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Notes: Computer II: Unbundling Dont be a FOOL; The Law is Not DIY

Notes:
Computer Inquiries
CPE
Unbundling
These notes are not complete and there is no guarantee that they are accurate. They are presented simply as notes. Feel free to use them but as with all material on the Cybertelecom, you should consider them a beginning to your research and not an end.
  • Unbundling (All Facilities Based Carriers)
  • Purpose
  • Application to Whom
  • Enhanced Services
  • Customer Premises Equiment
  • Restriction
  • Regulatory Concerns
  • What Distinguishes CPE
  • Jurisdiction
    •
  • Enforcment
    •

    Unbundling - All Facilities Based Carriers

    Our rules currently prohibit telecommunications carriers from bundling telecommunications services with CPE, and place restrictions on the bundling of telecommunications services with enhanced services.  Our current restrictions not only prevent carriers from offering distinct goods and/or services only on a bundled basis, but also prohibit carriers from offering "package discounts," which enable "customers [to] purchase an array of products in a package at a lower price than the individual products could be purchased separately."[5]
    [n 5] See Bundling of Cellular Customer Premises Equipment and Cellular Service, CC Docket No. 91-34, Report and Order, 7 FCC Rcd 4028, 4032 (1992) (Cellular Bundling Order) (noting that package discounts are commonplace in a variety of industries).  Economists have also examined the welfare effects of such package discounts, using the term "mixed bundling" to describe the situation in which a seller offers goods or services separately as well as in a package, with the package priced below the sum of the prices of individual goods or services.  See generally William James Adams & Janet L. Yellen, Commodity Bundling and the Burden of Monopoly, 90 Q.J. Econ. 475 (1976).  We note that our rules do not prohibit carriers from offering "one-stop shopping" for CPE and telecommunications services; the rules require only that the goods or services be priced separately.
    -- In the matter of 1998 Biennial Regulatory Review -- Review of Customer Premises Equipment and Enhanced Services Unbundling Rules in the Interexchange, Exchange Access and Local Exchange Markets, CC Docket No. 98-183, Further Notice of Proposed Rulemaking, para 1 (October 9, 1998)

    Purpose

    Historically, the Commission has restricted bundling of CPE and enhanced services with telecommunications services out of a concern that carriers could use such bundling in anticompetitive ways.   For example, a carrier in the long-distance market could require customers that wished to purchase just long-distance services also to purchase telephone equipment from that carrier.   Not only would those customers be forced to buy a product they may not want, but other companies trying to sell telephone equipment could be unfairly deprived of customers.  As a result, the Commission concluded that bundling could restrict customer choice and retard the development of competitive CPE and enhanced services markets.   We believe that our no-bundling rules have fostered more competitive markets for CPE and enhanced services and afforded consumers more options in obtaining equipment and services that best suit their needs.  We believe, however, that it is appropriate to consider whether these rules are no longer necessary and whether bundles of goods and/or services can provide benefits to consumers.
    -- In the matter of 1998 Biennial Regulatory Review -- Review of Customer Premises Equipment and Enhanced Services Unbundling Rules in the Interexchange, Exchange Access and Local Exchange Markets, CC Docket No. 98-183, Further Notice of Proposed Rulemaking, para 2 (October 9, 1998)
     
    Application to Whom
    "Accordingly, we will on our own motion grant any carrier offering enhanced services through facilities attached to the interstate network until March 1, 1982, to detariff such services. Of course, carriers are free to detariff these services any time in the interim by withdrawing the appropriate tariffs. New enhanced services, i.e., those not offered pursuant to a tariff which is in effect as of the effective date of the Final Decision, must be offered under the parameters of the Final Decision."
     7. This action has the effect of granting Telenet's and Tymnet's requests insofar as they seek to defer the date by which they would have to detariff their existing enhanced service offerings.
    --In the Matter of Amendment of Section  64.702 of the Commission's Rules and  Regulations (Second Computer Inquiry),  Docket No. 20828, MO&O, 79 FCC2d 953   ¶ 6-7  (July 22, 1980) (resolving requests for  partial stays of final decision)


     16. One final matter to be addressed is Telenet's statement that it is at a loss as to what the Commission intends it to do. Telenet asserts that it is unclear whether the Commission intends Telenet to cease to be a carrier, whether its offering of new enhanced services must be offered through a separate subsidiary, and if so, whether this would automatically trigger immediate imposition of the separation requirements set forth in the Final Decision.
     17. It should be stated at the outset that, under the Final Decision, whether Telenet remains a carrier providing communications services is a function of the types of services it offers. While Telenet's existing FCC Tariff No. 1 constitutes an enhanced service under the Final Decision, the Commission in that decision did not prevent Telenet from providing basic services, should it so choose. However, there are obvious structural implications should Telenet choose to offer basic services. Telenet itself notes the prohibition against the AT&T or GTE enhanced service subsidiary providing both basic and enhanced services. See Final Decision at para. 230.
     18. Accordingly, the determination as to the role it is to play in providing various services to consumers, and the structure under which such services are provided, rests with Telenet and its corporate parent. If Telenet is to serve as the GTE enhanced service subsidiary, then it will become a resale entity providing solely unregulated enhanced services on the date it detariffs its existing enhanced service offering, which, as indicated at para. 4 above, is not to be later than March 1, 1982. Under this scenario, Telenet is free to offer new enhanced services on non-tariffed basis subject to the conditions imposed by the GTE/Telenet Merger Opinion, as modified,--which in some instances may be less restrictive than the separation conditions imposed by the Final Decision--pending further Commission action 6 See Final Decision at n. 109. However, if its corporate plans envisage operation as other than a  resale entity, or involve the provision of basic services, then Telenet would be subject to the separate subsidiary requirements of the Final Decision for the provision of any new enhanced services.
    --In the Matter of Amendment of Section  64.702 of the Commission's Rules and  Regulations (Second Computer Inquiry),  Docket No. 20828,  MO&O, 79 FCC2d 953, ¶¶ 16-18  (July 22, 1980) (resolving requests for  partial stays of final decision)
     

    Enhanced Services

    The Commission required those carriers that own common carrier transmission facilities and provide enhanced services, but are not subject to the separate subsidiary requirement, to acquire the necessary basic services pursuant to tariff.82   The Commission also required these carriers to give competing enhanced service providers access to their facilities on the same rates, terms and conditions.83
    82  Id. at 474-75, para. 231.
    83  Id.
    --In Re Appropriate Framework for Broadband Access to the Internet over Wireline Facilities, CC Docket No. 02-33, CC Dockets Nos. 95-20, 98-10, NPRM ¶ 40 (February 15, 2002) http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-02-42A1.doc

    4. The Commission implemented enhanced services unbundling requirements to ensure such nondiscriminatory access to basic services.  For the Bell Operating Companies, which the Commission found to have sufficient market power on a national scale to engage in anticompetitive activity, it required that they establish a separate subsidiary to provide enhanced services.  It also required the subsidiary to acquire its transmission capacity from the parent company pursuant to tariff.11   The Commission explained that this meant that the same transmission facilities or capacity provided the subsidiary by the parent must be made available to all enhanced service providers under the same terms and conditions.12   For other facilities-based carriers that lacked market power and therefore were not subject to the separate subsidiary requirement, the Commission required them to "acquire transmission capacity pursuant to the same prices, terms, and conditions reflected in their tariffs when their own facilities are utilized."13   The Commission has interpreted this requirement to mean that "carriers that own common carrier transmission facilities and provide enhanced services must unbundle basic from enhanced services and offer transmission capacity to other enhanced service providers under the same tariffed terms and conditions under which they provide such services to their own enhanced service operations."14   The Commission has not changed this requirement for these carriers. The Commission did replace the separate subsidiary requirements for the BOCs with nonstructural safeguards established in the Computer III proceeding because it found that they would perform as well as structural safeguards in combating discrimination by the BOCs and be less costly.15   In doing so, it affirmed and strengthened the requirement that the BOCs acquire transmission capacity for their own enhanced services operations under the same tariffed terms and conditions as competitive enhanced service providers. 16
    11Id. at 466-74, paras. 215-230.
    12   Id. at 474, para. 229.
    13  Id. at 474-75, para. 231.  The Commission reemphasized this requirement in the Computer II Reconsideration Order.  Computer II Reconsideration Order, 84 FCC 2d at 75 n.19 ("Those carriers not subject to the separate subsidiary requirement, when employing their own common carrier transmission facilities in the provision of enhanced services, must obtain transmission capacity pursuant to the terms and conditions embodied in their tariff.").
    14  Independent Data Communications Manufacturers Association, Inc. Petition for Declaratory Ruling and American Telephone and Telegraph Company Petition for Declaratory Ruling, Memorandum Opinion and Order, 10 FCC Rcd 13717, 13719 (1995) (Frame Relay Order); Competition in the Interstate Interexchange Marketplace, CC Docket No. 90-132, Memorandum Opinion and Order on Reconsideration, 10 FCC Rcd 4562, 4580 (1995).
    15   Amendment of Section 64.702 of the Commission's Rules and Regulations (Computer III), Report and Order, CC Docket No. 85-229, Phase I, 104 FCC 2d 958 (1986) (Phase I Order), recon., 2 FCC Rcd 3035 (1987) (Phase I Recon. Order), further recon., 3 FCC Rcd 1136 (1988) (Phase I Further Recon. Order); second further recon., 4 FCC Rcd 5927 (1989) (Phase I Second Further Recon.), Phase I Order and Phase I Recon. Orders, vacated, California v. FCC, 905 F.2d 1217 (9th Cir. 1990) (California I); Phase II, 2 FCC Rcd 3072 (1987) (Phase II Order), recon., 3 FCC Rcd 1150 (1988) (Phase II Recon. Order), further recon., 4 FCC Rcd 5927 (1989) (Phase II Further Recon. Order), Phase II Order vacated, California I, 905 F.2d 1217 (9th Cir. 1990); Computer III Remand Proceedings, 5 FCC Rcd 7719 (1990) (ONA Remand Order), recon., 7 FCC Rcd 909 (1992), pets. for review denied, California v. FCC, 4 F.3d 1505 (9th Cir. 1993) (California II); Computer III Remand Proceedings; Bell Operating Company Safeguards and Tier I Local Exchange Company Safeguards, 6 FCC Rcd 7571 (1991) (BOC Safeguards Order), recon. dismissed in part, Order, CC Docket Nos. 90-623 and 92-256, 11 FCC Rcd 12513 (1996); BOC Safeguards Order vacated in part and remanded, California v. FCC, 39 F.3d 919 (9th Cir. 1994) (California III), cert. denied, 115 S.Ct. 1427 (1995); Computer III Further Remand Proceedings: Bell Operating Company Provision of Enhanced Services; 1998 Biennial Review - Review of Computer III and ONA Safeguards and Requirements, CC Docket Nos. 95-20; 98-10; Further Notice of Proposed Rulemaking, 13 FCC Rcd 6040 (1998) (Computer III 1998 FNPRM); Report and Order, 14 FCC Rcd 4289 (1999) (Computer III March 1999 Order)(addressing part of Computer III 1998 Further Notice), recon., 14 FCC Rcd 21628 (1999) (referred to collectively as the Computer III proceeding).
    16  Computer III Phase I Order, 104 FCC 2d at 1011-13.  Computer III established Comparably Efficient Interconnection (CEI) and Open Network Architecture (ONA) requirements.  CEI is a nonstructural safeguard that requires that if a BOC offers enhanced service, it must offer network interconnection opportunities to competitive enhanced service providers that are comparably efficient to the interconnection that its own enhanced service operation enjoys.  See Computer III Phase I Order, 104 FCC 2d at 1019, para. 112.  Both the BOCs and AT&T were initially subject to CEI requirements.  Id. at 1026-27, paras. 129-31.  In subsequent orders, the Commission first modified, and then relieved, AT&T of the CEI requirements.  See Computer III March 1999 Order, 14 FCC Rcd at 4294-95, n.17-18 (and cases cited therein).  The Commission has never imposed CEI requirements on GTE or any other independent LEC.  ONA is the overall design of a carrier's basic network services to permit all users of the basic network, including the enhanced service operations of the carrier and its competitors, to interconnect to specific basic network functions and interfaces on an unbundled and equal access basis.  The Commission initially applied the ONA requirements to both AT&T and the BOCs, but later relieved AT&T of most of the requirements.  Computer III Phase I Order, 104 FCC 2d at 1026-27, paras. 127-31.  AT&T remains subject, however, to a modified ONA plan that the Commission approved in 1988, and must submit an annual affidavit that affirms that it has not discriminated in the quality of network services provided to competing enhanced service providers.  See Filing and Review of Open Network Architecture Plan, CC Docket No. 88-2, Memorandum Opinion and Order, 4 FCC Rcd 2449 (1988).  In 1994, the Commission extended ONA requirements to GTE.  Application of ONA and Nondiscrimination Safeguards to GTE Corporation, CC Docket No. 92-256, 9 FCC Rcd 4922 (1994).  The Commission has not applied ONA requirements to any other local exchange carriers.
    -- In re Policy And Rules Concering The Interstate, Interexchange Marketplace/Implementation Of Section 254(G) Of The Communications Act Of 1934, As Amended/In 1998 Biennial Review -- Review Of Customer Premises Equipment And Enhanced Services Unbundling Rules In the Interexchange, Exchange Access and Local Exchange Markets, CC Docket No. 98-183; CC Docket No. 96-61, Report and Order, ¶ 4 (March 31, 2001) <www.fcc.gov/Bureaus/Common_Carrier/Orders/2001/fcc01098.doc>.


            39. In this section, we clarify that there is currently no prohibition on the bundling of basic telecommunications service and enhanced service at a single, discounted price for any carrier.  This clarification will allow carriers to offer innovative packages of enhanced services bundled with basic telecommunications service and CPE.  In order to ensure that competitive enhanced service providers continue to have non-discriminatory access to the underlying transmission capacity, we do not eliminate the existing requirement that facilities-based carriers offer such capacity to these providers on the same terms and conditions under which they provide such service to their own enhanced service operations.
                1. Existing Requirements for Nondominant Carriers
            40. We clarify that the requirement in Computer II, that carriers not subject to the separate subsidiary requirement acquire transmission capacity pursuant to the same prices, terms, and conditions reflected in their tariffs when their own facilities are used, does not prohibit them from offering packages of telecommunications service, including interstate, domestic, interexchange service or local exchange service, and enhanced services at a single price.   As long as they comply with the requirement to make their underlying transmission capacity for the enhanced service available on nondiscriminatory terms, it is consistent with the Commission's reasoning in Computer II to clarify that these carriers may offer bundled packages.  In particular, the Commission found in Computer II that carriers that had no control over local bottleneck facilities, and therefore no market power, would not be in a position to act anticompetitively if they had integrated basic and enhanced services operations.   It pointed out specifically that any advantages from anticompetitive conduct "would be short-lived, as customers could readily avail themselves of alternative suppliers."   The Commission also found that the potential for these carriers to offer innovative services to a broader range of customers would increase if they were not subject to the structural separation requirements.   We conclude that a natural outcome of allowing these carriers to operate on an integrated basis is that they would be able to offer packages of telecommunications and enhanced services at a single price, and indeed, there is no restriction against such packaging for these carriers in Computer II, provided that they comply with the safeguard to make available the underlying transmission capacity for the enhanced service.
            41. We also clarify the scope of the bundling that carriers may undertake.  While nearly all commenters agree that nondominant carriers should be permitted to bundle enhanced services with telecommunications services,  there is some confusion in the record regarding the extent to which carriers already bundle these services.  In particular, MCI WorldCom states that in the Non-Accounting Safeguards Order, the Commission explained that interLATA information service already includes a bundled interLATA telecommunications element because information service, itself, is a bundling of telecommunications service and the computer processing that is necessary to offer the information-based portion of the service.  In that sense, it points out, all enhanced services are "bundled" services.   It suggests that carriers should be permitted a greater degree of enhanced service bundling than simply the bundling that is inherent in the provision of any interLATA enhanced service.   For example, it states that nondominant interexchange carriers should be able to bundle enhanced services, such as voice mail, with other separate interexchange services.   We agree.  The benefits of bundling come from allowing consumers to purchase an all-inclusive bundle at a single price that consists of interstate, domestic, interexchange transmission services combined with their choice of enhanced service and CPE.
                2. Existing Requirements for Dominant Carriers
            42. Unlike nondominant carriers, dominant carriers are restricted under Computer II from offering enhanced services and basic telecommunications services at a single price.  This is because dominant carriers that choose to operate pursuant to Computer II, as opposed to Computer III, are required to maintain a fully separate subsidiary for the provision of enhanced services with the separate subsidiary having its own operating, marketing, installation, and maintenance personnel for the services it offers.   The Commission stated that because of the difficulties that it believed existed in allocating joint and common costs between such regulated an unregulated entities, it eliminated the allocations by prohibiting any joint activities in the areas of provisioning or marketing.   The carrier is then also required to offer its underlying transmission facilities to all competitive enhanced service providers, including its own subsidiary, on an equal basis.   Under such a regime, the dominant carrier could not bundle an enhanced service and a basic telecommunications service at a single price.
            43. In Computer III, the Commission replaced the structural safeguards established in Computer II with nonstructural safeguards, which it found would perform as well in combating discrimination by the BOCs and be less costly.  In doing so, it allowed BOCs to integrate their enhanced and basic service operations, but affirmed the requirement that they acquire transmission capacity under the same tariffed terms and conditions as competitive enhanced service providers.   This unbundling is accomplished primarily through CEI and ONA requirements.  The Commission recognized specifically that this integration would permit the BOCs to "engage in joint marketing of enhanced and basic services."   It is clear, however, that although BOCs are permitted to market telecommunications services jointly with enhanced services, they remain obligated to offer the telecommunications service component separately.  We therefore agree with U S West that BOCs can already jointly market basic and enhanced services under our existing requirements, but must continue to offer the basic service separately pursuant to tariff.   Indeed, the BOCs do not advocate that the Commission eliminate this requirement, but argue instead that we make it clear that they already may bundle enhanced services with local exchange service at one price in the same manner that CPE can be bundled.  As we stated above, we agree with this interpretation of Computer III.
            44. There are other existing safeguards that are applicable to incumbent LECs that seek to bundle.  There is no dispute in the record that the BOCs and all incumbent LECs are required to offer basic local exchange service on an unbundled, tariffed, nondiscriminatory basis.  Indeed, there is no evidence in the record that these carriers are relieved of this obligation in any state in which they provide local exchange service.  Customers would therefore be able to purchase enhanced services from competitive providers and still obtain local service from the incumbent pursuant to the tariff.  This prevents the incumbent carriers from discriminating against customers who purchase enhanced service from competitive suppliers.  As the Commission found in the Cellular Bundling Order, the separate availability of the transmission service is fundamental to ensuring that dominant carriers cannot discriminate against customers who do not purchase all the components of a bundle from the carriers, themselves.   Incumbent LECs are also subject to specific safeguards in sections 260, 274 and 275 of the Act for the provision of telemessaging, electronic publishing and alarm monitoring services.
            45. In addition, our cost-accounting rules reduce significantly the BOCs' incentive and ability to misallocate costs between their regulated and unregulated service operations.  We reject the unsubstantiated arguments of the commenters who contend that our cost allocation rules will not prevent cross-subsidization.   These rules consist of detailed cost allocation requirements and related cost accounting safeguards that separate nonregulated enhanced service costs from regulated service costs, cost accounting mechanisms to enforce the joint cost rules (including the filing and approval of cost allocation manuals), and the requirement that carriers submit to independent audits.   The Commission has also found that these cost allocation safeguards provide sufficient information for the states to protect against cross-subsidies at the intrastate level.   It explained that the operation of the joint cost and jurisdictional separations rules result in a BOC intrastate assignment of basic service costs.  To protect against cross-subsidy of enhanced services by intrastate ratepayers, which is an important issue if BOCs can bundle interstate enhanced services with local exchange service, a state need only use its normal regulatory mechanisms to ensure that intrastate rates are not too high in light of that assignment.
            46. We also emphasize that section 202 applies equally to all carriers, both dominant and nondominant, that provide transmission service to competitive enhanced service providers.  In particular, Internet Service Providers have raised issues regarding their ability to obtain DSL service on nondiscriminatory terms.   The internet service providers require DSL service to offer competitive internet access service.  We take this issue seriously, and note that all carriers have a firm obligation under section 202 of the Act to not discriminate in their provision of transmission service to competitive internet or other enhanced service providers.  Indeed, the Commission has already found that where there is an incentive for a carrier to discriminate unreasonably in its provision of basic transmission services used by competitors to provide enhanced services, section 202 acts as a bar to such discrimination.   In addition, we would view any such discrimination in pricing, terms, or conditions that favor one competitive enhanced service provider over another or the carrier, itself, to be an unreasonable practice under section 201(b) of the Act.  We also note that the Commission's Title II resale requirements mandate that wireline common carriers provide telecommunication services to competitors.
    -- In re Policy And Rules Concering The Interstate, Interexchange Marketplace/Implementation Of Section 254(G) Of The Communications Act Of 1934, As Amended/In 1998 Biennial Review -- Review Of Customer Premises Equipment And Enhanced Services Unbundling Rules In the Interexchange, Exchange Access and Local Exchange Markets, CC Docket No. 98-183; CC Docket No. 96-61, Report and Order, ¶ 39 (March 31, 2001) <www.fcc.gov/Bureaus/Common_Carrier/Orders/2001/fcc01098.doc> (footnotes omitted).

    In the Computer II proceeding, the Commission required common carriers that own transmission facilities and provide enhanced services to "acquire transmission capacity pursuant to the same prices, terms, and conditions reflected in their tariffs when their own facilities are utilized."   This requirement has been interpreted in decisions since Computer II to mean that "carriers that own common carrier transmission facilities and provide enhanced services must unbundle basic from enhanced services and offer transmission capacity to other enhanced service providers under the same tariffed terms and conditions under which they provide such services to their own enhanced service operations."
    -- In the matter of 1998 Biennial Regulatory Review --Review of Customer Premises Equipment and Enhanced Services Unbundling Rules in the Interexchange, Exchange Access and Local Exchange Markets, CC Docket No. 98-183, Further Notice of Proposed Rulemaking, para 33  (October 9, 1998)

    Section 202 of the Act prohibits common carriers from discriminating unreasonably in their provision of communications services. Pursuant to section 203, common carriers are required to tariff their interstate communications services. Although the separate subsidiary requirements of Computer II applied only to AT & T (and later to the divested Bell Operating Companies, "BOCs"), 159 the other requirements of Computer II applied to all facilities-based common carriers, regardless of whether their revenues exceeded the Computer I threshold. Carriers owning common carrier transmission facilities and providing enhanced services must unbundle the basic from the enhanced components of their services. They must offer the unbundled transmission capacity to other enhanced service providers pursuant to the same tariffed terms and conditions under which they provide such services to their own enhanced service operations.160

    160 "[T]hose carriers that own common carrier transmission facilities and provide enhanced services, but are not subject to the separate subsidiary requirement, must acquire transmission capacity pursuant to the same prices, terms, and conditions reflected in their tariffs when their own facilities are utilized. Other offerors of enhanced services, would likewise be able to use such a carrier's facilities under the same terms and conditions." Computer II Final Decision, 77 FCC2d at 475. In Computer II, the Commission also preempted state regulation of the sale of both customer premises equipment ("CPE") and enhanced services.
    --Barbara Espin, Internet Over Cable: Defining The Future In Terms Of The Past, OPP Working Paper No. 30, at 56 (August 1998)

    In light of our conclusion in the Non-Accounting Safeguards Order that the statutory term "information services" includes all services the Commission has previously considered to be "enhanced," and our decision in this proceeding to seek comment on whether the statutory term "telecommunications services" includes all services the Commission has previously considered to be "basic services," we seek comment on whether the Commission hereafter should conform its terminology to that used in the 1996 Act.  We ask commenters to discuss whether the Commission's rules, which previously distinguished between basic and enhanced services, should now distinguish between telecommunications and information services.  For example, we ask whether the Commission's Computer II decision should now be interpreted to require facilities-based common carriers that provide information services to unbundle their telecommunications services and offer such services to other ISPs under the same tariffed terms and conditions under which they provide such services to their own information services operations.131
    --  In The Matter Of Computer III Further Remand Proceedings:  Bell Operating Company Provision Of Enhanced Services, CC Docket No. 95-20, 1998 Biennial Regulatory Review -- Review of Computer III and ONA Safeguards and Requirements, CC Docket No. 98-10, FCC 98-8, Further Notice of Proposed Rulemaking,  42 (January 30, 1998).

    In the Computer II proceeding, the Commission required common carriers that own transmission facilities and provide enhanced services to "acquire transmission capacity pursuant to the same prices, terms, and conditions reflected in their tariffs when their own facilities are utilized." This requirement has been interpreted in decisions since Computer II to mean that "carriers that own common carrier transmission facilities and provide enhanced services must unbundle basic from enhanced services and offer transmission capacity to other enhanced service providers under the same tariffed terms and conditions under which they provide such services to their own enhanced service operations."
    -- In the matter of 1998 Biennial Regulatory Review -- Review of Customer Premises Equipment and Enhanced Services Unbundling Rules in the Interexchange, Exchange Access and Local Exchange Markets, CC Docket No. 98-183, Further Notice of Proposed Rulemaking, para 33 (October 9, 1998)

    "Under the Commission's Computer II decision, those carriers that own common carrier transmission facilities and provide enhanced services must unbundle basic from enhanced services and offer transmission capacity to other enhanced service providers under the same tariffed terms and conditions under which they provide such services to their own enhanced service operations."
    --In The Matter Of Independent Data Communications Manufacturers Association, Inc., Petition for Declaratory Ruling That AT&T's InterSpan Frame Relay Service Is a Basic Service; DA 95-2190, Memorandum Opinion and Order, 10 FCCR. 13,717, 10 FCC Rcd. 13,717, 1 Communications Reg. (P&F) 409,  13 (October 18, 1995) (Frame Relay)


    The requirements established in the Computer II proceeding are clear:
        [T]hose carriers that own common carrier transmission facilities and provide enhanced services, but are not subject to the separate subsidiary requirement, must acquire transmission capacity pursuant to the same prices, terms, and conditions reflected in their tariffs when their own facilities are utilized.  Other offerors of enhanced services would likewise be able to use such a carrier's facilities under the same terms and conditions.103
    Thus, having applied Commission Rules and found that frame relay service is a basic service, we conclude that, pursuant to the Computer II decision, all facilities-based common carriers providing enhanced services in conjunction with basic frame relay service must file tariffs for the underlying frame relay service and acquire that tariffed service in the same manner as resale carriers.  This requirement applies independently of any additional requirements (such as CEI) under the Computer III proceedings.104
    --In The Matter Of Independent Data Communications Manufacturers Association, Inc., Petition for Declaratory Ruling That AT&T's InterSpan Frame Relay Service Is a Basic Service; DA 95-2190, Memorandum Opinion and Order, 10 FCCR. 13,717, 10 FCC Rcd. 13,717, 1 Communications Reg. (P&F) 409,  59 (October 18, 1995) (Frame Relay)

    "40. We note further that Citicorp's petition seems to assume that in eliminating CEI parameters for streamlined services, we also relieved AT&T of all our Computer II requirements.  This is not the case.71  The other Computer II requirements, which apply to all carriers offering enhanced  services that own their own common carrier transmission facilities, were not affected by the Interexchange Order.  Thus AT&T (and other carriers) must continue to unbundle basic and enhanced services and they must offer transmission capacity to other enhanced service providers under the same tariffed terms and conditions under which they provide such services to their own enhanced service operations. 72"
    --In The Matter Of Competition In The Interstate Interexchange Marketplace, CC Docket No. 90-132, Memorandum Opinion and Order on Reconsideration  40 (February 17, 1995)

    "20. We removed both enhanced services and customer premises equipment from regulation as common carrier communications services at the federal and at the state levels.29  We required all carriers owning transmission facilities to unbundle their basic and enhanced offerings, and to use their basic transmission facilities under the terms and conditions of their own tariffs when providing enhanced services.30  While the "tariff rates" condition was intended mainly to prevent carriers from using their control of their networks to squeeze competitive enhanced service providers, it also functioned as a firm cost allocation rule for assigning transmission costs to the carriers' enhanced service operations."
    In the Matter of
    -- Separation of costs of regulated telephone service from costs of nonregulated activities. Amendment of Part 31, the Uniform System of Accounts for Class A and Class B Telephone Companies to provide for nonregulated activities and to provide for transactions between telephone companies and their affiliates, CC Docket No. 86-111, Report And Order,  20 (February 6, 1987)


     231.  By removing other carriers from the separate subsidiary requirements of the First Computer Inquiry, they are now able to offer basic and enhanced services through common computer and transmission facilities. However, an essential thrust of this proceeding has been to provide a mechanism whereby non-discriminatory access can be had to basic transmission services by all enhanced service providers.  Because enhanced services are dependent upon the common carrier offering of basic services, a basic service is the building block upon which enhanced services are offered.  Thus those carriers that own common carrier transmission facilities and provide enhanced services, but are not subject to the separate subsidiary requirement, must acquire transmission capacity pursuant to the same prices, terms, and conditions reflected in their tariffs when their own facilities are utilized.  Other offerors of enhanced services would likewise be able to use such a carrier's facilities under the same terms and conditions.
    --Final Decision, In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), 77 FCC2d 384, ¶ 231 (1980)
     
     

    Customer Premises Equipment


     8.  In the Tentative Decision we proposed a regulatory scheme for carrier- provided customer-premises equipment (CPE) based on whether the CPE performed more than a basic media conversion (BMC) function.  We attempted to set forth a structure under which carriers could, separate from their basic transmission services, provide CPE that incorporated various computer processing applications.  We sought comment, however, as to whether any regulatory distinction should be made between the various kinds of CPE offered by carriers, and whether all such equipment should be deregulated.  We find that the public interest would not be served by classifying CPE based on whether or not more than a basic media conversion function is performed.  We conclude that, in light of increasing sophistication of all types of CPE and the varied uses to which CPE can be put while under the user's control, it is likely that any given classification scheme would impose an artificial, uneconomic constraint on the design and use of CPE.  In general, no regulatory distinction should be made between various types of carrier-provided CPE.
     9.  As to the appropriate regulatory scheme for CPE, we find that the tariffing of CPE in conjunction with regulated communications services has a direct effect on rates charged for interstate services.  To the extent rates for interstate services bear costs attributable to carrier-provided CPE regulation serves to thwart the competitive provision of CPE.  The continuation of tariff-type regulation over carrier-provided CPE neither recognizes the role of carriers as competitive providers of CPE, nor does it reflect the severability of CPE from transmission services.  We conclude that CPE is a severable commodity from the provision of transmission services and that regulation of CPE under Title II is not required and is no longer warranted.
     10.  We appreciate that implementation of our decision to exclude carrier- provided CPE from regulation requires the eventual removal of CPE related costs from a carrier's rate base and its ultimate exclusion from the jurisdictional separations process.  A transition period is established to allow for the orderly removal of CPE investment and other CPE related costs from the jurisdictional separations process.  During this transition period, a Federal- State Joint Board will consider whether modifications to the separations process are warranted in light of the removal of CPE.
    --In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Final Decision, 77 FCC2d 384 (May 2, 1980) (Computer II Final Decision)


     64.  With respect to the provision by carriers of customer-premises equipment, we note that the provision of such equipment, in and of itself, is not a common carrier activity.  This does not mean that carriers may not provide various terminal devices in conjunction with a communications service. In view of the dynamic nature of computer processing applications which can be incorporated into such devices and the applications which are under the user's control, we do not apply a definitional structure to the processing capabilities incorporated within customer-premises equipment.  Instead, we distinguish between devices which function as transducers or basic media conversion devices, and those which do more.  We conclude that carrier-provided transducers and basic media conversion devices may be provided as part of a 'voice' or 'basic non-voice' service.  With respect to that class of equipment which performs more than a basic media conversion function, we conclude that there should be no requirement that such equipment be tariffed as part of a communications service.  However, if a carrier desires to provide such equipment as part of a communications offering, it may only be offered in conjunction with an 'enhanced non-voice' communications service.  Thus, equipment which performs more than a basic media conversion function may be offered on a tariffed basis only by a resale carrier.  Otherwise it must be offered on a non-tariffed basis through a separate corporate entity.  We note, moreover, the possibility of lessening (under this structure) the nature and scope of regulation as applied to resale carriers providing 'enhanced non- voice' services and customer premises equipment, but not without first addressing the implications of the 1956 AT&T consent decree.
    --In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Tentative Decision And Further Notice Of Inquiry And Rulemaking, 72 FCC2d 358 (July 2, 1979)
     91.  A distinction can be made between the processing capabilities incorporated within a carrier's network and the processing capabilities within customer-premises equipment.75 From its inception, telecommunications has involved end-to-end transfer of information over communication channels (originally wires).  Electrical signals transmitted over the communication channels were converted into a form intelligible to humans by devices at each end of the channel called 'transducers'.  In telegraphy, the transducers originally were telegraph keys and sounders; these devices were largely supplanted by teletypewriters.76  In telephony, the transducers originally were telephone handsets.  Telephones remain the most common transducers supplied by telephone carriers.
         92.  By the mid-1930's, when Congress adopted the Communications Act, telephone and telegraph carriers were furnishing communication channels and transducers to provide the public end-to-end communication services.  Moreover, the carriers furnished the service of routing or directing a subscriber's communication to a particular recipient.  Thus, the telegraph and record carriers would physically deliver messages to recipients, while the telephone carriers would receive from the caller the recipient's 'address' (usually, a telephone number) and set up the desired end-to-end communications channel.  In the case of a switched connection, the channel was set up for the duration of the call either by an operator's manual action, or by switching equipment within the central office.
         93.  In the same time frame, premises equipment having additional functions began to appear.  Early key telephone systems (also called 'wiring plans') began to be offered to perfrom limited switching among telephone channels at customer premises; these systems allowed single telephones to be switched among various telephone and intercommunication channels.  Similarly, PBXs which used an attendant at the customer's premises to perform such switching and intercommunication began to be offered; these systems also moved switching functions which previously were only offered within the carriers' central facilities to the customer's premises. Finally, although generally not available in the United States, telephone answering equipment began to be offered which would record incoming telephone calls and play them back at a later time to the user.  Although these emerging forms of premises equipment began to do more than act solely as transducers, they were generally thought of as so closely related to telephone instruments as to be treated in the same manner by regulatory agencies and the carriers.  Thus, they were offered in tariffs duplicative of those offering telephones, and their rates were regulated in much the same manner.
         94.  Even more recently, other uses and functions have emerged in premises equipment.  Teletypewriters, for example, originally were used purely for record communications either by, or in connection with services offered by, telegraph and record carriers. With the development of remotely-accessible computers, they became the predominant form of computer input/output terminal, although their design remained unchanged as their character of use changed. The teletypewriter are today, using technological innovations of the computer industry and in recognition of their common usage with remote computers, has progressed to the point where teletypewriting terminals no longer only reproduce input information which appears at their keyboard or paper tape reader inputs.  Today's 'smart' teletypewriters, or data terminals, are themselves miniature computers with information-processing capabilities used to generate information and to operate on and alter information received at their inputs.
         95.  Computers themselves, when connected to communication channels at a customer's premises (and not in the carriers' facilities, the case considered in the First Computer Inquiry) are customer-premises equipment with respect to the communication channels.  The computers are obviously more than 'communications' devices, for they operate on and alter information which traverses them.
         96.  There is an increasing trend towards integration of various communication and information processing functions in single systems and pieces of apparatus, which previously were treated and configured separately.  Thus, while in the past separate systems handled document reproduction, intra-company information distribution, telephone communication, and 'data processing', today there is movement towards combining these functions in single systems which use processing capabilities which economically can be shared among such disparate uses.  A single unit or system today can handle traditional voice communications (often with extra features such as delayed message handling), reproduction of written copy (facsimile and electronic photocopying functions), document preparation (text-editing) and information storage and retrieval (often with the information routinely updated through the communications channel, e.g. inventory, stock market status, credit authorization-listing, etc.).  This trend too is moving premises equipment used with the carriers' communication channels away from its traditional status as transducing equipment.
         97.  The marketing of 'smart' remote-access data terminals which incorporate microprocessor technology (miniature computers) and new forms of local memory have accelerated the loss of identity between what previously was generally thought of as 'communications' equipment.  User versatility has been enhanced in these terminals by configuring them so that the user can determine their functions, capabilities and uses to best fit his needs by altering their programming.  These highly sophisticated user terminals are being offered both by communications common carriers and by the unregulated equipment manufacturing sector.  To the extent that the carriers are offering such devices in conjunction with their regulated communications offerings, the processing functions, capabilities and uses--which are often not even under the carriers' control--have become enmeshed in the regulatory controversy over the proper boundary between regulated 'communications' offerings and unregulated 'data processing' offerings.  Moreover, with the advent of digital networks and new forms of terminal devices to be used with these networks, combinations of equipment and software packages customized to individual subscriber needs will increasingly be offered.
         98.  While these trends are most manifest in customer-premises equipment largely used with computers and data processing systems, they are also appearing in expanded-function telephone instruments not generally thought of as part of the 'data processing' field. For example, 'telephones' are now available which combine in a single unit the functions of a basic telephone transducer and a calculator.  Other expanded-function 'telephones' can store and retrieve oftencalled telephone numbers, while still others can remember the last number called, and when a busy signal is reached automatically re-dial that number until the desired call is completed.  These developments too, are indicative of a general trend towards integration of processing functions with basic communications customer-premises equipment.
     99.  The expansion of the inquiry to address equipment related issues was premised in part on regulatory problems raised by AT&T's offering of a 'smart' teletypewriter terminal, the Dataspeed 40/4,77 and the recognition that our existing policies and rules fail to address the processing capabilities incorporated into carrier-provided customer-premises equipment.  In addressing the tariffability of AT&T's Dataspeed 40/4 offering, we found that processing functions which historically had been built into large computers increasingly are moving into data terminals used at customer premises and that such premises equipment increasingly is being used both for communications and data processing purposes.  We noted that our existing communications/data processing rules were adopted at a time when the majority of data processing applications were implemented by large-scale general purpose computers at centralized locations and fail to address those processing capabilities which are now being moved into remotely-located input/output terminal devices.
    --In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Tentative Decision And Further Notice Of Inquiry And Rulemaking, 72 FCC2d 358 (July 2, 1979)
    Restriction
            1. In this proceeding, we eliminate the bundling restriction, adopted in the Commission's Computer II  proceeding,  that limits the ability of common carriers to offer consumers bundled packages of telecommunications services and customer premises equipment (CPE) at a discounted price.
    . . . . .
            5. The Commission also deregulated CPE in the Computer II Order.  It determined that the CPE market was becoming increasingly competitive and that in order to increase further the options that consumers had in obtaining equipment, it would require common carriers to separate the provision of CPE from the provision of telecommunications services.  It found that the continued bundling of telecommunications services with CPE could force customers to purchase unwanted CPE in order to obtain necessary transmission services, thus restricting customer choice and retarding the development of a competitive CPE market.   The Commission determined that by separating the provision of CPE from a carrier's provision of monopoly telecommunications services, consumers would benefit not only through competitive sources of supply for CPE, but also through the option of leasing or owning equipment, competitive pricing and payment options, and improved maintenance.   It codified this "no bundling" requirement in rule section 64.702(e), which requires all common carriers to sell or lease CPE separate and apart from such carriers' regulated communications services, and to offer CPE solely on a deregulated nontariffed basis.   As the Commission pointed out in the Further Notice, this rule does not prohibit carriers from offering "one-stop shopping for CPE and telecommunications services, but requires only that the goods or services be priced separately.
            6. Although it imposed bundling restrictions in Computer II, the Commission recognized that bundling can benefit consumers if the markets for the components of the bundle are "workably competitive."   For example, bundling may reduce the "transaction costs" of assembling a desired package of goods and services.  When the markets for both bundled and unbundled commodities are sufficiently competitive, consumers can decide whether the benefits of a package exceed the potential benefits of buying the components of the bundle individually.   The Commission reaffirmed these benefits when it allowed cellular CPE and cellular service to be offered on a bundled basis.  It found, in particular, that the price of cellular CPE represented the greatest barrier to inducing subscription to cellular service and that bundling could be used as an "efficient distribution mechanism" and an "efficient promotional device" that allows consumers to obtain service and equipment "more economically than if it were prohibited."
            7. In light of the increasing competitiveness of the CPE and enhanced services markets, the Commission, on several occasions, has sought to reexamine the need for the bundling restrictions.  It first sought comment in 1996 in the Interexchange Notice on its tentative conclusion to revise the CPE restriction by allowing nondominant interexchange carriers to bundle CPE with interstate, domestic, interexchange telecommunications services.   In response to the Interexchange Notice, AT&T suggested that the Commission also allow nondominant interexchange carriers to bundle enhanced services with interexchange services, while SBC asserted that the Commission should eliminate the CPE bundling restriction for all carriers, including incumbent local exchange carriers (LECs).   The bundling restrictions were among many issues raised in the Interexchange Notice, and although AT&T, SBC and other commenters addressed bundling, most focused their comments on other issues.  In the Interexchange Second Report and Order, the Commission therefore deferred action on its tentative decision to modify the CPE bundling restriction, stating that it would issue a Further Notice addressing the continued application of both the CPE and enhanced services bundling restrictions.
            8. On October 9, 1998, the Commission released a Further Notice seeking comment on the economic, competitive, and regulatory implications of eliminating our CPE and enhanced services bundling rules for nondominant interexchange carriers, and nondominant and incumbent local exchange carriers seeking to offer packages of transmission services, CPE, and enhanced services.   The Commission also explained in the Further Notice that in accordance with the requirement in section 161 of the 1996 Act, it had begun a comprehensive biennial review of telecommunications and other regulations to promote "meaningful deregulation and streamlining where competition or other considerations warrant such action," and therefore sought comment on the extent to which the continued application of both the CPE and enhanced services bundling restrictions are "no longer necessary in the public interest" pursuant to section 161(a)(2).
            9. In light of the record developed in response to the Further Notice, we now conclude that it is appropriate to eliminate the CPE bundling restriction in its entirety and clarify, but not eliminate, the enhanced services requirement so that all carriers may offer consumers packages of equipment, enhanced services, and telecommunications services at a single price.  We find that consumers can benefit significantly by relying on the competitive markets that exist for the components contained in a bundle, and that as a result of this competition, and existing safeguards that are applicable in certain instances, we no longer need to rely on the CPE bundling regulation to ensure that carriers do not restrict consumers from taking advantage of competitive suppliers of CPE.  We also clarify that under our existing rules, carriers may offer consumers bundles of enhanced and basic telecommunications services, subject to existing safeguards, thereby encouraging further options for consumers.
            10. We discuss initially the public interest benefits of bundling, and find, in particular, that offering consumers the choice of purchasing packages of products and services at a single low-rate will encourage them to subscribe to new, advanced, or specialized services by reducing the costs that they have to pay up-front to purchase equipment, or by giving them a choice of relying on one provider instead of having to assemble the desired combinations on their own.  Price bundling also eliminates the transaction costs that carriers have to absorb in order to comply with the bundling rules, thereby enabling them to offer better prices whenever possible.  Indeed, facilitating consumer choice is what compels us to take action in this proceeding.  The state of competition in the CPE and enhanced services markets and in the telecommunications markets is drastically different from the state of competition in these markets in 1980.  Unlike in 1980, we now have no doubt that consumers who choose to purchase CPE or enhanced services on a stand-alone basis may do so from a myriad of suppliers.  Coupled with this wide choice of CPE and enhanced services suppliers is now a wide choice of interexchange telecommunications carriers and a growing choice of local exchange carriers.  Eliminating and clarifying our bundling restrictions will allow the suppliers of each of these components to compete more freely, making consumers the beneficiaries of deregulation, as we believe Congress intended when it passed the 1996 Act.
            11. It is also compelling to us that all carriers, both incumbent and nondominant carriers, in all markets, demonstrate a desire to compete for customers through bundled service offerings.  We find that it is appropriate to grant bundling relief to all of them, and address the ability of these carriers to provide specific service combinations.  We find first that nondominant carriers should be able to offer packages of service that include CPE, enhanced services, and interstate, domestic, interexchange services at one price.  Because these markets are competitive, the risk of anticompetitive conduct that the Commission cited originally in enacting the bundling restrictions has been virtually eliminated.  We also find that it is in the public interest to allow nondominant carriers to bundle CPE and enhanced services with local exchange service.  Although the local exchange market is not substantially competitive, the 1996 Act eliminated barriers for carriers seeking to enter this market.  Competitive carriers have made steady progress in doing so, increasing their market size by 53 percent during the first half of 2000.  Because these carriers have no market power in the local exchange market, it is undisputed in the record that they cannot engage in anticompetitive conduct if we grant them the flexibility to respond to consumer demand for packages that contain local exchange service.
            12. We further find that incumbent local exchange carriers should be able to offer packages of service that include CPE, enhanced services, and local exchange service at one price.  We acknowledge that because the local exchange market is not substantially competitive and because incumbent LECs have market power, we must balance the risk that the incumbents can act anticompetitively with the public interest benefits associated with bundling.  After undertaking this analysis, we conclude that the risk of anticompetitive behavior by the incumbent LECs is low, not only because of the economic difficulty that even dominant carriers face in attempting to link forcibly the purchase of one component to another, but also because of the safeguards that currently exist to protect against this behavior.  In particular, incumbent LECs will, under state law, offer local exchange service separately on an unbundled tariffed basis if they bundle such service with CPE.  We also require them to offer exchange access service and any other service for which the Commission considers them to be dominant separately on nondiscriminatory terms if they bundle such service with CPE.  We go on to conclude that the risk is also outweighed by the consumer benefits of allowing bundling.  In the case of enhanced services, we emphasize that we are not eliminating at this time the fundamental provisions contained in our Computer II and Computer III proceedings that facilities-based carriers continue to offer the underlying transmission service on nondiscriminatory terms, and that competitive enhanced services providers should therefore continue to have access to this critical input.
            13. Finally, we address the impact of bundling on our universal service requirements, and we suggest methods that carriers may use to determine their universal service obligations.  We also find that permitting carriers to bundle will not impact our Part 68 requirements that attached CPE not cause harm to the public switched network, and that our network disclosure rules in Part 51 will ensure that competitive CPE suppliers continue to obtain access to network information they require from the incumbent carriers.
    -- In re Policy And Rules Concering The Interstate, Interexchange Marketplace/Implementation Of Section 254(G) Of The Communications Act Of 1934, As Amended/In 1998 Biennial Review -- Review Of Customer Premises Equipment And Enhanced Services Unbundling Rules In the Interexchange, Exchange Access and Local Exchange Markets, CC Docket No. 98-183; CC Docket No. 96-61, Report and Order, ¶ 1 (March 31, 2001) <www.fcc.gov/Bureaus/Common_Carrier/Orders/2001/fcc01098.doc> (footnotes ommitted).

    In the Interexchange Second Report and Order, the Commission deferred action on its tentative conclusion to modify the CPE bundling restriction.14 The Commission noted that AT&T, in its comments on the Commission's tentative conclusions regarding CPE bundling, raised the issue of whether the Commission should also eliminate the restrictions on bundled packages of enhanced and interexchange services offered by nondominant interexchange carriers.  The enhanced services restriction (which is not codified in the Commission's rules) was adopted by the Commission in the Computer II proceeding. In the Interexchange Second Report and Order, the Commission stated that it would issue a Further Notice addressing the continued application of both the CPE and enhanced services bundling restrictions.
    14 Policy and Rules Concerning the Interstate, Interexchange Marketplace; Implementation of Section 254(g) of the Communications Act of 1934, as amended, CC Docket No. 96-61, Second Report and Order, 11 FCC Rcd 20730, 20732, 20790-93 (1996) (Interexchange Second Report and Order), stay granted, MCI Telecommunications Corp. v. FCC,  No. 96-1459 (D.C. Cir. Feb. 13, 1997), Order on Reconsideration, 12 FCC Rcd 15014 (1997), further recon. pending.
    -- In the matter of 1998 Biennial Regulatory Review --Review of Customer Premises Equipment and Enhanced Services Unbundling Rules in the Interexchange, Exchange Access and Local Exchange Markets, CC Docket No. 98-183, Further Notice of Proposed Rulemaking, para 7 (October 9, 1998)

    47 C.F.R. § 64.702(e)
    "Except as otherwise ordered by the Commission, after March 1, 1982, the carrier provision of customer-premises equipment used in conjunction with the interstate telecommunications network shall be separate and distinct from provision of common carrier communications services and not offered on a tariffed basis."


     129.  While we have not foreclosed carriers from providing customer- premises equipment which performs more than basic media conversion function, we have established a structure for the provision of this type of equipment when offered as part of a common carrier communications service.  Just as we have separated the various categories of services based on those which can be provided without concern as to the nature of the processing employed, so we separate the kinds of terminal equipment which can be offered by underlying carriers.  We distinguish basic media conversion devices from those devices which incorporate information processing capabilities.  Only basic media conversion devices may be provided in conjunction with a 'voice' or 'basic non- voice' service.  If a carrier desires to tariff as part of a communications offering equipment which performs more than a basic media conversion function, such equipment must be provided under the structure set forth for the provision of 'enhanced non-voice' services.  If a carrier chooses not to offer this type of equipment as part of a resale communications service, such equipment may be marketed on a non-tariffed basis through a separate corporate entity.107 We believe this is a reasonable method whereby all carriers can provide equipment on a competitive basis unencumbered by the prospect of ad hoc regulatory intervention.  Moreover, because the statutory scheme for regulation of interstate common carrier communications in part is dependent upon intrastate offerings by connecting carriers as well as more directly regulated interstate offerings,108 this requirement is applicable to connecting carriers as well as carriers which are subject to direct regulation by the FCC.109
     130.  By this action we are not preventing communications common carriers from providing customer-premises terminal equipment.  We are only establishing structural safeguards which limit how the carriers provide certain equipment not offered as part of a communications service.  Moreover, we are not limiting the carriers' flexibility by this decision.  Under the classification scheme which we are adopting for premises terminal equipment, we are avoiding arbitrary and uneconomic distinctions between 'communications' and 'data processing' capabilities, and increasing the carriers' flexibility in meeting user needs.  A carrier would be free to supply any premises terminal equipment, regardless of the computer processing capabilities it incorporates.
    --In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Tentative Decision And Further Notice Of Inquiry And Rulemaking, 72 FCC2d 358 (July 2, 1979)
    Regulatory Concerns
     99.  The expansion of the inquiry to address equipment related issues was premised in part on regulatory problems raised by AT&T's offering of a 'smart' teletypewriter terminal, the Dataspeed 40/4,77 and the recognition that our existing policies and rules fail to address the processing capabilities incorporated into carrier-provided customer-premises equipment.  In addressing the tariffability of AT&T's Dataspeed 40/4 offering, we found that processing functions which historically had been built into large computers increasingly are moving into data terminals used at customer premises and that such premises equipment increasingly is being used both for communications and data processing purposes.  We noted that our existing communications/data processing rules were adopted at a time when the majority of data processing applications were implemented by large-scale general purpose computers at centralized locations and fail to address those processing capabilities which are now being moved into remotely-located input/output terminal devices.
         100.  In the Supplemental Notice comments were sought regarding the role of communications common carriers in the offering of customer premises equipment and the conditions, etc., under which carriers should be permitted to make such offerings.  We invited comment on the regulatory and policy issues raised by the increasing incorporation and utilization of computer processing capabilities into customer-premises equipment provided by communication common carriers as part of their regulated communication offerings.  We inquired as to the advisability of classifying customer-premises equipment as 'data processing' or 'communications' under any definitional structure that might be adopted, and the public interest implications of such a classification.  We also recognized, however, that such classification might not be practical or possible and requested comments on an alternative regulatory scheme.  We requested comments on whether the offering of customer-premises equipment which performs more than basic media conversion is a communications common carrier activity, and solicited comments on appropriate institutional arrangements, terms, conditions and regulations under which communications common carriers might be permitted to offer such equipment.
         101.  The developments already noted with respect to the processing capabilities which can be incorporated into terminal devices through the use of microprocessor technology raise concern over the use to which such processing capabilities can be put when offered as part of a communications service.  If any regulatory scheme for distinguishing common carrier communication services from unregulated data processing services were to focus upon the processing capabilities of premises equipment, this would necessitate the classifying of processing capabilities within such devices.  There are public interest considerations, however, which dictate against classifying the data processing or communications nature or processing capabilities of such consumer equipment.
         102.  The underlying telecommunications network is relatively stable and, because of massive numbers of existing equipment and plant operationally dependent upon the network's characteristics, any changes in the network will occur gradually.  An introduction of 'data processing' into shared or common telephone network facilities can workably be the subject of classification between 'communications' and 'data processing', the classification scheme which formed the basis of the First Computer Inquiry.  However, there simply is no design stability in the terminal equipment field.  Different customers require different equipment, often uniquely designed for and tailored to their specific information processing and data processing needs.  There is constant technological change, product innovation and refinement, and development of new markets and sub-markets in this field, which are not inhibited by large capital outlays such as may be required in introducing new technology into the network.
         103.  The comments compellingly make the point that any classification or definitional boundary which is premised on distinguishing the processing capabilities of the device is likely to be arbitrary, interfere with economical design of equipment, and be easily circumvented.  Terminal devices are taking on more functions and intelligence and are increasingly incorporating data processing characteristics.  The comments point out that any attempt at classifying terminal equipment as 'communications' or 'data processing' will result in a regulatory quagmire necessitating numerous ad hoc determinations as to the nature of the processing functions performed by the device.  It is argued that customer-premises equipment is too rapidly changing to be subject to a classification scheme based on processing capabilities.  Yet, as the comments point out, new and enhanced communications services must be provided if the user's information handling needs are to be met.  In order for there to be new and innovative services carriers must have flexibility in designing their communications systems. Technological sophistication has reached a point where the processing needs of the user can be placed where it makes economic sense to do so, and, in fact, it is argued that it is the processing needs of the user which should determine where the computer processing capabilities should be placed, i.e., whether within the communications network, or within the terminal equipment located on the customer's premises.  Yet it is argued that if a definitional structure is applied to the processing capabilities of carrier provided customer-premises equipment, for purposes of determining a regulatory boundary, carriers could be restricted or inhibited in the offering of new and innovative services to meet user needs.  It is argued that if a carrier provides a terminal it should be permitted to make the terminal as useable as possible.
         104.  In the current environment of 'smart' teletypewriter and data terminals, classification of the function and use of such equipment increasingly is being determined by the user, and not the equipment supplier.  The development of microprocessors has made it possible, and in many cases economically desirable, to define the functions and uses of the terminal equipment by 'software' instructions supplied by the user or the equipment supplier rather than by physical 'hardware' which the user is not likely to alter. One such terminal might be programmed by its user to perform communications functions; another, identical to the first when    supplied, might be programmed by its user to perform data processing functions.
         105.  Any classification of customer-premises equipment based on its processing capabilities has the potential for interfering with equipment suppliers' design options by forcing, perhaps uneconomically, the inclusion or deletion of functions or features to place the equipment under one or the other of the classifications.  A classification scheme carries the risk of impeding suppliers' ability to tailor their offerings to the specific requirements of users, for fear of reclassifying the suppliers' activities.  Thus, an arbitrary distinction between 'communications' and 'data processing' capabilities, functions or uses in customer-premises equipment could impede a supplier's ability to refine and adapt its offerings to user requirements for the various combinations and permutations of computer processing applications, often accomplished by simple 'software' or 'hardware' changes to existing equipment. In the extreme case, such an arbitrary distinction might require separate units to perform functions which otherwise economically could and should be performed by one unit, using the same microprocessors to perform both processing and communications functions.
         106.  Where a reasonable alternative exists which does not seriously jeopardize the availability or costs of equipment or services to be used by the public, such alternatives merit serious consideration.  We believe such a situation exists here.  The unique and dynamic nature of terminal equipment devices capable of use in connection with the telecommunications network compels us to adopt a regulatory approach different from the one we have adopted to deal with the processing capabilities within a carrier's network. We conclude that the processing capabilities of carrier provided customer- premises equipment should not be subject to the definitional structure of Section 64.702(a), nor should a separate classification scheme be adopted which attempts to classify such devices as either 'communications' or 'data processing'.  Similarly, we are rejecting, for customer-premises equipment, a classification approach which distinguishes between equipment which is primarily 'communications' and that which is primarily 'data processing' based on the processing capabilities of the device.
         107.  It is evident that there are certain carrier offerings of customer- premises equipment which are necessary for subscriber utilization of the communications channel(s) and may properly be provided as part of a communications offering.  This is not the case with respect to all customer- premises equipment, especially that consumer equipment which is oriented toward enhancing or satisfying the user's computer processing requirements locally within the terminal device.  Specifically, we believe there is a fundamental distinction between those premises equipments which serve only as transducers or basic media conversion devices, and those which provide a variety of on- premises information processing functions. We conclude that the public interest requires that this distinction be reflected in both the institutional and regulatory framework applicable to the supply of such equipment.  We have set forth a structure under which various categories of common carrier services may be provided.  The manner in which we have divided the various categories of service, for purpose of addressing permissible computer processing activity, is also conducive to structuring the manner in which the various types of equipment are provided.  We conclude that carrier-provided transducers and basic media conversion devices may be provided as part of a voice or 'basic non-voice' service.  With respect to that class of equipment which performs more than a basic media conversion function, we conclude that there should be no requirement that such equipment be tariffed as part of a communications service.  However, if a carrier desires to tariff such equipment as part of a communications offering, it may only be offered in conjunction with an 'enhanced non-voice' communications service.  Thus, equipment which performs more than a basic media conversion function may be offered on a tariffed basis only by a resale carrier.  Otherwise it must be offered on a non-tariffed basis through a separate corporate entity.78
    --In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Tentative Decision And Further Notice Of Inquiry And Rulemaking, 72 FCC2d 358 (July 2, 1979)
    CPE Distinguished
     108.  A transducer is a two-port device (an input and an output port) which converts input energy of one form to output energy of another.  For example, the input port might convert human inputs into electrical signals capable of transmission, while the output port would convert electrical transmission signals into a form intelligible to humans.
     109.  The transducers which properly are contemplated by the regulatory scheme as necessary for the provision of end-to-end interstate communications service include telephones, teletypewriters, facsimile terminals, signature reproduction terminals (a primitive form of a facsimile terminal) and electronic display devices such as cathoderay tube (CRT) and luminescent displays.
     110.  Additional functions have been incorporated into customer-premises equipment used primarily as transducers, to make the transducers more useful for communications.  These functions include signaling capabilities to set up and take down the communications channels, and peripheral equipment functions which facilitate the basic transducing and signaling function.79
     111.  Basic media conversion devices are two (or more) port devices which do not necessarily change the form of their input and output energy, but which serve as the interface between dissimilar media for information transfer.  This category is broader than transducers, and includes transducers within it. Examples of basic media conversion devices include modulator/demodulator (MODEM) or dataset equipment which serve as the inferface between analog and digital transmission media, and devices which 'read' paper or magnetic tapes and which serve as the interface between a communications channel and paper or magnetic storage media, and basic communication path switching in PBX and key telephone systems.
    --In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Tentative Decision And Further Notice Of Inquiry And Rulemaking, 72 FCC2d 358 (July 2, 1979)
     
    Jurisdiction
         112.  In creating the Federal Communications Commission (FCC) Congress gave this agency the mandate '. . . to make available, so far as possible, to all people of the United States a rapid, efficient, Nationwide and world-wide wire and radio communication service with adequate facilities at reasonable charges . . .'80 In carrying out this mandate Congress made clear that the Commission's jurisdiction extends '. . . to all interstate and foreign communication by wire or radio.  . . .' 81 In defining 'communication by wire' section 3(a) of the Act states that it '. . . means the transmission of writing, signs, signals, pictures and sounds of all kinds . . . including all instrumentalities, facilities, apparatus, and services . . . incidental to such transmission.'82
         113.  Since customer-premises equipment represents 'instrumentalities',  'facilities' or 'apparatus' incidental to the interstate communication channel offerings which we regulate, it is argued that any such equipment offered by a common carrier is required to be offered on a regulated basis.  It is argued that the 'all instrumentalities' provision of Section 3 of the Act brings such devices within the scope of 'common carrier' communications services and that they become part and parcel of the common carrier communications service.  The contention is made that all customer-premises equipment offered by a carrier in connection with, in support of, or incidental to transmission in its public communication service offering is part of communications common carriage, regardless of the functional capabilities of the equipment.83  In addressing these arguments, an analysis must be made of Commission jurisdiction over customer-premises equipment, the nature of the Commission's duties and responsibilities with respect to carrier offerings of customer-premises equipment, and whether the Communications Act requires that all such equipment be offered pursuant to tariffs filed with this Commission when offered by communications common carriers.
         114.  Various considerations are relevant in this regard with respect to the 'all instrumentalities' provision.  One consideration weighing on the meaning of the 'all instrumentalities . . .' language of Section 3(a) is whether this language implies that all customer-premises equipment used for interstate communications is required to be pervasively regulated under the complete panoply of Title II of the Communications Act, e.g. Sections 201-05, subject only to the limitations of Sections 2(b) and 221(b) of the Act. Another consideration weighing on the meaning of the 'all instrumentalities . . .' language of Section 3(a) is its construction in NCUC v. FCC, 552 F.2d 1036 (4th Cir., 1977), cert. denied 434 U.S. 874, and NCUC v. FCC, 537 F.2d 787 (4th Cir. 1976), cert. denied 429 U.S. 1027 (1976), upholding the Commission's assertion of jurisdiction over the provision of customer-premises equipment through our telephone equipment registration program.  There we facilitated the ability of consumers to connect their own equipment to the network if that equipment conformed to certain technical standards and was properly registered with the Commission.  This program was held consistent with the 'all instrumentalities . . .' language of Section 3(a), despite opponents suggestions that such registration made equipment suppliers subject to direct regulation under the Communications Act.  Thus, these cases demonstrate that the Commission may select from a broad array of administrative tools in order to regulate 'all instrumentalities' under Sections 2(a) and 3(a) of the Act.
         115.  There is a clear distinction to be made between our jurisdiction over  'all instrumentalities' under Sections 2(a) and 3(a), and the discretion we have in deciding how best to implement that jurisdiction in the public interest.  The 'all instrumentalities' language of Section 3 of the Act and Sections 201-205, which prescribe certain responsibilities, duties, and powers with respect to common carrier communication services subject to the Act, have their origin in the Interstate Commerce Act (ICA) of 1887,84 specifically the so-called Hepburn Amendments 85 to the ICA.  To understand the Congressional intent behind these sections in the Communications Act, it is helpful to examine the appropriate legislative history.
         116.  Prior to enactment of the Hepburn Amendments, the Elkins Act of 1903,86 which amended the original ICA, had forbidden rebates by railroads to favored shippers because the 'rebate' could be used as a vehicle to circumvent adherence to published tariffs. The railroads had been avoiding this proscription against rebates by leasing facilities such as cars, trackage, and other services from favored shippers at inflated rates.  By paying exorbitantly high rates for the use of such facilities or other services performed by the shipper, the railroads were, in effect, giving the shipper a rebate on the total cost of transporting the shipper's goods.  The consequence of such discriminatory practices was that certain shippers were able to transport their goods at lower rates than other shippers.  In order to put a halt to such discriminatory practices Congress adopted the so-called 'Hepburn Amendments' to the ICA.87  The Hepburn Act expanded the definition of the term 'transportation' to include' . . . all instrumentalities and facilities of shipment or carriage, irrespective of ownership or of any contract . . . and all services in connection with the receipt, delivery, elevation, and transfer in transit, ventilation, refrigeration or icing, storage, and handling of property transported . . .',88 and gave the ICC jurisdiction over such activities as they affect a carrier's rates, charges, and practices associated with 'transportation'.  By giving a broader meaning to the terms 'railroad' and 'transportation' to include 'all instrumentalities' and the necessary means of accommodation in transit, it was thought that the possibility of secret rebates of all kinds would be done away with.89
         117.  The 'all instrumentalities' provision and the various provisions giving the ICC authority over rates, charges and carrier practices set forth in the Hepburn Act were subsequently to become the foundation for comparable provisions in the Communications Act. It is clear that in basing provisions of the Communications Act on comparable provisions of the ICA, Congress was attempting to confer on the FCC the same power granted to the ICC over carrier rates, charges and practices with respect to 'all instrumentalities.'  In the Senate Report accompanying what later become the Communications Act of 1934 it is stated:
      In this bill many provisions are copied verbatim from the Interstate Commerce Act because they apply directly to communication companies doing a common carrier business, but in some paragraphs the language is simplified and clarified.  These variances or departures from the text of the Interstate Commerce Act are made for the purpose of clarification in their application to communications, rather than as a manifestation of congressional intent to attain a different objective.  S. Rep. No. 781, 73d Cong., 2d Sess. 2 (1934).90
         118.  The legislative history demonstrates that this Commission has a mandate which compels, at a minimum, that any carrier charge, practice, classification or regulation in connection with the offering of a communications service be just and reasonable.  This is what Congress intended in basing Section 201-205 of the Communications Act on comparable provisions in the Hepburn Amendments, i.e., to give the FCC the ability to regulate any charge or practice associated with a common carrier service in order to insure that the carrier operated for the public benefit.  Based on this grant of authority we have exercised and continue to exercise jurisdiction over carrier provided customer-premises equipment.91
         119.  In addition to the relationship between the 'all instrumentalities' provision and responsibilities under Section 201-205 of the Act, Section 3(a) and (b) confer subject matter jurisdiction over 'all instrumentalities' necessary to effect the Commission's mandate under Sections 1 and 2(a) of the Act.  This nexus was recognized, for example, when we established a registration program for all terminal equipment attached to the interstate telephone line network, where previously attachment of non-carrier supplied terminal equipment had been restricted by telephone company tariffs.92 The registration program permits customers to attach any registered terminal equipment93 to the network without being forced to use certain carriersupplied intermediary devices.  The courts have upheld this program as a proper and reasonable exercise of our jurisdiction over the interconnection of customer-provided terminal equipment within the national telecommunications network94
         120.  The central issues here are (1) whether the Communications Act precludes common carriers from providing customer-premises equipment unless it is part of a tariffed offering, and (2) whether the Commission has discretion to establish conditions under which carriers may offer such equipment.  While it is well recognized that joint equipment is not beyond federal jurisdiction should the need for federal action arise,95 the legislative history of the Communications Act manifests no Congressional intent that all carrier-provided customer-premises equipment be offered on a regulated basis subject to the tariff requirements of Section 203 of the Act, or that such equipment must be offered as 'part and parcel' of a communications service.  In this regard the provision of customer-premises equipment, itself, is not an activity which under the common law construction of common carrier can be construed as common carriage.  The fact that a communications common carrier may provide such equipment as part of its common carriage function does not mean that the provision of equipment is a common carrier activity.  Common carrier status is not conferred on an entity which does nothing more than manufacture and market customer-premises equipment.96  However, because a particular activity by itself is not a common carrier activity, does not mean that a carrier cannot engage in such activity as part of its common carrier function.97
         121.  The Communications Act provides ample flexibility to enable the Commission to establish public interest parameters under which carriers may offer customer-premises equipment which perform more than a basic media conversion function.98  The Commission was given 'expansive powers' to tailor regulation as appropriate to fit the needs of the highly complex and rapidly changing communications industry.99  To this end we have established a structure which leaves carriers the choice of providing customer- premises equipment under either a tariff or non-tariff basis.
         122.  The manner in which we have exercised our discretion in this area of customer-premises equipment is consistent with the regulatory scheme established by Congress.  We find nothing in the 'all instrumentalities' clause or other provisions of the Communications Act, in prior judicial decisions, or in prior practices of this Commission which would deny us the discretion to regulate a carrier's provision of consumer equipment in this manner.  We have seen that when sophisticated terminal equipment is provided on a competitive basis, the public reaps dividends in the form of rapid innovation which will meet consumer's communications need in terms of quality and cost.  AT&T charges for Interstate Telephone Service (Docket 19129), 64 FCC 2d 1, 26-29 (1977).  To this end we distinguish between those devices which are transducers and basic media conversion devices and those which perform more than basic media conversion, and we establish the conditions under which the latter may be offered by carriers.  We conclude that the public interest will best be served if customer-premises equipment which performs more than a basic media conversion function is offered by a carrier on a tariffed basis only through its resale subsidiary in conjunction with 'enhanced non-voice' services.  If a carrier chooses not to offer such equipment as part and parcel of a communications service, it may be marketed through a separate resale or other subsidiary.  This structure will ensure that basic communications services are not burdened by improper subsidization to sophisticated terminal offerings while at the same time providing flexibility and incentives for new and efficient terminal offerings.
    --In re Amendment of Section 64.702 of the Commission's Rules and Regulations (Second Computer Inquiry), Docket No. 20828, Tentative Decision And Further Notice Of Inquiry And Rulemaking, 72 FCC2d 358 (July 2, 1979)
     
  • Bundling

    •  

     
     
     
     
     
     
     
     
     

    Our rules currently prohibit telecommunications carriers from bundling telecommunications services with CPE, and place restrictions on the bundling of telecommunications services with enhanced services. Our current restrictions not only prevent carriers from offering distinct goods and/or services only on a bundled basis, but also prohibit carriers from offering "package discounts," which enable "customers [to] purchase an array of products in a package at a lower price than the individual products could be purchased separately."[5]

    [n 5] See Bundling of Cellular Customer Premises Equipment and Cellular Service, CC Docket No. 91-34, Report and Order, 7 FCC Rcd 4028, 4032 (1992) (Cellular Bundling Order) (noting that package discounts are commonplace in a variety of industries). Economists have also examined the welfare effects of such package discounts, using the term "mixed bundling" to describe the situation in which a seller offers goods or services separately as well as in a package, with the package priced below the sum of the prices of individual goods or services. See generally William James Adams & Janet L. Yellen, Commodity Bundling and the Burden of Monopoly, 90 Q.J. Econ. 475 (1976). We note that our rules do not prohibit carriers from offering "one-stop shopping" for CPE and telecommunications services; the rules require only that the goods or services be priced separately.

    -- In the matter of 1998 Biennial Regulatory Review -- Review of Customer Premises Equipment and Enhanced Services Unbundling Rules in the Interexchange, Exchange Access and Local Exchange Markets, CC Docket No. 98-183, Further Notice of Proposed Rulemaking, para 1 (October 9, 1998)

    1. Purpose

      2. Historically, the Commission has restricted bundling of CPE and enhanced services with telecommunications services out of a concern that carriers could use such bundling in anticompetitive ways. For example, a carrier in the long-distance market could require customers that wished to purchase just long-distance services also to purchase telephone equipment from that carrier. Not only would those customers be forced to buy a product they may not want, but other companies trying to sell telephone equipment could be unfairly deprived of customers. As a result, the Commission concluded that bundling could restrict customer choice and retard the development of competitive CPE and enhanced services markets. We believe that our no-bundling rules have fostered more competitive markets for CPE and enhanced services and afforded consumers more options in obtaining equipment and services that best suit their needs. We believe, however, that it is appropriate to consider whether these rules are no longer necessary and whether bundles of goods and/or services can provide benefits to consumers.

      -- In the matter of 1998 Biennial Regulatory Review -- Review of Customer Premises Equipment and Enhanced Services Unbundling Rules in the Interexchange, Exchange Access and Local Exchange Markets, CC Docket No. 98-183, Further Notice of Proposed Rulemaking, para 2 (October 9, 1998)
       
       

    2. Background

      3. In the Interexchange Second Report and Order, the Commission deferred action on its tentative conclusion to modify the CPE bundling restriction.[14] The Commission noted that AT&T, in its comments on the Commission's tentative conclusions regarding CPE bundling, raised the issue of whether the Commission should also eliminate the restrictions on bundled packages of enhanced and interexchange services offered by nondominant interexchange carriers. The enhanced services restriction (which is not codified in the Commission's rules) was adopted by the Commission in the Computer II proceeding. In the Interexchange Second Report and Order, the Commission stated that it would issue a Further Notice addressing the continued application of both the CPE and enhanced services bundling restrictions.

      [14] Policy and Rules Concerning the Interstate, Interexchange Marketplace; Implementation of Section 254(g) of the Communications Act of 1934, as amended, CC Docket No. 96-61, Second Report and Order, 11 FCC Rcd 20730, 20732, 20790-93 (1996) (Interexchange Second Report and Order), stay granted, MCI Telecommunications Corp. v. FCC, No. 96-1459 (D.C. Cir. Feb. 13, 1997), Order on Reconsideration, 12 FCC Rcd 15014 (1997), further recon. pending.

      [15] Computer II Final Decision, 77 FCC 2d at 475; see also Competition in the Interstate Interexchange Marketplace, CC Docket No. 90-132, Memorandum Opinion and Order on Reconsideration, 10 FCC Rcd 4562, 4580 (1995); Independent Data Communications Manufacturers Association, Inc. Petition for Declaratory Ruling and American Telephone and Telegraph Company Petition for Declaratory Ruling, Memorandum Opinion and Order, 10 FCC Rcd 13717, 13719 (1995).

      [16] Interexchange Second Report and Order 11 FCC Rcd at 20732, 20790-93.

      -- In the matter of 1998 Biennial Regulatory Review -- Review of Customer Premises Equipment and Enhanced Services Unbundling Rules in the Interexchange, Exchange Access and Local Exchange Markets, CC Docket No. 98-183, Further Notice of Proposed Rulemaking, para 7 (October 9, 1998)
       
       

    3. CPE

      4. 47 C.F.R. § 64.702(e)

      "Except as otherwise ordered by the Commission, after March 1, 1982, the carrier provision of customer-premises equipment used in conjunction with the interstate telecommunications network shall be separate and distinct from provision of common carrier communications services and not offered on a tariffed basis."

      Enforcement

    FCC actions to enforce the unbundling requirements have been rare; the most recent major affirmation of the rule came in 1995.  The resulting practical difficulty in enforcing the rule is increased by the fact tha tthe FCC asked for comment in October 1998 on wehther to eliminate the "Computer II" unbundling rule as to long-distance carriers as part of its efforts to deregulate the long-distance market. -James H. Lister, The Rights of Common Carriers and the Decision Whether to be a Common Carrier or a non-regulated Communications Provider, 53 FCLJ 91, 107 (Dec. 2000)