Federal Communications Commission FCC 97-350
Before the
FEDERAL COMMUNICATION COMMISSION 
Washington, D.C. 20554
In the Matter of
MCI Telecommunications Corporation 
Application for Review of
The Ameritech Operating Companies, Bell 
Atlantic Telephone Companies, BellSouth 
Telecommunications, Inc., Cincinnati Bell 
Telephone Company, GTE Service 
Corporation, The NYNEX Telephone 
Companies, Pacific Bell, Rochester 
Telephone Corp., Southern New England 
Telephone Company, Southwestern Bell 
Telephone Company, The United 
Telephone and Central Telephone 
Companies, and U S West 
Communications
Petitions for Waiver of Sections 69.4(b) 
and 69.106 of Part 69 of the Commission's 
Rules
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ORDER
Released: October 7, 1997Adopted: September 29, 1997 
By the Commission:
I. INTRODUCTION
1. MCI Telecommunications Corporation (MCI) filed an Application for Review of 
the Common Carrier Bureau's Order granting waivers of the Commission's Part 69 Rules to 
twelve incumbent local exchange carriers (incumbent LECs) pursuant to Section 1.115 of the 
Commission's Rules. 1 MCI requests review of the Bureau's decision to allow the incumbent
47 CFR§ 1.115.
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Federal Communications Commission FCC 97-350
LECs to establish separate rate elements for the provision of 500 access service.2 We conclude 
that the matter was properly decided by the Common Carrier 
Bureau, and deny MCI's Application for the reasons described below.
II. BACKGROUND
2. Between July and September 1994, twelve incumbent LECs independently filed 
petitions for waiver of the Commission's Part 69 Rules in anticipation of providing 500 access 
service.3 Interexchange carriers (IXCs) that purchase this access service offer to end users a retail 
500 service, a relatively new service that provides "follow me" capabilities to a customer.4 The 
record before the Bureau demonstrated that LECs provide 500 access service via one of two 
methods, and that each method of access causes LECs to incur costs differently. The switch- 
based method, which employs a translation table contained in the software of each switch, 
requires a LEG to incur significant non-recurring costs. The Advanced Intelligent Network (AIN) 
method, which makes a signalling query to a centralized AIN database, causes a LEG to incur 
costs largely on a per-query basis.5 Some LECs proposed to offer 500 access service exclusively 
through the AIN method. Others proposed to offer 500 access service initially through the 
switch-based method and then to shift over time to the AIN method. Other LECs proposed to 
offer 500 access service through the switch-based method in some switches and the AIN method 
in other switches. In its order, the Bureau rejected arguments that the Commission should 
impose a uniform rate structure or a particular technological approach to providing 500 access 
service.6 The Bureau approved waivers that allowed rate structures of three general types: One 
was designed to be suitable for the LECs that use the AIN method to offer 500 access service. 
A second rate structure was designed to be suitable for LECs that intended to change their 500 
access service from a switch-based offering to an AIN-based offering over time. A third rate
2 The Ameritech Operating Companies. Bell Atlantic Telephone Companies. BellSouth
Telecommunications. Inc.. Cincinnati Bell Telephone Company. GTE Service Corporation, the ^NYNEX 
Telephone Companies. Pacific Bell. Rochester Telephone Corp.. Southern New England Telephone 
Company. Southwestern Bell Telephone Company, the United Telephone and Central Telephone 
Companies, and U S West Communications Petitions for Waiver of Sections 69.4Cb) and 69.106 of Part 
69 of the Commission's Rules. 9 FCC Red 7873 (Com. Car. Bur. 1994) (500 Access Waiver Order"). 
The Commission released a public notice establishing a pleading cycle on January 25, 1995. 10 FCC 
Red 951 (1995).
3 500 Access Waiver Order. 9 FCC Red at 7873, ffi 2-3.
4 Id. 500 number service, also known as "follow me" service, allows a customer to instruct his 500
number service provider where to route his calls, whether to a landline telephone, a cellular telephone, a 
pager, or a voice-message system. This access service also allows the customer to instruct his 500 
number service provider to screen calls, allowing only authorized callers to reach the customer via the 
500 access number. Id. at 7873,1 2.
5 Id, at 7878, T5 28-30.
6 Id, at 7878,1 27.
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Federal Communications Commission FCC 97-350
structure was designed to be suitable for LECs that intend to use both the switch-based and AIN- 
based methods to provide 500 access service.7
III. APPLICATION FOR REVIEW
3. Generally, MCI argues that the Bureau's decision is contrary to the Commission's 
policies that favor increasing the availability of 500 number service to consumers, promoting 
technological advances, and implementing 500 number portability.8 MCI specifically requests 
that the Commission set a date certain for LEG implementation of a uniform rate structure and 
require that the uniform rate structure mirror the 800 database rate structure.9 MCI further argues 
that the Commission should initiate proceedings that would allow the Commission to set a 
deadline for 500 number portability.10 Eleven incumbent LECs filed comments or reply 
comments, one interexchange carrier filed comments in support of MCI, and MCI filed reply 
comments. 11
A. Uniform Rate Structure 
1. The Record
4. MCI claims that the Bureau's order unreasonably imposes administrative burdens 
on MCI and other 500 access service customers and fails to promote technological- Advances in 
accordance with Section 7 of the Communications Act of 1934.J2 According to MCI;Jb> allowing 
LECs to implement both AIN-based and non-AIN-based 500 access service, the order created a 
conflict between the Commission policy that favors cost-causation and the Commission policy 
that favors network efficiency. MCI contends that the Bureau did not adequately resolve this
7 Id, at 7878, f5 28-30.
8 MCI at 1-2.
9 MCI at 8.
10 MCI Reply at 19. Number portability is the statutory requirement that customers be able to take their 
individual phone numbers with them when they switch to a different telecommunications provider. See 
47 U.S.C. § 251(b)(2) and (e)(2).
11 The following companies filed comments in opposition: the Ameritech Operating Companies
(Ameritech), Bell Atlantic (BA), BellSouth Telecommunications, Inc. (BellSouth), Cincinnati Bell 
Telephone (CBT), GTE Service Corporation (GTE), the NYNEX Telephone Companies (NYNEX), 
Rochester Telephone Corporation (Rochester), Southwestern Bell Telephone Company (SWBT), the 
United Telephone and Central Telephone Companies (Sprint LECs), and U S West. LDDS 
Communications, Inc. (LDDS) filed in comments in support of MCI. MCI, Pacific Bell (PacBell) and 
NYNEX filed reply comments.
12 MCI at 2; MCI Reply at 3, 23.
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Federal Communications Commission FCC 97-350
conflict in its order.13 MCI further claims that a uniform rate structure would resolve the conflict 
between these policies and better serve the public interest. 14
a. Administrative Burden Issues
5. MCI argues that the Bureau's refusal to mandate a uniform rate structure 
unreasonably places a massive administrative burden on 500 access customers.15 LDDS states 
that the cost of the increased burden on LXCs of auditing LEG bills that use a variety of rate 
structures will increase consumer rates for 500 number service and, therefore, reduce its 
attractiveness to retail customers.16 All of the commenting incumbent LECs oppose MCI's 
assertions on the ground that the Bureau's decision to allow companies to recover costs in 
accordance with cost-causation principles represented a sound application of Commission policy.17 
A number of incumbent LECs stress that MCI has produced no evidence regarding the 
administrative burdens imposed on it by varying rate structures.18 Ameritech and GTE note that 
attaining uniformity in rate structures will be increasingly impossible because LECs are offering 
a growing array of access services, with a corresponding variety of rates.19 SWBT emphasizes 
that, in the future, local access competition is likely to lead to a greater variety of rate 
structures.20 Rochester argues that imposing a uniform system would increase its administrative 
burden, and that the non-recurring charge billed by the non-AIN LECs will be simpler to track 
than the recurring charge used by AIN LECs and favored by MCI.21 MCI counters that LECs 
do not understand the burdens that interexchange carriers encounter in having to audit a large 
number of LEC bills.22 MCI explains that it must write software to extract LEG charges and rate 
elements from each bill, must audit LEC bills and compare them to MCI records, and must
13 MCI Reply at 7.
14 MCI Reply at 7.
15 MCI at 3-4.
16 LDDS at 3-4, 5-6.
17 See, e.g.. Ameritech at 2-3; BellSouth at 4; CBT at 1-2; GTE at 3, NYNEX at 3; Rochester at 3; Sprint 
 LECs at 2.
18 Rochester at 1; SWBT at 2; Sprint LECs at 2.
19 Ameritech at 1-2; GTE at 3.
20 SWBT at 5.
21 Rochester at 2-3.
22 MCI Reply at 14.
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Federal Communications Commission FCC 97-350
accommodate every variation in access rate structures in its billing and auditing software.23 In 
addition, MCI contends that non-AIN LEG billing is actually more difficult to audit than AIN 
billing.24
6. MCI additionally claims that the uniform rate structure for 500 numbers should 
utilize recurring elements similar to the rate structure for 800 data base access service.25 
BellSouth and U S West contend that the 800 access service rate structure is inappropriate 
because, for some carriers, that rate structure does not reflect the manner in which they incur 
costs to provide 500 access service.26 In addition, some incumbent LECs argue that the 
technology used to offer 500 access service is different from 800 number technology.27 MCI 
disputes incumbent LEC arguments that the technologies underlying 500 number service and 800 
service differ materially.28 MCI argues that in the current waiver, the Bureau recognized these 
similarities when it authorized a 500 access rate structure for some of the incumbent LECs that 
is similar to the 800 number rate structure.29
7. All LEC commenters oppose MCI's Application because they believe that imposing 
a specific rate structure or technology will delay the offering of 500 number service.30 Several 
telephone companies indicated that they would begin offering AIN-based 500 access service when 
business conditions and consumer demand warranted it.31 MCI insists that its proposal would not 
delay implementation of 500 number service, but instead would allow the current rate structures 
to be used only as a temporary measure until recurring rate structures could be implemented.32
23 MCI Reply at 14. MCI cites the decision to impose a uniform billing structure in the Meet Point 
Billing proceedings as an example of the Commission's recognition of the need for simplified billing 
requirements. Id. at n.35 (citing Access Billing Requirements for Joint Service Provision. Order, 65 
Rad. Reg. 2d 650 (1988) (Meet Point BillingV).
* Id,
25 MCI at 8; MCI Reply at 18-19.
26 BellSouth at 4; U S West at 7-8.
27 GTE at 2-3; Sprint LECs at 3-4; U S West at 7-8.
28 MCI Reply at 22-23.
29 MCI Reply at 18.
30 See, £,£., BA at 1-2; BellSouth at 3-4; GTE at 2; Rochester at 2; Sprint LECs at 3; SWBT at 5-6.
31 CBT at 2; GTE at 3; Rochester at 2; U S West at 6.
32 MCI Reply at 20.
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Federal Communications Commission FCC 97-350
b. Technological Incentives Issues
8. MCI contends that refusing to mandate a rate structure utilizing recurring charges 
will discourage LECs from deploying new technology and thus depart from the Commission 
policy of promoting technological advances.33 MCI indicates that AIN technology is cheaper and 
preferable to switch-based technology. In particular, MCI indicates that the cost of opening a 500 
access code using non-AIN technology can be almost three times more expensive for a LEC than 
using AIN technology, and that the time required for a non-AIN LEC to load and test an NXX 
code can be five times greater than the time required by a LEC using. AIN technology.34 LDDS 
and MCI indicate that, because the older technology will result hi higher end-user prices, it is 
likely to inhibit the development of 500 number service offerings.35 MCI additionally claims that 
all LECs possess AIN and signalling system 7 (SS7) capabilities, and that because these 
technologies are necessary for 500 number portability, they should be implemented as quickly 
as possible.36 MCI claims that the minority of LECs that are not utilizing AIN are depriving the 
public of many of the benefits of 500 number service.37 MCI further contends that implementing 
a uniform rate structure would not amount to a mandate that LECs implement a particular 
technology because LECs would be free to operate under the rate structure with any technology 
they choose.38
9. In response, SWBT and the Sprint LECs argue that the LEC decisions to provide 
500 access before they were able to implement AIN technology reflect their desire to offer this 
service as quickly as possible, and thus demonstrate that LECs do not need additional incentives 
to implement AIN.39 Five companies dispute MCI's claim that all telephone companies have the 
capability to offer AIN and SS7.40
10. MCI also argues that failing to encourage efficient technology may enable LECs 
unlawfully to gain pricing flexibility under price cap regulation.41 MCI alleges that some LECs
33 MCI Reply at 11-13.
34 MCI Reply at 16.
35 MCI at 5-7; LDDS at 4-6.
36 MCI at 5.
37 MCI at 7.
38 MCI Reply at 23-24.
39 SWBT at 2; Sprint at 4.
40 CBT at 2-3; GTE at 2; Rochester at 2; SWBT at 2-3; Sprint LECs at 3.
41 MCI Reply at 8-9.
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Federal Communications Commission FCC 97-350
may deploy 500 access service using higher-cost technology first, thus gaining a higher price cap 
index when the new service is included in the service basket. According to MCI, LECs then will 
be able to implement the lower-cost technology and reduce 500 access revenues while increasing 
rates and revenues for other services simply by making a within-band filing.42
2. Decision
11. We conclude that the Common Carrier Bureau's decision regarding the LECs' rate 
structures for 500 access service is consistent with the Commission's well-established policy of 
allowing incumbent LECs to charge access rates based on cost-causation principles.43 We find 
that the Bureau correctly determined that the existing Part 69 rate elements are not adequate for 
500 access service and that this service was not anticipated when Part 69 was adopted.44 We 
further find that the Bureau's analysis of the record correctly found that LECs are currently using 
a variety of technologies to provide 500 number service, and that, as a consequence, LECs do 
not incur costs to provide this access service in a uniform manner.
12. Commission policy favors economically efficient prices that reflect the manner in 
which costs are incurred.45 A LEG that must make a non-recurring expenditure to provide 500 
access service should not generally be forced to recover its costs as if it were using technology 
that causes a recurring charge. Such a mechanism would distort the prices paid by access 
customers. Rate structures for 500 access service should reflect the manner in which the costs 
of providing the service are incurred because this will cause customers of 500 access to make 
economically rational decisions regarding the use of that service. Providers of 500 service will 
then offer services that are more efficient in both price and quantity, properly taking into account 
the cost of the technology used to provide that service to the public. Further, MCI has not shown 
with any specificity that the three basic rate structures permitted by the Bureau decision cause 
the "massive" administrative burden it claims. Additionally, we find unpersuasive MCI's request 
to base a uniform rate structure on the current 800 number rate structure. MCI admits that the 
800 number access rate structure would not reflect the way some LECs incur costs.46 Consistent 
with longstanding precedent, we decline to require a LEC to employ a rate structure for 500 
access service that does not accurately reflect the manner in which a LEC incurs costs to offer 
that service.
« LL
43 See, e.g.. Amendments of Part 69 of the Commission's Rules Relating to the Creation of Access Charge 
Subelements for Open Network Architecture. Report and Order, & Order on Further Reconsideration, & 
Supplemental Notice of Proposed Rulemaking, 6 FCC Red 4524 at 4533, ? 50 (1991) (Part 69 
Amendment OrderX
44 500 Access Waiver Order. 9 FCC Red at 7877, fl 25.
45 See, e.g.. Part 69 Amendment Order. 6 FCC Red 4524 at 4533,1 50 (1991).
"* MCI Reply at 23.
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Federal Communications Commission FCC 97-350
13. MCI has requested that we set a deadline for implementing a uniform rate 
structure. Although MCI appears to recognize that the immediate imposition of a uniform rate 
structure is not appropriate and that, if the LECs are saddled with an unuseable rate structure, it 
will hamper implementation of 500 number service,47 MCI nevertheless contends that it is 
unreasonable for 500 access customers to bear the administrative burden of multiple rate 
structures. We decline to adopt MCI's recommendation concerning a deadline for uniform rate 
structure. Currently, we are considering fundamental issues underlying both AIN and 500 number 
portability in separate mlemaking proceedings.48 It would be premature to set a deadline for the 
institution of a uniform rate structure as part of this waiver proceeding because either the 
Commission or the industry may decide that 500 access need not be provided in a uniform 
manner. In light of these proceedings, establishing a deadline for a uniform rate structure for 500 
access service in the context of this waiver would be premature. Furthermore, we note that issues 
about the relative administrative burdens of various outcomes are, by necessity, incorporated into 
these various rulemaking proceedings.
14. We reject MCI's request to impose a uniform rate structure as a means to 
encourage particular technology choices by LECs. In general, Commission policy allows 
telephone companies to select their technological approaches, and MCI has advanced no 
persuasive reason that would warrant a departure from this policy in this waiver proceeding. 
Similarly, we decline to address the price cap issues raised by MCI. As the Bureau indicated 
below, the tariff review process is the proper forum for reviewing the reasonableness of rate 
levels.49
B. 500 Number Portability Deadline 
1. The Record
15. MCI argues that without number portability the 500 number service market will 
be slow to mature, and some services may never be offered.50 LDDS shares MCI's concern that 
the lack of 500 number portability will diminish competition in the marketplace.51 The LECs
47 Indeed, the LECs have confirmed that the rate structure options available under the waivers are
allowing them to offer 500 number service faster than if the Commission had mandated a uniform rate 
structure. See, e.g.. Rochester at 2; U S West at 4-5, 7; BA at 1; SWBT at 2.
48 Intelligent Networks. Notice of Proposed Rulemaking, 8 FCC Red 6813 (1993) (Intelligent Networks 
MERM); Telephone Number Portability. CC Docket 95-116, First Report and Order, 11 FCC Red 8352, 
8449-8454, 15 188-98 (1996) (Number Portability Ordert. petition for recon. filed. Public Notice Rep. 
No. 2151 (rel. Sept. 6, 1996).
49 500 Access Waiver Order at 7879, 1 32.
50 MCI at 4.
51 LDDS at 5.
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Federal Communications Commission FCC 97-350
contend that 500 number portability does not yet exist anywhere in the industry, that it will be 
more complex than 800 service, that it will raise issues different from the 800 number database, 
and that it is currently the subject of extensive industry negotiations.32 Four parties argue that 
the issues raised by MCI with regard to number portability and implementation of specific 
technology and service offerings are outside the scope of this Part 69 waiver proceeding. A 
majority of the LECs opposing MCI's application urge the Commission to begin a rulemaking 
on these issues.53 In its reply, MCI concedes that it is not appropriate for the Commission to set 
a date for number portability in a Part 69 waiver proceeding, but asks that the Commission 
initiate the appropriate proceedings to do so.54
2. Decision
16. This waiver proceeding is not the appropriate forum to create a deadline for 500 
number portability. After MCI filed this Application for Review, we released an order in a 
rulemaking proceeding on telephone number portability, including 500 number portability.55 
MCI, as well as many of the parties that have commented on MCI's Application, participated in 
that proceeding. In the Number Portability Order, we concluded that we lacked sufficient 
information to determine whether it is technically feasible for LECs to provide portability for 
their own 500 numbers, and directed the Industry Numbering Committee (INC) to examine this 
issue and file a report within twelve months of the release of that order.56 We agree with the 
Bureau's decision that the issue of whether 500 numbers should be portable is beyond the scope 
of a Part 69 waiver proceeding, and that a full record should be developed on that matter before 
we consider issuing a deadline.57
52 Ameritech at 2; BellSouth at 4, 5; GTE at 2-3; NYNEX at 4; Rochester at 2, n.2; Sprint LECs at 3-4; 
 U S West at 7-9.
53 Ameritech at 2; BellSouth at 5; Rochester at 2, n.2; U S West at 8.
* MCI Reply at 19.
55 Number Portability Order at 8454,1 198.
56 Number Portability Order at f 198.
57 500 Access Waiver Order. 9 FCC Red at 7879, 1 32.
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Federal Communications Commission FCC 97-350
IV. ORDERING CLAUSE
17. Accordingly, IT IS ORDERED, pursuant to section 4(i) of the Communications 
Act, as amended, 47 U.S.C. § 154(i), and the Commission's Rules, 47 CFR § 1.115(g), that MCI's 
Application for Review of the Common Carrier Bureau's 500 Access Waiver Order is hereby 
DENIED.
FEDERAL COMMUNICATIONS COMMISSION
William F. Caton 
Acting Secretary
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