FCC Record, Volume 2, No. 1, Pages 1 to 409, January 5 - January 16, 1987 Page: 157
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Federal Communications Commission Record
a significant burden.227 Similarly, NATA advocates application
of safeguards to all ITCs, but specifically addresses
only the proposed COG requirement. contending
that we need more information to decide whether to
apply the other safeguards to ITC provision of CPE.228
99. A few commenters agree with the tentative conclusion
in the Notice that our nonstructural safeguards
should apply to large ITCs. For example. UTC contends
that the larger ITCs should be subjected to the same or
similar safeguards as the BOCs because they have similar
opportunities to engage in anticompetitive behavior and
improper cross-subsidization.229 IDCMA230 and NATA231
also contend that nonstructural safeguards should apply to
large ITCs.
100. USTA and a number of ITCs oppose the application
of nonstructural safeguards to the provision of CPE
by any ITC. They argue generally that such safeguards are
not appropriate because: (1) the significantly smaller size
of the ITCs prevents them from engaging in substantial
cross-subsidization or discrimination: (2) the costs associated
with implementation of the safeguards would be
unnecessarily burdensome and unwarranted: and (3) the
existing safeguards are sufficient, as evidenced by the lack
of any substantive complaints. In addition, GTE argues
that the potential for anticompetitive abuse by ITCs now
is much less than existed in 1980, when the Commission
declined in the Computer II Reconsideration to apply
structural separation requirements to GTE or any other
ITC. In support of this position. GTE points to the ITCs'
CPE market share. which is significantly lower now than
at the time of Computer II and is still rapidly shrinking.232
Finally, GTE emphasizes that there have been few problems
and complaints concerning provision of CPE by the
ITCs under the current regulatory regime and thus there
is no basis for applying additional nonstructural safeguards
to the ITCs.23
101. The commenters differ on the wisdom of applying
the nonstructural safeguards to GTE. IDCMA, UTC,
NATA, and California advocate that we implement our
proposal and apply nonstructural safeguards to GTE.
California notes that GTE is affiliated with a CPE manufacturing
subsidiary and argues that GTE therefore retains
a substantial incentive to engage in anticompetitive conduct
by integrating its offerings of local service and CPE
manufactured by its affiliate.234 California also states that
GTE serves primarily urban, not rural, areas in its
state.235 NTIA is of the opinion that GTE is the only ITC
that might legitimately be subjected to nonstructural safeguards,
but stops short of advocating that position. Rather,
it asserts that the potential ability of GTE to exercise
market power to the detriment of CPE competition on a
broad geographic scale must be balanced against the fact
that this would subject GTE to more regulation than it
has faced in the past.236 Several BOCs argue that nonstructural
safeguards need not be applied to GTE.237
102. GTE itself argues that its position is not similar to
that of the BOCs, and that comparing its holding company
to the RBOCs is inappropriate. GTE argues that
nonstructural safeguards should not be applied to its
provision of CPE in light of several significant differences
between its operating companies (GTOCs) and the BOCs.
GTE maintains that, unlike the BOCs: (1) the GTOCs are
separate, autonomous enterprises; (2) the GTOCs are
widely dispersed over a large geographic area; (3) the
GTOCs' lack of dominance in any region of the United
States (except Hawaii); (4) the service areas of the GTOCsare predominantly rural or suburban, resulting in significantly
fewer lines served per square mile and (except for
Hawaii) service to fewer than 25 percent of the access
lines in any one state: and (5) the percentage in GTOC
service areas of business customers, who tend to be the
major purchasers of CPE. is relatively small.238 GTE
further argues that the same reasoning that led this Commission
not to apply the structural requirements of
Computer II to GTE23 should continue to be dispositive
here.
B. Discussion
103. In this proceeding we have established a new set of
nonstructural safeguards to take the place of the structural
separation requirements now applicable to the
BOCs' CPE operations. These safeguards are designed to
address concerns that, absent structural separation, the
BOCs might engage in improper cross-subsidization and
discrimination. With respect to safeguards to detect and
remedy cross-subsidizationJointCost proceeding. For the
ITCs. we defer to the Joint Cost proceeding the question
whether it is appropriate to apply some or all of the
standards and compliance procedures to be developed
there to the ITCs or to some subset of them. The question
of whether different accounting requirements should apply
to carriers of different size is squarely raised in the
Joint Cost rulemaking and is best addressed on the basis
of the record and in light of the full range of options
developed in that proceeding. Accordingly, we address in
this Order the application to the ITCs of the nonaccounting
nonstructural safeguards that we have today
established for the BOCs.240
104. After review of the record, we believe that application
of the proposed new nonstructural safeguards to any
of the Independents, including GTE, would be unduly
burdensome and is not necessary to protect against potential
anticompetitive conduct.24' The comments provide
overwhelming support for our conclusion that smaller
ITCs need not be subject to nonstructural safeguards,242
and our own analysis does not indicate that such safeguards
would be necessary or desirable, as there is no
indication of competitive problems with their supply of
CPE. These carriers lack the size and resources to affect
the national competitive CPE market in any significant
way. In addition, even though both BOCs and ITCs
provide local monopoly service within defined geographic
areas, competition will prevent a CPE monopoly where
the carrier's individual service areas are relatively small
and scattered because other CPE providers will not be
discouraged from serving the regions in which these
smaller companies are located. Furthermore, the application
of these new safeguards to smaller ITCs could, in
many cases, prove burdensome. Therefore, we decline to
apply nonstructural safeguards to smaller ITCs.
105. We now believe that, contrary to our tentative
conclusion in the Notice, imposing new nonstructural
safeguards on large ITCs would not be in the public
interest. As stated in the Notice and emphasized in many
of the comments, every ITC has been able to provide CPE
free of the structural separation requirements that we
applied to the BOCs in Computer II. These ITCs have
been subject only to the "All Carrier Rule" for network
information disclosure243 and the other nondiscrimination
requirements incorporated in our Part 68 rules governing
the CPE registration program and Section 202 of the
Communications Act of 1934.244 Yet no commenter has157
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United States. Federal Communications Commission. FCC Record, Volume 2, No. 1, Pages 1 to 409, January 5 - January 16, 1987, book, January 1987; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc1597/m1/164/: accessed April 25, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.