WEST further urges that "[t]he benchmark should not necessarily try to emulate
presumed  just and reasonable rates  or to conform to speculative  customer expectations. "

     28.  NTCA states that ["it] is not opposed to the use of benchmarks for 0+ interstate calls,
so long as the plan does not place the burden of monitoring and enforcement on its LEC members." 
Further, NTCA submits that the proposal to set a benchmark by approximating the average price
charged by AT&T, MCI and Sprint is reasonable.  Pacific Telesis asserts that "setting a benchmark
level for operator service rates will help to curb some of the abuses present in the marketplace", and
that a "useful benchmark would be based on the average price charged by AT&T, MCI and Sprint." 
Pacific Telesis supports oral disclosure of rates which exceed the benchmark, on the ground that
"disclosing the actual price of the call is the only disclosure that will address the problem these rules
are trying to solve."

Commenters Opposed to Proposed FCC Benchmark Rules
     
     29.  AMNEX and CompTel contend that the use of the rates assessed by AT&T, MCI, and
Sprint to define consumer expectations violates the Equal Protection Clause of the U.S.
Constitution.  According to AMNEX,  the benchmark does not apply equally to all OSPs because,
absent a precipitous increase in their own rates, which although legal have not been found to be just
and reasonable, AT&T, MCI, and Sprint by definition would be excluded. CompTel states that
under the proposed benchmark, AT&T could raise its surcharge from $2.25 to $3.75 on third-party,
operator station rates (an increase of over 67%) and still fall within the benchmark rate, which would
increase to $3.76, all other factors being equal.  Relying on Supreme Court cases, CompTel contends
that "the Commission may not grant preferences to preferred classes of carriers, and penalize others,
simply based upon a hostility toward the disfavored class."  CompTel further argues that a
disclosure requirement based on the rates of the Big Three would be arbitrary and discriminatory and
deny all other OSPs equal protection of the laws.  CompTel states that because AT&T, MCI and
Sprint permit but do not offer to bill and collect PIFs for aggregators such as hotels that presubscribe
to them, these fees are not included in calculating the benchmark, even though they are part of the
total charges for which consumers would be liable.  CompTel contends that this arbitrarily penalizes
those OSPs that collect PIFs on behalf of aggregators that presubscribe to them and that such
distinction is arbitrary and capricious.  Cleartel/ConQuest contend that any standard disclosure that
only applies to the smaller OSPs, and not to the three largest carriers, would be arbitrary and
discriminatory.  

     30.  Noting that OSPs have many different classes of automated and live-operator-assisted
calls as well as a variety of rates based on such factors as location, the jurisdictional  nature of the
call, and the distance of the call, AMNEX contends that if the FCC opted for a  lesser disclosure
regulation, such as the disclosure of its highest or average rate for a seven-minute domestic call, the
requirement would in many cases only serve to confuse or mislead customers about the rates they
actually would be charged. AMNEX further contends that "alternative proposals . . . would compel
affected OSPs to make commercial speech that was  misleading or confusing."  AMNEX states
that, "[b]ecause such speech would not directly advance the FCC's and [Congress' goal of allowing]
consumers to make informed choices when making operator services calls, and could even serve
instead to frustrate that purpose, such a regulation would contravene the First Amendment protection
afforded commercial speech."

     31.  AMNEX and CompTel contend that TOCSIA does not authorize the Commission to
require OSPs to quote their exact charges on each call.  According to CompTel, Section 226(h)(2)
allows the Commission only to require OSPs to state that rates are available on request and that "the
Commission is not free to circumvent the OSP branding requirement by using it as a vehicle to
bootstrap any information disclosure the Commission desires."   Similarly, AMNEX contends that
TOCSIA expressly delineates the authority the Commission has to impose a pre-connection disclosure
requirement and "limits" that authority to information concerning the availability of rates, not the rates
themselves.  AMNEX further contends that "if carrier identification is to be equated with disclosure
of rates," a conclusion that AMNEX finds illogical, "then all OSPs, including AT&T, MCI and
Sprint, must disclose their rates prior to call connection, and the benchmark-related disclosure
requirement is indefensible."

     32.  AMNEX and CompTel contend that the Commission lacks authority to adopt its
benchmark price disclosure proposal, not only under Section 226(h)(2) of the Act, but also under
other sections of the Act.  AMNEX contends that adoption of a benchmark as proposed would
constitute ratemaking that would not be in compliance with the Commission's authority to prescribe
rates. According to AMNEX, "rates consumers are willing to pay have never been relevant to a
determination to reasonableness" and because the proposed benchmark is not based upon a record
inquiry into the costs of providing operator services, the benchmark cannot be justified as just and
reasonable. Finally, AMNEX contends that the general provisions governing the Commission's
rulemaking authority contained in Sections 4(i) and 226(d)(1) of the Act do not authorize the
Commission to adopt its benchmark price disclosure proposal.  Similarly, CompTel contends that,
for all practical purposes, the proposal would "prescribe" rates and the absence of any Commission
finding, based on record evidence, that the prescribed rate is just and reasonable is "fatal to the
Commission's exercise of its benchmark ratemaking authority under Section 205(a)."  CompTel
further contends that the proposal cannot be justified under provisions of the Act that require carrier-
specific hearings before prescribing a "hard" rate, which it defines as that which a carrier may not
exceed under any circumstances, and that the affected carriers have not been afforded the "full
opportunity for hearing" required under Section 205 of the Act for adoption of benchmark rates other
than those that it has proposed.   

     33.  Cleartel/ConQuest assert that an FCC rate benchmark is the "functional equivalent of
an FCC-prescribed OSP rate, even if the effect of exceeding the benchmark is only a trigger for rate-
disclosure announcements.  While they concede that setting a benchmark rate level for OSP rate
disclosures "is not per se ratemaking," they state that "it effectively establishes an industry-wide rate,
because OSPs with rates exceeding this level will be driven to set rates at or below the benchmark
level to avoid announcement burdens."

     34.  CompTel asserts that the Commission's proposal to rely on "vague" conceptions of
consumer "expectations" as the rationale for the proposed benchmark is legally and factually
insufficient.  In its view, rates that consumers expect to pay for "away from home" calling are not
a valid legal basis for prescribing carrier rates.  CompTel also argues that even if it is assumed that
AT&T, MCI and Sprint's rates apply to the majority of minutes from aggregator telephones, this does
not define consumer expectations in all operator service contexts.  AMNEX notes that FCC reports
indicate that more consumers have complaints about AT&T than any other OSP, which "suggests that
many persons simply are unaware of the high rates for operator services in general compared to those
for direct dialed 1+ calls 
. . . " and, accordingly, that "customer willingness to pay is a fickle matter and certainly not a sound
basis upon which to base a ratemaking."  Cleartel/ConQuest agree with CompTel's view that
expectations of consumers is an invalid standard for ratesetting. Further, they contend that, even if
a rate benchmark could be justified on the basis of consumer expectations, the choice of the three
largest OSPs is "an administrative shortcut lacking in rational public policy justification," is "entirely
arbitrary," is discriminatory "by definition," places an uneven burden on smaller OSPs, "would
stigmatize all carriers other than AT&T, MCI and Sprint for the traveling public," and "creates a
significant opportunity for anticompetitive pricing."

     35.  ClearTel/ConQuest also argue that the OSP Reform Notice's benchmark and
disclosure proposal would result in excessive regulations that impose burdensome and misleading
requirements on OSPs and consumers alike.   USOC contends that "[n]either benchmark nor oral
notification of rates are supported by any evidence."  HCI argues that the additional time it will take
to process and disclose the information "will cause many otherwise-satisfied callers to hang up and
go elsewhere even before the rate is delivered." 

     36.  ACTA submits that the Commission's benchmark proposals cannot pass Regulatory
Flexibility Act (RFA) muster and that "a price disclosure requirement for all 0+ calls would provide
consumers with the information necessary to make informed choices, and do away with the need for
benchmark rates and oral disclosure requirements."  ACTA considers the Commission's tentative
conclusion to rely on the Big Three's rates to establish publicly acceptable rates as "simply unsound"
because it "ignores the different underlying costs borne by smaller carriers and the economic
disparities which exist between the Big Three carriers and all other OSPs."   ACTA asserts that
OSPs will be forced to charge rates below the Big Three benchmark rates to get consumers to use
their services, and that such rates will not allow these carriers to recover their costs and a reasonable
profit.  Accordingly, such proposal "has a confiscatory effect and the already disadvantaged smaller
OSPs will be unable to sustain themselves in the marketplace . . . [contrary to] both the broad general
policies seeking greater participation by smaller companies in competing in the OSP market, and with
the more specific policy the Commission must apply in terms of its RFA analysis."  Moreover,
consideration of the several characteristics or rate elements in the Commission's benchmark proposal
"is contrary to the industry's growing reliance on nationwide flat rates."  In addition, ACTA asserts
that "the formula underlying the proposal will provide the benchmark carriers with the opportunity
to engage in anti-competitive conduct and predatory pricing."  ACTA contends that the
Commission's proposal ignores economic facts and "leaps to the assumption that the rates of the Big
Three represent those rates that consumers would expect to pay for operator services . . . [and as
such] is but a self-fulfilling prophecy."  ACTA argues that "[s]uch circuitous reasoning creates the
antithesis of maintaining competition and of avoiding regulation which unduly and unfairly burdens
small businesses."

     37.   BA/BS/NYNEX argue that the Commission should not base benchmarks on what
consumers pay the Big Three for a 1+ call because "these prices are lower than those same carriers'
prices for 0+ calls and may bear no particular, predictable relationship to 0+ prices."  USOC and
HCI both argue that the difference between the hospitality and payphone industries are different
enough to warrant separate regulatory treatment by the Commission.   USOC contends that guest
phones should be considered in the eligibility pool for payphone compensation or any implementation
of benchmark rates should apply only to payphones. 

     38.  Opticom argues that the Commission has failed to provide support for the conclusion
that consumers generally expect rate levels to be within a comparable range of rates  charged by the
three largest carriers.  Opticom further argues that even if such rates were reasonable, "the
Commission has not proposed any safeguards to ensure that such rates remain  reasonable." 
Opticom continues, stating that "[l]arge OSPs such as AT&T, MCI and Sprint have wide latitude in
setting their rates due to their large market share and other service offerings.  Consequently, these
carriers could engage in predatory pricing by reducing the cost of calls so dramatically as to destroy
the ability of other OSPs to compete in the marketplace."

     39.  Oncor similarly contends that, "the proposal to base the rate  benchmarks  on the rates
of the three leading operator service providers -- all of whom are considered to be non-dominant --
would result in three companies whose rates are virtually unregulated becoming the de facto rate
regulators of 500 other companies, the totality of which compromise a minuscule market share." 
OSC asserts that "[a] benchmark rate must take into consideration the costs of providing service, yet
no cost data has been provided to make this determination."  AT&T does not support the
establishment of benchmark rates based upon the charges of any specific carrier or small group of
carriers because such carriers' rates may not be reflective of the costs of other carriers.  Noting that
because OSP rate structures vary, GTE contends that trying to force all to comply with a benchmark
based on a fixed set of criteria could stifle innovative offerings. 

     40.  MCI, which continues to urge BPP as "the best way to protect the public, promote
true competition in this market and end the need for a never-ending series of administrative
proceedings," notes that "[s]o long as OSPs  compete  to be the presubscribed carrier at a location
by offering commission payments to premise owners, they may charge the calling public high rates
in order to pay those commissions and profit . . . [and] aggregators will have the incentive to try to
force consumers to use the presubscribed carrier to increase those payments."  Arguing that the
proposed benchmark and disclosure rule is not needed in light of current rule Section 64.703(a)(3),
MCI contends that such a requirement "would significantly increase the burden on OSPs by requiring
rate disclosure on all calls, even when consumers already know and accept the rates, without
significantly improving the protection afforded consumers under the current rule.  MCI further
contends that "[a]ll calls may have to be sent to a live operator, in the near term, in order to disclose
the rates for a call . . .   [and] estimates that it would cost an additional $0.40 per call to do this." 


     41.  Intellicall state that the use of benchmarking would not reduce the cost of complying
with a Commission order because, "as a manufacturer, Intellicall must offer a product that could be
used by all carriers, including those that wish to charge above benchmark rates" so that "every store-
and-forward payphone it manufactured would have to have this capability (and absent grandfathering,
all embedded equipment would need to be retrofitted, even if the buyer of the product intended to
charge less than the benchmark rates."

     42.  The Office of Management and Budget (OMB), in commenting on our benchmark
proposal in OSP Reform Notice, states:

          There are some fundamental questions that the FCC must answer with this
     proposed rule and collection.  First, how will consumers be informed what the
     benchmark is?  Would the consumer be better served by requiring the OSP to
     inform the caller of the cost of the call, regardless of any benchmark?  The FCC
     should also calculate and include, as a cost burden, the cost of installing the
     systems that will inform the consumer of the cost of call [sic] (or if the cost
     exceeds the benchmark.)  It should not be assumed by the FCC that members of
     the public will know what a benchmark cost is.  Their knowledge will, in general,
     be limited to the cost of services provided by their interlata carrier of choice. 

     
C.  COMMENTS ON BILLED PARTY PREFERENCE

Commenters Opposed to Ending Consideration of BPP

     43.  Ameritech, in a manner similar to MCI and Sprint, expresses its regret that the
Commission announced its tentative conclusion to not consider BPP at this time, and encourages the
Commission to continue to consider the idea in the future.  Ameritech disagrees with the
Commission, stating that it does not believe the deployment of Local Number Portability (LNP) will
lessen the incremental cost of BPP.  It, nevertheless, continues to support BPP as the best long-run
solution to customer satisfaction issues regarding calling card, collect, and third-number calling. 
MCI argues that BPP will provide an incentive for OSPs to compete for consumers' business on the
basis of cost and service quality, which MCI contends is the best way to protect the public, and
promote true competition in the market.  Sprint agrees that adoption of BPP would make all OSPs
compete for call traffic by offering high-quality services to consumers at the lowest possible price.

     44.  NARUC and the California Commission express their continued support for the BPP
concept and encourage the Commission to act expeditiously to determine if BPP implementation is
justified in light of the costs and jurisdictional issues.   The California Commission agrees with the
Commission's observation that if local exchange carriers (LECs) are required to install the facilities
needed to perform database queries for number portability purposes for each call, the incremental cost
to query the database for the customer's preferred OSP may be less than customer benefits from
BPP. The NYCPB also supports the Commission's further consideration of BPP, especially as LNP
develops, as the NYCPB shares California Commission's belief regarding lower incremental costs.

Commenters In Favor of Ending Consideration of BPP

     45.  APCC, citing the opinions of many other parties, maintains that the record is
"overwhelmingly" in favor of terminating consideration of BPP.  APCC states that of the LECs
which previously supported BPP, all except one, now do not support BPP. APCC notes that
SWBT, which strongly supported BPP, now believes that the time for implementation of BPP has
passed and  that GTE, "another erstwhile diehard supporter, states that adoption of BPP has been
frustrated by high capital costs and resultant cost recovery impacts on OSP rates."  APCC further
notes that Ameritech, the only LEC still declaring support for BPP, states unequivocally that
deployment of LNP databases as required by the 1996 Act is not likely to lessen the incremental cost
of BPP.   BA/BS/NYNEX similarly contend that the record illustrates that technology and the
market have overtaken BPP, and accordingly, the Commission should terminate this proceeding. 
Like APCC, they note that even SWBT, perhaps BPP's most ardent supporter, has concluded that
"the time for BPP has come and gone and the issue should now be closed". BA/BS/NYNEX state
that "[t]here is no factual support in the comments for the Commission's suggestion that number
portability will put BPP back in the running again, even from those who continue to support BPP as
a long range option."  Finally, BA/BS/NYNEX state that U S WEST has demonstrated in detail
why BPP cannot "piggyback" on number portability; and that Ameritech has also concluded that
number portability is not likely to lessen the incremental cost of BPP.  U S WEST asserts that LNP
does not provide an alternative solution because LNP databases will only exist in limited geographic
areas.  As such, LECs will have to interconnect their Line Information Databases (LIDB) to the
LNP database and consequently incur excessive costs for the investment in OSS7 switching and
additional signaling capacity.
     
     46.  Other parties urge the Commission to cease consideration of BPP.  CCI argues that
for several years, consumers have been assured of reaching their preferred long distance carrier at
payphones as required by TOCSIA, which is the key benefit of BPP, through dial-around calling. 
CCI argues, therefore, that a need for BPP has been eliminated and implementation would impose
extreme and unnecessary costs on the payphone industry.

     47.  In addition to CompTel's assertion that the record establishes that BPP is not in the
public interest, other parties suggest that the costs of BPP implementation outweigh the benefits. 
APCC argues that, based on the Commission's own assumptions, implementing BPP would cost $1.5
billion per year and would not produce benefits worth more than $221 million per year.  Intellicall
and Teltrust state that they explicitly support the Commission's tentative conclusion that the "costs
of implementing BPP significantly outweigh its purported benefits."  Intellicall continues, stating
that imposing "the economic costs of BPP upon consumers would have substantially raised the rates
for operator services, and substantially decreased the number of providers and the diversity of
services."  NTCA agrees, specifically contending that the record has shown that industry-wide
mandated BPP deployment is not economically feasible and would adversely affect small and rural
LECs.  ACTA echoes the arguments of other parties in stating that it and many competitive IXCs,
have argued that the costs of BPP substantially outweigh any potential benefit to customers. 
Oncor, in accord with other parties, such as the Pennsylvania Commission and Peoples, cites
numerous problems with BPP, including the extreme expense, and the inability of OSPs and LECs
to implement the system in a manner which would result in categories of calls being routed to the
billed parties' preferred carriers.   It is also claimed that BPP would have relatively little impact on
the routing of interexchange calls because a majority of public phones are presubscribed to the same
carrier that is the preferred carrier for a substantial majority of billed parties.   Oncor asserts that
in light of the rapid proliferation of dial-around calling by consumers to reach their preferred carriers,
the implementation of TOCSIA, the Commission's regulations, and general consumer education, the
need for BPP has dissipated.

     48.  GTE and Intellicall assert that the "time has come to terminate further consideration
of BPP" and that the Commission should "put billed party preference behind us."  Pacific Telesis
expresses its agreement that, in light of changes that have taken place in the industry, BPP is not the
appropriate solution "today that it may have been years ago." USOC contends that the operator
services industry has changed significantly since the original discussions on BPP, including increased
dial-around traffic and competition in the industry and, as such, the Commission no longer need
consider BPP. 

     49.  Certain parties, in their opposition to BPP, propose alternative pricing mechanisms. 
The Pennsylvania Commission supports the establishment of a modified ceiling on interstate domestic
operator service rates in accord with the CompTel benchmark proposal, combined with the disclosure
requirements outlined in the Attorneys General proposal.  GTE and SWBT propose that, in place
of BPP, the Commission should allow market forces to operate for the protection of consumers and
the elimination of unscrupulous carriers.  

     50.  The Attorneys General contend that, despite BPP's benefit of preventing OSPs from
billing unsuspecting consumers at excessive rates, the BPP system's cost appears substantial and, the
Attorneys General note, many reservations had been voiced against its adoption.  As such, the
Attorneys General propose an alternative that would require OSPs to provide consumers with an oral
disclosure, prior to connecting the call, warning of the potential for higher rates than charged by the
consumer's regular carrier.
 
     51.  Other parties argue that deployment of LNP data bases will not result in development
of network capabilities that will significantly reduce BPP implementation costs.  SWBT argues that
LNP and BPP would use separate data bases and would require different network upgrades.  Thus,
according to SWBT, LNP implementation will not aid BPP deployment.  SWBT further contends that
the time in which OSPs and LECs could have deployed BPP efficiently has passed and deployment
of BPP would now take years, particularly if it is attempted as a retrofit into a number portability
design.  GTE contends that information for BPP is provided through LIDB, and as such, may
require an OSP to access the LNP database on every call. GTE continues, stating that the LIDB
is only designed for storage of information necessary to route the call to the terminating location, not
to the preferred OSP. Thus, argues GTE, this factor, among other network costs, renders BPP
prohibitively expensive.  Pacific Telesis supports this conclusion by cautioning that the database
being developed for LNP could not accommodate the information necessary to perform the BPP
function.  Pacific Telesis maintains its belief that BPP should not be required during implementation
of LNP.

     52.  NTCA reiterates its concern that, in implementing a solution to OSP pricing, no undue
burdens are imposed on small and rural carriers in efforts to simplify access to the network.  NTCA
urges the Commission to eliminate BPP as an alternative in addressing operator service rate issues
in the payphone services marketplace.  NTCA further urges the Commission to reject BPP as an
appropriate mechanism by which to induce more effective competition, lower prices and improved
services for customers who prefer not to use access codes.
     
     53.  The Ohio Commission agrees with the Commission's tentative conclusion that it would
not be economical to institute BPP at the present time, since such a requirement would require the
building of duplicate systems which would be capable of providing virtually identical functionalities. 
The Ohio Commission, however, contends that the Commission should only defer its implementation
of a BPP system until such time as number portability has been established.
     
     54.  TRA echoes its previous comments before the Commission, arguing that immediate
deployment of BPP will not result in an increase to consumer protection commensurate with the
technical and financial burdens necessary to implement the system.  TRA does acknowledge its
belief that the emergence of LNP may eventually lessen the costs of implementing BPP, but agrees
with the Commission's tentative conclusion that, at the present, costs continue to outweigh the
benefits BPP would provide consumers.

     55.  APCC and CompTel assert that the lingering existence of the BPP docket continues
to harm OSPs by making it more difficult for them to access capital and by increasing aggregator
demands for accelerated commissions to recoup their investments.

     
D.  COMMENTS ON FORBEARANCE FROM APPLYING SECTION 226 TARIFF FILING
REQUIREMENTS

Commenters Supporting Complete Detariffing
     
     56.  Oncor maintains that informational tariffs are not necessary to protect consumers
against unfair or deceptive practices, or to ensure that consumers have the opportunity to make
informed choices when placing a 0+ call from an aggregator location. Therefore, Oncor believes that
the informational tariff requirement may be waived under Section 226, irrespective of Section 10(a)
of the Act. Oncor maintains, however, that the Commission should not adopt rate benchmark
proposals, which Oncor maintains are inconsistent with such waiver or forbearance. Oncor further
maintains that tariff forbearance for non-dominant carriers, both under Section 226 and Section 10
of the Act, will have many pro-competitive public interest benefits, and that the Commission should
not sacrifice its ability to take that deregulatory step simply to implement an unnecessary and ill-
advised rate benchmark/rate disclosure requirement for non-dominant carriers providing 0+
services.  

     57.  Opticom supports a complete detariffing policy with regard to informational tariffs,
agreeing with the Commission's conclusion that such tariffs are ineffective because they cannot
provide information at the time of purchase.  Instead, Opticom supports the Commission's
alternative proposal of a mandatory price disclosure as the best long-term solution for protecting
consumers, particularly transient callers making 0+ calls from aggregator locations.

     58.  AT&T maintains that the Commission should apply the same tariff forbearance rules
to its operator services as it applies to its other interstate services. BA/BS/NYNEX believe that
Section 10(a) of the Act requires the Commission to forbear from applying all OSP tariffing
requirements, those imposed by both Section 203 and Section 226 of the Act, and that either an
audible disclosure of charges before connecting the call or a certification that the OSP will not charge
more than FCC-established benchmarks will be far more effective in ensuring reasonable rates and
protecting consumers than a complete tariff filing requirement.  

     59.  Pacific Telesis maintains that tariffs will not, and can not, protect consumers at the
point of purchase; that the benefits of such tariffs are outweighed by their costs; and that oral
disclosure is a much better tool for ensuring consumer protection.  SWBT states that the one tool
with which consumers may protect themselves, namely, access code dialing, already exists; and that
informational tariffs will not aid consumers in determining whether to use a particular OSP because
a consumer using a payphone does not have ready access to the tariffs.   SWBT asserts, however,
that in a market as competitive as operator services, all OSPs must be regulated equally, so that
complete detariffing of non-dominant OSPs, without detariffing all competitors, fails to meet the
Commission's pro-competitive goals.     

     60.  The OCC supports forbearance with regard to the requirement to file informational
tariffs "[b]ecause OSPs have misinformed consumers about the purpose of informational tariffs." 


Commenters Opposed to Complete Detariffing

     61.  The Telecommunications Subcommittee of the Consumer Protection Committee of
the Attorneys General urge the Commission to maintain informational tariffing requirements for OSPs
as a consumer protection measure and to ensure that OSP charges and practices are just and
reasonable.  They recommend that OSP rates and charges, in addition to being available for public
inspection at the FCC, also be accessible on line to the general public. The California Commission
strongly opposes forbearance of Section 226 tariff filing requirements applicable to nondominant
interexchange OSPs.  It believes that the filing requirement is an important safeguard that helps
prevent arbitrary and discriminatory pricing, as well as an enforcement mechanism that may assist this
Commission in determining whether an OSP's rates exceed its disclosure statement, or whether an
OSP has violated or complied with FCC rules.   The Florida Commission does not support the use
of forbearance authority to eliminate interstate tariff requirements because of possible repercussions
at the state level.  If, however, the Commission should eliminate requirements for informational
tariffs by non-dominant OSPs, the  Florida Commission asserts that OSPs should be required to
maintain, at their premises, price and service information and billing records at a designated location
for inspection by regulators and consumers.  The Florida Commission further maintains that this
information should be subject to a minimum retention period.  Similarly, the IPTA, which also
urges that the Commission continue to require OSPs to file tariffs, states that "[i]t is important that
all OSPs . . .  be  on record  somewhere of what rates they are charging for their services."  

     62.  ACTA does not support complete detariffing of any service offerings, including
Section 203 tariffs.  It contends that the rates of AT&T, MCI and Sprint should be published and
readily available, given their tendency to act in their own vested interests, and further contends that
informational tariffs are the only means by which consumers, competitors and regulatory bodies have
sufficient information about OSP rates being charged and to control unscrupulous operators that give
inadequate or intentionally misleading price disclosures.  APCC contends that: it is premature to
remove the tariff filing requirement, not only of Section 226 but also of Section 203;  benchmarks
could be used as a criterion for when carriers should be required to file Section 203 tariffs; such
filings should be on sufficient notice to prevent new above-benchmark rate filings from taking effect
before they were found to be just and reasonable; and either Section 203 or Section 226 tariffs would
enable the Commission to identify OSPs with above-benchmark rates for purposes of checking
compliance with disclosure requirements.  APCC recommends that the Commission retain Section
203 authority with respect to OSP tariffs, establish a longer notice period before above-benchmark
rates could take effect, and require detailed cost support information to be filed in support of such
rates.  CompTel submits that the Commission should permit the filing of informational tariffs and
that such permissive detariffing should apply equally to all nondominant OSPs, regardless of the rates
that they charge.USOC takes the position that all OSPs should be required to file tariffs containing
exact rates and rate plans in order to understand industry actuals and resolve consumer complaints.

     63.  MCI maintains that, if the Commission determines that tariffs are not required to
protect the public interest, there can be no justification for an informational tariff and the Commission
should forbear from applying this requirement.  MCI further maintains, however, that the
Commission should not require complete detariffing for interstate operator services for all the reasons
presented in CC Docket No. 96-91. Sprint believes that all OSPs should be required to file tariffs
for 0+ calls from public phone and other aggregator locations; that the Commission should prohibit
range-of-rate tariff filings and require OSPs to file their tariffs pursuant to Section 203 of the Act. 
Sprint argues that competition in this segment of the market does not work to drive prices down but
instead drives prices up in order to finance commissions to aggregators to gain the 0+ business. 
Sprint maintains that tariffs are needed as a tripwire to enable the Commission to determine whether
further investigation is necessary.  Even if proposed benchmark/disclosure requirements are adopted,
Sprint maintains that tariffs can have important consumer protection functions.   For example, if a
benchmark is based on an assumed average call length, Sprint states that an OSP could charge below-
benchmark rates for that particular call length, so as not to have to disclose its rates to customers,
but charge higher rates for calls of shorter or longer duration.  Sprint further states that tariffs also
perform a useful function for OSPs.  Where there is no pre-established relationship between the
carrier and the party paying for the call, Sprint maintains that a tariff is necessary to form a contract
between the carrier and casual users of its services and to protect the carrier from unscrupulous
consumers of its services.  In any event, even if the Commission forbears from requiring OSP tariffs,
Sprint finds no warrant for complete detariffing.  According to Sprint, OSP competitors have every
incentive to raise their rates, and whatever collusive effect the filing of tariffs may have in other
market segments is totally absent here.

     64.  GTE, which favors benchmark rate regulation directed against the limited number of
abusing OSP carriers, contends that forbearance from OSP tariff filing requirements is inconsistent
with such regulation and inappropriate at this time.  NTCA believes, as it did with respect to the
Section 203 tariff filing requirement, that a decision not to rely on tariffs would be premature; but that
any decision made in this docket should be consistent with that reached in CC Docket No. 96-61. 

     
E.  COMMENTS ON PETITIONS FOR RECONSIDERATION OF THE PHASE I ORDER 
(0+ IN THE PUBLIC DOMAIN)

Petitions Seeking Reconsideration of the 1992 Phase I Order

     65.  CompTel, Polar Communications Corporation (Polar), LinkUSA Corporation
(LinkUSA), Capital Network System, Inc. (CNS), and International Telecharge Incorporated (ITI)
collectively contend that the Commission has acted arbitrarily, capriciously, and in contravention to
the record which, according to these parties, supports the argument that AT&T's CIID card program
causes competitive harm to the OSP industry.  CNS argues that the Commission "improperly and
unlawfully failed to establish regulations that would eliminate [the] anticompetitive problems" posed
by the CIID program.  ITI and Polar contend that the Commission failed to adequately assess the
costs and benefits of the O+ public domain proposal. Intellicall and LinkUSA express their support
of CompTel's Petition for Reconsideration, and urge the Commission to adopt a 0+ public domain
policy that requires AT&T to open its validation database to all carriers, or require AT&T to use its
proprietary CIID card in conjunction with an access code.  Opticom also supports CompTel's
position, but urges the Commission to further modify the proposal to require AT&T to open its CIID
database to OSPs regardless of whether AT&T requires CIID customers to access its network
through access codes.

     66.  CompTel argues that although the Commission recognized that in 1992 AT&T
accounted for the majority of OSP minutes, it failed to adopt an effective solution. CompTel
presents four points in support of its Petition: (i) the record before the Commission demonstrates that
AT&T's introduction of its CIID card created competitive harms; (ii) the Phase I Order concluded
an "immediate competitive problem" existed due to the requirement by other OSP providers to devote
their "facilities to uncompletable calls"; (iii) despite recognizing these harms, the Commission failed
to act in accord with its findings and instead promised to consider BPP as a solution and examine a
compensation mechanism for CIID calls misdirected to OSPs; and (iv) the Commission's
cost/benefit analysis of 0+ public domain was erroneous because it increased the costs of the proposal
based upon AT&T's statement that it would require access codes for its cardholders.  CompTel
ultimately argues that the Commission's Phase I Order failed to assess properly the relative costs and
benefits of the 0+ public domain proposal because its failed to recognize the unique nature of the
CIID card in the 0+ dialing environment.  CompTel concludes that AT&T's CIID card will continue
to confuse callers as long as it is permitted to blur the long-established separation between proprietary
calling cards and the 0+ dialing method.

     67.  MCI claims that the Commission's Phase I Order failed to address AT&T's
"anticompetitive and discriminatory" behavior in connection with AT&T's CIID card.  MCI
contends that although the Commission recognizes that AT&T's behavior was improper, the
Commission's Phase I Order allows AT&T to benefit from an unfair competitive advantage in the
OSP market.  MCI further contends that the Commission inappropriately dismissed the issue of
allowing LECs to validate its CIID card, but not OSPs, and thus, ignored further evidence of AT&T
anticompetitive behavior.  MCI claims that the Commission is incorrect in stating an uncertainty
regarding whether the 0+ public domain alternative would substantially aid OSP competition for
presubscribed locations.  Indeed, MCI contends that a competitive benefit would exist if AT&T
no longer issued a 0+ card or if AT&T issued a 0+ card and opened its database.

     68.  Value-Added Communications (VAC) contends that the Commission's Phase I Order
is in derogation of past Commission precedent and the public interest.  VAC argues that the
issuance of AT&T's proprietary CIID card represents an attempt by AT&T to re-monopolize the OSP
industry.  VAC urges the Commission to subject CIID cards to validation sharing requirements
because, as VAC argues, "AT&T's status as a dominant carrier makes it unlawful for AT&T to
provide validation functions for intraLATA usage of its cards" to some but not all competing OSPs. 
PhoneTel Technologies, Inc. (PhoneTel) also asks the Commission to require the opening of AT&T's
database, contending that AT&T chooses to allow certain companies access to its database, while
denying others access, and thus concludes that the CIID cards are not truly proprietary.  PhoneTel
contends that AT&T's establishment of "voluntary relationships with its former partners" is further
evidence that AT&T's CIID card is not truly proprietary.  PhoneTel argues the CIID card is not
proprietary because "use of a CIID card neither ensures the cardholder AT&T service nor AT&T
rates." LDDS Communications, Inc. (LDDS) concurs in this conclusion, stating that AT&T's
calling card may be validated by virtually any company that jointly provided long distance telephone
service with AT&T prior to divestiture.  LDDS contends that "since the entire pre-divestiture long
distance telephone  partnership  has access to that data base, the cards are not proprietary cards; they
are  integrated monopoly  cards."  LDDS further argues that under prior Commission decisions,
"once AT&T held out the availability of access to its CIID card data base to some carriers, it became
obligated as a common carrier to make that access available on a nondiscriminatory basis to all
carriers.

     69.  The petitioners also present arguments against the Commission's consumer education
mandate.  LDDS argues that the Phase I Order remedy allows AT&T to continue to benefit from the
very conduct which gave rise to the Commission's competitive concerns, and consumers as well as
competitors will continue to suffer the adverse consequences of that conduct. APCC argues that
by requiring AT&T to "cease discriminatory validation," AT&T would then have the option of
preserving its cards as true proprietary cards which cannot be validated by any other carrier.  Thus,
APCC argues, AT&T cards are placed "on the same footing as other IXC proprietary cards."  MCI,
in addition to CompTel, and LDDS, argues that the Commission's proposed customer education
solution will "do nothing to reduce AT&T's dominant position" in the OSP industry because of
AT&T's ability to offer a 0+ card, and will fail to end consumer confusion and frustration.  LDDS
argues that there is no basis to support the Commission's conclusion in this proceeding that customer
education will be sufficient to change twenty-five million CIID card holders' dialing practices. 
PhoneTel urges the Commission to modify its customer education requirement by directing AT&T
to recall all CIID cards and issue replacement cards with correct dialing instructions.  SWBT argues
that, unless modified, the Commission's present instructions will require customers to dial calls with
access codes and without "the convenient use of 0+".  SWBT further contends that the
Commission's instructions to AT&T will "create confusion for customers who receive conflicting
information from SWBT service personnel in response to questions about use of AT&T cards on
SWBT's network."  SWBT recommends that the Commission, in reconsideration of its Phase I
Order, order AT&T to inform customers that calls can be completed on a 0+ basis when they hear
the announcement of AT&T or a LEC.  SWBT and Intellicall contend that informing customers
that 0+ dialing is readily available will reduce confusion and inconvenience because customers may
dial 0+ and complete the call over the LEC's network.

Opposition to Reconsideration of the 1992 Phase I Order

     70.  AT&T argues that none of the OSPs offers any new facts or presents any valid reason
why the Commission should now reverse its course and impose the costs of the 0+ public domain
proposal upon millions of consumers.  AT&T contends that the Phase I Order's remedies are
supported by the record.  AT&T disputes CompTel's claims that 0+ dialing is inconsistent with
proprietary cards.  AT&T further argues that, unlike the LECs who have independent non-
discrimination obligations to all IXCs because they provide monopoly access service, AT&T owes
no such obligations to its OSP competitors.   In reply to the OSPs' petitions, AT&T points to
CompTel's statement that "industry experience shows that with accurate and understandable dialing
instructions, customers have little problem using access codes and proprietary cards."  AT&T
argues that the adoption of the 0+ public domain concept purely for the sake of "increasing parity in
the operator services market," is not consistent with the role of the Commission, and in all events,
would "simply handicap AT&T for the sake of its competitors."

     71.  AT&T further disputes PhoneTel and LDDS' arguments that AT&T should make its
validation database accessible to OSP competitors, arguing that the defining attribute of all
proprietary assets, including AT&T's proprietary card validation system, is the owner's right to
control the use of those assets.  Thus, AT&T argues, the proprietary nature of AT&T's card
validation system is not affected by the voluntary relationships AT&T has established for the use of
that system.  AT&T notes that the issues raised by SWBT relate solely to competition for intrastate
calls and the potential impact of AT&T's marketing messages on the LECs. AT&T contends that
these issues were ruled beyond the scope of this proceeding and, with respect to the intrastate
competition issues, were beyond the scope of the Commission's jurisdiction.

     72.  Sprint, opposes reconsideration of the Phase I Order, in part, because it believes that
BPP is the optimal solution to the imbalances that exist in the OSP market.  SWBT  expresses its
agreement with Sprint on this point, arguing that the technology required for implementation of 0+
public domain is not yet available, as 0+ public domain requires signaling technology which is a
component required for implementation of BPP, and as such, is not expected to be available before
the other required technology components needed for BPP are also available.  SWBT argues that
0+ public domain would require specially designed Signaling System Seven (SS7) technology
between LEC end-offices and IXC operator services switches for processing of operator services
calls.  Such signaling would be necessary so that  IXCs could know how the customer dialed the
call (i.e., 0+ vs. access code).  SWBT contends that unless this intelligence was passed to the IXCs,
all 0+ interLATA calls would have to be blocked at the end office, which, SWBT asserts is not in
anyone's interest.

     73.  Sprint also opposes reconsideration of the Phase I Order because certain OSPs define
0+ public domain so broadly as to affect practices of other carriers, including Sprint, which Sprint
contends are not part of the problem with CIID card use.  Sprint argues that the current technology
does not allow proprietary calling card issuers to block the use of 0+ without also blocking the access
code.  Sprint further contends that the effect of a broadly defined "0+ public domain" proposal
would require Sprint and other IXCs to abandon 10XXX as an access method for calling card calls. 
Sprint argues that it, and other similarly situated IXCs, should not be forced to bear the brunt of
solving "a problem that is of AT&T's making".


F.  COMMENTS ON 0+ CALLS BY PRISON INMATES

     74.  In addressing the issue of BPP for inmate-only telephones, C.U.R.E. notes that for
over three years it has urged the Commission to adopt a BPP scheme for inmate calling.  C.U.R.E.
expressed its continuing support for BPP as the best available means of promoting lower rates and
improved services for families and friends of inmates and acknowledged the Commission's indication
that BPP would be given further consideration in relation to the implementation of number portability. 
 C.U.R.E. urged the Commission to implement mandatory, self-executing rate-caps and other
operational measures as interim alternatives to BPP.
 
     75.  The Florida Commission states that requiring full price disclosure to the called party
before the call is completed would not be an effective way to prohibit unreasonable rates on collect
calls placed by prison inmates because the called party cannot choose another carrier to complete the
call.  Instead, the Florida Commission supports imposition of an absolute rate cap on such calls,
as it does on OSP rates.  The  Florida Commission notes that inmates' families and legal counsel
can be protected from excessive charges if inmates may place calls to personal 800 numbers.  As
it explains, the use of 800 numbers allows the called party to:

          use whatever IXC he prefers and . . . retain control of the rates he is billed.  The
     correctional facility can still retain control over the numbers the inmate calls as it has
     the ability, through [customer-premises equipment], to prohibit calls to all but
     previously authorized numbers, blocking all other numbers so that the inmate cannot
     dial around.

Similarly, prisons could allow inmates to use debit cards that they purchased, or their families
purchased on their behalf, and screen access numbers inmates would use to place a call before
allowing them to use such cards.  The  Florida Commission recognizes that administration of such
a system might be a burden on prisons that currently rely on providers of operator services to
maintain fraud control systems "in return for an outbound calling monopoly" and also could result
in reduced "commission payments" to such prisons. It believes, however, that because customer-
premises equipment (CPE) solutions to control fraud in prisons are now readily available, "it is
appropriate to review the justification for restricting all inmate outbound calls to a single provider." 


     76.  The Coalition proposes that any inmate calling services provider charging in excess
of FCC-benchmark rates for inmate calls be subject to dominant carrier tariff filing procedures,
including the requirement that it cost-justify its rates.   The Coalition further proposes that any such
carrier should also be required to file individual tariffs for every facility where it charged rates over
the FCC-benchmark for inmate calls (except interstate calls from states that have capped intrastate
rates below "compensatory levels").   The Coalition urges the Commission to require quotes on-
demand rather than as a mandatory rate disclosure to maximize the utility of rate information.  The
Coalition contends that disclosure notices should apply to called parties, because it argues, "[a] price
disclosure message will also trigger called parties to investigate what they believe to be excessive
rates." The Coalition argues that, especially in the case of inmates, who, "repeatedly call the same
small circle of friends and family", a mandatory price rate quote could have a "numbing effect on
consumers." C.U.R.E. believes that, to ensure that ratepayers and their representatives are able to
monitor inmate provider billing rates, the Commission should require inmate service providers to: file
informational tariffs with the FCC; make copies available for public inspection in a file maintained on
the premises of the correctional facility to whom the provider offers service; and provide copies to
interested parties on request.          

     77.  Both the Federal Bureau of Prisons and the Office for Victims of Crime, two agencies
within the Department of Justice, have expressed concern that BPP in the prison setting might
jeopardize the current capability of correctional agencies or prisons to control and monitor inmate
telephone use.  Because of these concerns, the Attorney General of the United States has urged that
BPP not be applied to prison inmate telephones, noting that the capability to control and monitor
inmate telephone use "is crucial in maintaining the security of correctional facilities, the safety of the
general public, and special protections for victims and witnesses of crime."
     
     78.  The Coalition asserts that it would be "a gross mistake" to implement BPP in the
inmate calling environment, because it would be tremendously expensive; lead to a marked decrease
in the security of confinement facilities; lead to a drastic increase in telephone harassment, fraudulent
calling and other criminal activity by inmates; drastically reduce the access of inmates to calling
opportunities; and because it could result in an increase in inmate calling rates, rather than "its only
possible benefit - a reduction" in such rates. Indeed, the Coalition argues that due to the enormous
cost of instituting BPP in the inmate environment, it is likely that the recipients of inmate collect calls
would incur that cost, through a BPP charge added to the rates for such calls to pay for BPP
implementation. The Coalition asserts that not a single commenter continues to advocate BPP in
the inmate environment, and that "even C.U.R.E., which has long been a highly vocal proponent of
BPP, concedes that BPP is not currently a viable option." Gateway asserts that inmate service
providers face significant security and fraud prevention needs that can only be satisfied through call
blocking and restricting inmate services to collect calls and, accordingly, that the Commission cannot
legitimately provide for carrier choice or BPP in the inmate services environment. 

     79.  Gateway believes that targeted Commission enforcement efforts against inmate
operator service providers charging excessive rates are preferable, for both policy and legal reasons,
to an FCC-mandated rate cap.  Gateway recognizes, however, that the only information useful to
recipients of inmate calls is rate information provided in real time, prior to acceptance of the call. 
Accordingly, Gateway asserts that establishing a rebuttable rate ceiling for inmate service rates, at
the average inmate service rates of the three leading IXCs, and requiring full rate disclosure, in real
time, by inmate service providers is "the best alternative to BPP for the inmate services market." 
GTE, specifically argues that application of BPP is unnecessary in light of the Commission's
acknowledgement in CC Docket No. 94-158 of many commenters' assertions that inmate service rates
had been brought under control during the previous five-year period and that the market was highly
competitive.
        Separate Statement of Commissioner Gloria Tristani
                                        
                                        
     
                                        


Re: Billed Party Preference for InterLATA 0+ Calls, Second Report and Order and Order on
Reconsideration               


     The Commission continues to receive thousands of complaints every year about high rates
charged by Operator Service Providers (OSPs).   Today's Order greatly simplifies the way
payphone users can learn the OSP's rates for a 0+ call prior to placing the call.  I hope that our
action today will eliminate the "sticker shock" often experienced by consumers when they use
OSPs to place long distance calls. 

     However, we should be clear about what today's Order does not do -- it does not
automatically eliminate high OSP rates.   It merely enables payphone users who dial 0+  for a long
distance call to know the rate before making the call.  If the rate quoted is too high, the caller can
choose not to make the call using 0+ dialing.

     Unfortunately, operator services from payphones are a rare example of competition
leading to higher prices for consumers.  When more OSPs compete for the right to serve a
particular location, they must pay higher commissions to the location owner.  OSPs often recover
those higher commissions from consumers in the form of higher calling charges.

     For that reason, we will continue to monitor OSP rates through tariff filings and through
the complaint process.  If the "bad actor" OSPs continue to generate a significant volume of
complaints at the Commission, I would support more direct action to protect payphone users,
such as capping the rates that OSPs can charge.  


                                        
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