*Pages 1--68 from Microsoft Word - 14951* Federal Communications Commission FCC 02- 16 1 Before the Federal Communications Commission Washington, D. C. 20554 In the Matter of Telephone Number Portability ) ) ) ) ) ) ) ) ) CC Docket No. 95- 116 MEMORANDUM OPINION AND ORDER ON RECONSIDERATION AND ORDER ON APPLICATION FOR REVIEW Adopted: January 23, 2002 Released: February 15, 2002 By the Commission: Commissioner Copps approving in part, dissenting in part, and issuing a s t a t e m e n t Paragraph No. I. INTRODUCTION ............................................................................................................... 1 II. BACKGROUND ................................................................................................................. 5 III. MEMORANDUM OPINION AND ORDER ON RECONSIDERATION......................... 9 A. Jurisdiction............................................................................................................... 9 1. Federal/ State Jurisdiction............................................................................. 9 2. Determining the N- 1 Carrier on IntraLATA and Extended Area Service Calling Plans ................................................................................. 14 B. Costs of the Regional Databases............................................................................ 18 1. Billing and Collection Issues ..................................................................... 18 2. Revenues to be Included in the Allocator.................................................. 28 3. National and Multi- Regional Carriers ....................................................... 35 C. Recovery of Carrier- Specific Costs Directly Related to Providing Number Portability............................................................................................................... 41 1. Independent and Rural Incumbent LECs................................................... 41 2. Recovery of Number Portability Costs from Other Carriers ..................... 59 3. Recovery of Number Portability Costs from Feature Group A Access Lines .............................................................................................. 66 1 Federal Communications Commission FCC 02- 16 2 4. Recovery of Number Portability Costs from Centrex and PBX Lines........................................................................................................... 74 5. Recovery through the Incumbent LEC End- User Charge. ........................ 83 6. Querying all Calls to an NXX.................................................................... 95 IV. ORDER ON APPLICATION FOR REVIEW................................................................. 102 A. Operation Support Systems (OSS) Costs............................................................. 102 1. Background.............................................................................................. 102 2. Discussion................................................................................................ 104 B. 911 Costs.............................................................................................................. 112 1. Background.............................................................................................. 112 2. Discussion................................................................................................ 113 C. Joint Costs............................................................................................................ 114 1. Recovery of Advancement Costs............................................................. 114 V. FINAL REGULATORY FLEXIBILITY CERTIFICATION ........................................ 118 VI. PAPERWORK REDUCTION ANALYSIS................................................................... 124 VII. ORDERING CLAUSES................................................................................................. 125 PARTIES TO THE PROCEEDING.............................................................................. Appendix A FINAL RULES .............................................................................................................. Appendix B I. INTRODUCTION 1. On May 5, 1998, the Commission adopted the Third Report and Order 1 in this docket, implementing section 251( e)( 2) of the Communications Act of 1934, as amended (the Act), with regard to the costs of providing local number portability. The Third Report and Order, among other things, determined that section 251( e)( 2) requires the Commission to ensure that carriers bear the cost of providing long- term number portability on a competitively neutral basis for both interstate and intrastate calls. The Third Report and Order also determined that incumbent local exchange carriers (LECs) may recover carrier- specific costs of number portability through federally- tariffed end- user and query service charges. 2 2. Eighteen parties filed petitions for reconsideration and clarification in response to the Third Report and Order. Thirteen parties filed oppositions or comments on the petitions, and 1 Telephone Number Portability, Third Report and Order, CC Docket No. 95- 116, 13 FCC Rcd 11701 (1998) (Third Report and Order). 2 Id. at 11707, para. 9. 2 Federal Communications Commission FCC 02- 16 3 ten parties filed reply comments. 3 In this Order, we resolve the following issues raised in these filings regarding the rules adopted in the Third Report and Order. Specifically, we (1) affirm that the Commission has exclusive jurisdiction over the distribution and recovery of costs associated with intrastate and interstate number portability; (2) clarify that the local number portability administrator may assess shared costs on all eligible telecommunications carriers, not just carriers with existing long- term number portability contracts; (3) clarify that incumbent LECs must allocate their shared costs between the query service and end- user charges; (4) affirm the adoption of the end- user revenue allocator; (5) deny petitioners' request that costs associated with a number portability charge to carriers purchasing unbundled switching be calculated based on total element long run incremental cost (TELRIC); 4 (6) deny petitioners' request that costs for number portability be based on avoided costs; 5 (7) clarify that carriers may not recover number portability costs from other carriers through interconnection charges or resale prices; (8) clarify that as long as an incumbent LEC provides number portability functionality, it may assess the number portability end- user charge on resellers and purchasers of switching ports as unbundled network elements; (9) affirm that carriers not subject to rate- of-return regulation or price caps may recover their carrier- specific costs in any lawful manner consistent with their obligations under the Communications Act; (10) clarify that commercial mobile radio service (CMRS) providers are co- carriers, not end users, and, therefore, are not subject to an end- user charge; (11) clarify that carriers who offer Feature Group A access lines may assess an end- user surcharge on such lines; (12) affirm that Centrex lines may be assessed one end- user number portability charge per line and a Private Branch Exchange (PBX) trunk may be charged nine end- user number portability charges per PBX trunk; (13) affirm that Plexar may be assessed one number portability charge per line; (14) affirm that incumbent LECs may impose an end- user charge in service areas where the switch is number- portability- capable; (15) clarify that small and rural incumbent LECs that do not yet provide number portability functionality but provide service under Extended Area Service (EAS) arrangements may recover their N minus one (N- 1) query and Number Portability Administration costs through end- user charges; (16) clarify that incumbent LECs may not begin billing carriers for N- 1 queries until a number has been ported from an NXX; (17) clarify that after the five- year recovery period for implementation costs of number portability through the end- user charge, any remaining costs will be treated as normal network costs; (18) affirm that price cap LECs and rate- of- return LECs should treat the query services charge as a new service within the meaning of section 61.38 of 3 A list of petitioners and commenting parties appears at Appendix A. 4 We note that the Eighth Circuit has ruled that, while TELRIC is an acceptable method for determining costs, certain specific rules contained within the Commission’s pricing rules are contrary to congressional intent. Iowa Utils. Bd. v. FCC, 219 F. 3d 744, 749- 53 (8 th Cir. 2000), cert. granted sub nom., Verizon Communications v. FCC, 531 U. S. 1124 (2001). The Eighth Circuit has stayed the issuance of its mandate, Iowa Utils Bd. v. FCC, No. 96- 3321, et al. (8 th Cir. Sept. 25, 2000), pending appeal before the Supreme Court, which has granted certiorari in the case. Verizon Communications v. FCC, 531 U. S. 1124 (2001). Accordingly, the Commission’s rules continue in effect at this time. 5 In Iowa Utilities Bd. v. FCC, see n. 4, supra, the Eighth Circuit concluded that section 252( d)( 3) of the Communications Act requires costs that are actually avoided, not those costs that could be avoided, be excluded from wholesale rates offered to resellers. Iowa Utilities Bd. v. FCC, 219 F. 3d at 755. 3 Federal Communications Commission FCC 02- 16 4 our rules; and (19) affirm our rules adopted in the Third Report and Order concerning levelized charges. We take this action toward the implementation of local number portability at the direction of Congress, 6 and apply the mandate of section 251( e)( 2) in the most efficient manner possible. 3. In the Third Report and Order, the Commission delegated authority to the Common Carrier Bureau (Bureau) to determine appropriate methods for apportioning joint costs among portability and non- portability services, and to provide guidance to carriers before they filed their federal number portability tariffs. 7 On December 14, 1998, pursuant to delegated authority, the Bureau issued the Cost Classification Order. 8 The Cost Classification Order, among other things, provided guidance to incumbent LECs concerning: (1) the costs that are eligible for recovery through federal number portability charges established in the Third Report and Order; (2) the appropriate methodologies for determining the amount of eligible number portability costs; (3) advancement costs; and (4) allocation of these eligible costs between the end- user, pre-arranged and default query charges. 9 4. In response to the Cost Classification Order, four parties filed petitions for clarification or applications for review. Four parties filed oppositions or comments and four parties filed replies. In this Order, we address all issues raised in these petitions. Specifically, we: (1) affirm that carriers may only recover carrier- specific costs directly relating to the provision of number portability; (2) affirm that carriers must distinguish clearly costs incurred for narrowly defined portability functions from costs incurred to adapt their systems to implement number portability; (3) affirm that costs carriers incur as an incidental consequence of number portability are ordinary costs of doing business and represent general network upgrades; (4) affirm the two- part cost recovery test; and (5) affirm that costs which do not meet the two- part recovery test may not be recovered through the number portability cost recovery mechanisms. II. BACKGROUND 5. In the Third Report and Order, we concluded that section 251( e)( 2) requires that carriers bear the following costs on a competitively neutral basis: (1) costs the LECs incur to meet the obligations imposed by section 251( b)( 2); and (2) costs other telecommunications carriers, such as interexchange carriers (IXCs) and CMRS providers, incur for industry- wide solutions to provide local number portability. 10 We also held that the costs of establishing number 6 Section 251( e)( 2) of the Act requires that "[ t] he cost of establishing telecommunications numbering administration arrangements and number portability shall be borne by all telecommunications carriers on a competitively neutral basis as determined by the Commission." 47 U. S. C. § 251( e)( 2). 7 Third Report and Order, 13 FCC Rcd at 11740, para. 75. 8 Telephone Number Portability Cost Classification Proceeding, CC Docket No. 95- 116, Memorandum Opinion and Order, 13 FCC Rcd 24495 (CCB 1998) (Cost Classification Order). 9 See Cost Classification Order, 13 FCC Rcd at 24498, para. 5. 10 Third Report and Order, 13 FCC Rcd at 11723- 24, para. 36. Section 251( e)( 2) requires that the costs of establishing number portability be “borne by all telecommunications carriers on a competitively neutral basis.” 47 (continued….) 4 Federal Communications Commission FCC 02- 16 5 portability include: (1) costs associated with the creation of the regional databases to support number portability; 11 (2) costs associated with the initial upgrading of the public switched network; and (3) ongoing costs of providing number portability, such as the costs involved in transferring a telephone number to another carrier and routing calls under the N- 1 querying protocol. 12 We concluded that section 251( e)( 2) applies to the distribution of number portability costs among carriers as well as the recovery of those costs by carriers. 13 We found that carrier-specific costs not directly related to providing number portability are not costs of number portability and, consequently, are not subject to section 251( e)( 2) and its competitively neutral mandate. 14 6. In the Third Report and Order, we applied the rules adopted in the First Report and Order regarding competitively neutral cost recovery to the rules regarding the recovery of shared and carrier- specific costs. 15 The rules regarding shared costs require that each (Continued from previous page) U. S. C. § 251( e)( 2). Section 251( b)( 2) requires all LECs "to provide, to the extent technically feasible, number portability in accordance with requirements prescribed by the Commission." 47 U. S. C. § 251( b)( 2). 11 Number portability is deployed through a system of multiple regional databases. The regional databases will facilitate the provision of number portability by providing carriers with the number portability routing information that is necessary to route telephone calls between the carriers' networks. Each database serves an area that corresponds to one of the original regional Bell Operating Company service territories. See Telephone Number Portability, CC Docket No. 95- 116, First Report and Order and Further Notice of Proposed Rulemaking, 11 FCC Rcd 8352, 8399- 8400, paras. 91- 92 (1996) (First Report and Order). 12 Third Report and Order, 13 FCC Rcd at 11725, para. 38. Under the N- 1 querying protocol, the N- 1 carrier is the carrier responsible for the query to the carrier's or a third party's service control point. The query is a call made to determine the address or location routing number (LRN) for the call. "N" is the entity terminating the call to the end- user, or a network provider with whom the entity has contracted to provide tandem access. The N- 1 carrier for a local call will usually be the calling customer's LEC and the N- 1 carrier for an interexchange call will usually be the calling customer's interexchange carrier. Carriers may arrange for another carrier or third party to perform query services for them as long as that entity charges the N- 1 carrier in accordance with the requirements established in this proceeding. If a call is not queried by the N- 1 carrier, the call might be routed by default to the LEC that originally served the telephone number, who will perform the default query for the N- 1 carrier. The N- 1 protocol was recommended by the North American Numbering Council (NANC), the industry and the state/ regional workshops regarding the technical and operational standards for long term number portability and was adopted by the Commission in the Second Report and Order. See Telephone Number Portability, CC Docket No. 95- 116, Second Report and Order, 12 FCC Rcd 12281, 12287, para. 8, 12323- 24, paras. 73- 75 (1997) (Second Report and Order). 13 Third Report and Order, 13 FCC Rcd at 11725- 26, para. 39. 14 Id. at 11724, para. 37. On December 14, 1998, the Common Carrier Bureau issued an order providing guidance for carriers on: (1) the costs that are eligible for recovery through federal number portability charges; (2) the appropriate methodologies for measuring costs eligible for LNP recovery; and (3) the allocation of eligible costs between end user and query services charges. Cost Classification Order, 13 FCC Rcd 24495. The Third Report and Order delegated authority to the Common Carrier Bureau for this purpose. Id. at 11740, para. 75. 15 Id. at 11731- 32, 11754- 56, paras. 52- 53, 105- 107. Our competitive neutrality rules require that the cost of number portability borne by each carrier does not affect significantly any carrier's ability to compete with other carriers for customers in the marketplace. Under our two- part test to determine whether this requirement is met, the way carriers bear the costs of number portability: (1) must not give one service provider an appreciable, (continued….) 5 Federal Communications Commission FCC 02- 16 6 telecommunications carrier contribute to the costs of each regional database in proportion to each carrier’s intrastate, interstate, and international end- user telecommunications revenues for that region. We determined that after each carrier's portion of the shared costs is distributed on the basis of end- user revenues, the costs are treated as carrier- specific costs directly related to providing number portability. 16 We concluded that it is competitively neutral for carriers to bear their own carrier- specific costs directly related to providing number portability, 17 and we allowed the incumbent LECs to recover these costs through: (1) a monthly number portability end– user charge; 18 and, (2) a number portability query- service charge that applies to carriers on whose behalf the incumbent LEC performs queries. 19 We allowed other telecommunications carriers to recover their carrier- specific costs directly related to providing local number portability in any lawful manner. 20 7. In the Cost Classification Order, the Bureau adopted a two- part test for incumbent LECs to use to identify carrier- specific costs that are directly related to the implementation and provision of number portability. 21 In order to determine that costs are eligible for recovery through the federal cost recovery mechanism, a carrier must show that these costs: (1) would not have been incurred by the carrier "but for" the implementation of number portability; and (2) were incurred "for the provision of" number portability. 22 The Bureau found that application of this test would avoid over compensation of LECs for their costs, as LECs already recover the cost of general network upgrades through standard cost recovery mechanisms. The Bureau, therefore, concluded that the incumbent LECs should not be allowed to recover these same costs through both federal number portability charges, as well as through price caps or rate- of- return recovery mechanisms. 23 8. The Bureau concluded that only new costs, but not the costs incurred by incumbent LECs prior to number portability implementation, could be claimed as eligible number portability costs. 24 The Bureau reasoned that to allow recovery of costs other than new costs would lead to (Continued from previous page) incremental cost advantage over another service provider when competing for a specific subscriber, and (2) must not disparately affect the ability of competing service providers to earn a normal return. See First Report and Order, 11 FCC Rcd. at 8419- 21, paras. 131- 135. 16 Third Report and Order, 13 FCC Rcd at 11738- 39, para. 69. 17 Id. at 11773- 76, paras. 135- 141. 18 Id. at 11776, para. 142. See 47 C. F. R. §§ 52.33( a), (a)( 1). 19 Third Report and Order, 13 FCC Rcd at 11778, para. 147. See 47 C. F. R. §§ 52.33( a), (a)( 2). 20 Third Report and Order, 13 FCC Rcd at 11774, para. 136. 21 Cost Classification Order, 13 FCC Rcd at 24500, para. 10. 22 Id. 23 Id. at para. 11. 24 Id. at 24503, para. 18. 6 Federal Communications Commission FCC 02- 16 7 double recovery of costs already subject to recovery through standard recovery mechanisms. 25 The Bureau directed the LECs to submit tariffs that distinguish clearly costs incurred for the narrowly defined portability functions from costs incurred to adapt other systems to implement number portability, such as repair and maintenance, billing, or order processing systems. 26 III. MEMORANDUM OPINION AND ORDER ON RECONSIDERATION A. Jurisdiction 1. Federal/ State Jurisdiction a. Background 9. In the Third Report and Order, we determined that section 251( e)( 2) 27 requires the Commission to ensure that carriers bear the costs of providing local number portability on a competitively neutral basis for both interstate and intrastate calls. 28 In this light, we determined that an exclusively federal recovery mechanism for long- term number portability would enable the Commission to satisfy most directly the competitive neutrality mandate of the 1996 Act and minimize the administrative and enforcement difficulties that might arise if jurisdiction over local number portability was concurrent, i. e., split between federal and state regulatory authorities. 29 Several petitioners seek reconsideration of the Commission's conclusion that it has exclusive jurisdiction to establish a federal cost recovery mechanism for the cost of providing intrastate local number portability. Petitioners argue that section 251( e)( 2) provides no express authority for the Commission to establish an end- user collection mechanism for intrastate number portability costs or to develop a centralized approach for the recovery of the ongoing intrastate costs of implementing long- term number portability. 30 Specifically, petitioners argue that the language of section 251( e)( 2) does not grant the Commission the unambiguous, straightforward authority required to preempt the states' authority to determine an appropriate recovery mechanism for the intrastate costs of number portability. 31 b. Discussion 10. We are unpersuaded by petitioners' arguments. We agree with commenters that petitioners have not raised any new or compelling arguments that were not presented to, and 25 Id. 26 See id. at 24501, para. 12. 27 See 47 U. S. C. § 251( e)( 2). 28 See Third Report and Order, 13 FCC Rcd at 11719- 20, para. 28. 29 See id. at 11720, para. 29; see also First Report and Order, 11 FCC Rcd at 8415- 24, paras. 121- 40. 30 See New York DPS Petition at 2- 6; Pennsylvania Office of the Consumer Advocate Petition at 3. 31 See New York DPS Petition at 2- 6; Pennsylvania Office of the Consumer Advocate Petition at 3. 7 Federal Communications Commission FCC 02- 16 8 considered by, the Commission in the Third Report and Order. 32 As we determined in the Third Report and Order, section 251( e)( 2) 's express and unconditional grant of authority to the Commission requires us to ensure that carriers bear the cost of providing number portability on a competitively neutral basis for both interstate and intrastate calls. 33 Section 251( e)( 2) states that carriers shall bear the costs of number portability "as determined by the Commission," and does not distinguish between costs incurred in connection with intrastate calls and costs incurred in connection with interstate calls. Additionally, the Supreme Court has stated that "[ t] he FCC has rulemaking authority to carry out the 'provisions of this Act, ' which include §§ 251 and 252, added by the Telecommunications Act of 1996." 34 11. Moreover, we are unpersuaded by petitioners' arguments that section 251( e)( 2) provides no express authority allowing the Commission to exercise jurisdiction over the carrier- specific cost recovery mechanism for the ongoing intrastate costs of number portability. 35 As we concluded in the Third Report and Order, section 251( e)( 2) requires the Commission to ensure that number portability costs are distributed among, as well as recovered by, carriers on a competitively neutral basis. 36 Despite our tentative conclusion in the First Report and Order 37 that section 251( e)( 2) only applied to the distribution of number portability costs, in the Third Report and Order we determined that section 251( e)( 2) applies to both distribution and recovery of number portability costs. 38 We concluded that this interpretation of section 251( e)( 2) best achieves the congressional goal of ensuring that the costs of providing number portability are recovered in a manner that does not discourage the development of local competition that number portability is intended to encourage. 39 We reasoned that if we ensured the competitive neutrality of only distribution of costs, carriers could effectively undo this competitively neutral distribution by recovering some of these costs from other carriers in a manner that is not competitively neutral. 40 We continue to believe that section 251( e)( 2) applies to both the distribution and recovery of number portability costs, thereby ensuring achievement of the congressional goal of promoting local competition. 12. We are not persuaded by petitioners’ argument that because the 1996 Act does not 32 AT& T Opposition at 2; BellSouth Comments at 7- 8; MCI's Response at 13; SBC Comments at 4- 5. 33 Third Report and Order, 13 FCC Rcd at 11719- 20, paras. 28- 29. 34 AT& T Corp. v. Iowa Utilities Board, 525 U. S. 366, 378 (1999). 35 See New York DPS Petition at 7. 36 Third Report and Order, 13 FCC Rcd at 11725, para 39. 37 First Report and Order, 11 FCC Rcd at 8460, para. 209. 38 Third Report and Order, 13 FCC Rcd at 11725, para 39. 39 Id. 40 Id. The Commission noted, as an example, that an incumbent LEC could redistribute its number portability costs to other carriers by seeking to recover them in increased access charges to IXCs. 8 Federal Communications Commission FCC 02- 16 9 modify section 152( b), 41 which specifically preserves state jurisdiction over intrastate communications, the Commission lacks jurisdiction over intrastate number portability costs. 42 In AT& T Corp. v Iowa Utilities Board, 43 the Supreme Court rejected the argument that because local competition provisions are not identified in section 152( b) 's "except" clause, the 1996 Act does nothing to displace the presumption that the states retain their traditional authority over local phone service. 44 The Court determined that this argument ignores section 201( b), which explicitly gives the Commission jurisdiction to make rules governing matters to which the 1996 Act applies. 45 The Supreme Court concluded that section 201( b) "means what it says: The FCC has rulemaking authority to carry out the 'provisions of this Act, ' which include §§ 251 and 252, added by the Telecommunications Act of 1996." 46 Thus, we affirm our decision in the Third Report and Order that we have exclusive jurisdiction over the distribution and recovery of both intrastate and interstate costs of implementing long- term number portability. 13. Finally, we note that some petitioners request clarification that in states where a recovery mechanism has not yet been established for interim number portability, the incumbent LEC may elect to have the costs of interim number portability incorporated into the long- term number portability monthly charge. 47 This issue was decided in our reconsideration of the First Report and Order. 48 In the Fourth Reconsideration Order, although we reaffirmed our authority over interstate and intrastate number portability cost recovery, we denied requests that we generally preempt state number portability cost recovery decisions for interim number portability. 49 Instead, we affirmed our earlier conclusion in the First Report and Order that states may continue to decide on cost recovery mechanisms for interim number portability, as long as they meet our competitively neutral guidelines. 50 Thus, we will not allow incumbent LECs to incorporate the costs of interim number portability into their long- term number portability monthly charge. 41 See 47 U. S. C. § 152( b). 42 See New York DPS Petition at 2- 6. 43 AT& T Corp. v. Iowa Utilities Board, 525 U. S. 366. 44 Id. at 379- 80. Title 47 U. S. C. § 152( b) states, in relevant part, that "Except as provided in sections 223 through 227, inclusive, and section 332, and subject to the provisions of section 301 and title VI, nothing in this Act shall be construed to apply or to give the Commission jurisdiction . . . ." 47 U. S. C. § 152( b). 45 AT& T Corp. v. Iowa Utilities Board, 525 U. S. at 380. 46 Id. at 378. 47 See Ameritech Petition at 12; U S WEST Reply at 4. 48 See Telephone Number Portability, CC Docket No. 95- 116, Fourth Memorandum Opinion and Order on Reconsideration, FCC 99- 151 (rel. July 16, 1999) (Fourth Reconsideration Order). 49 Fourth Reconsideration Order at para. 29. 50 Id. 9 Federal Communications Commission FCC 02- 16 10 2. Determining the N- 1 Carrier on IntraLATA and Extended Area Service Calling Plans a. Background 14. In the Second Report and Order, we adopted the North American Numbering Council‘ s (NANC's) recommendation that the carrier in the call routing process immediately preceding the terminating carrier be designated the "N- 1" carrier. 51 Petitioners request that the Commission, in instances of intraLATA toll calling and EAS calling plans, relinquish jurisdiction over the distribution and recovery of intrastate costs associated with long- term number portability to the states. 52 In the alternative, petitioners request that the Commission direct NANC to develop querying protocol and cost recovery scenarios for intraLATA and EAS- type services. 53 Petitioners contend that due to the complex and varied arrangements for these services, it will be difficult for the Commission to determine the N- 1 carrier assignment for intrastate services and appropriate tariff rates for number portability network interconnection and local number portability queries associated with various intraLATA and EAS type services. 54 b. Discussion 15. We agree with petitioners that these types of intrastate services may create complex issues regarding those costs that may be appropriate for recovery by carriers in the implementation of long- term number portability. However, we do not believe it appropriate to allow the individual states to exercise jurisdiction over the implementation and cost recovery mechanism for local number portability in the context of intraLATA and EAS- type services. As we have stated above, we believe that an exclusively federal cost recovery mechanism for long-term number portability enables the Commission to satisfy most directly the 1996 Act’s competitive neutrality mandate and minimize the administrative and enforcement difficulties that might arise if jurisdiction over local number portability were divided. 55 Therefore, we deny petitioners’ request that we should relinquish jurisdiction over the intrastate costs of number portability associated with intraLATA and EAS- type service calling plans. 16. Petitioners further request that the Commission clarify its definition of N- 1 carrier assignment responsibility for these specific intraLATA and EAS- type services. Petitioners argue that the many and varied types of call routing arrangements for these types of intrastate services will make it difficult for the Commission to determine the N- 1 carrier in all instances. 56 51 See Second Report and Order, 12 FCC Rcd at 12323, para. 73. 52 ORTC and TSTCI Joint Petition at 8- 9. 53 Id. at 11. 54 Id. at 8- 9. 55 Third Report and Order, 13 FCC Rcd at 11720, para. 29; see also First Report and Order, 11 FCC Rcd at 8415- 24, paras. 121- 40. 56 ORTC and TSTCI Joint Petition at 8- 9. 10 Federal Communications Commission FCC 02- 16 11 Petitioners argue that NANC's Architecture & Administrative Plan for Local Number Portability 57 failed to provide N- 1 querying protocol scenarios for IntraLATA toll calls or EAS-type service. 58 Petitioners request that the Commission direct NANC to develop comprehensive intraLATA and EAS- type service querying protocol scenarios for the various arrangements for these services throughout the country. 59 17. We deny the request to develop the specific protocol scenarios requested by petitioners because at this time the procedures established under the Second Report and Order appear sufficient. 60 We do believe that, in most instances, carriers have not had any significant difficulty determining which carrier is the N- 1 carrier. Under the N- 1 querying protocol, the N- 1 carrier is responsible for the query where "N" is the entity terminating the call to the end- user, or a network provider contracted by the entity to provided tandem access. 61 Thus, the N- 1 carrier (i. e., the last carrier before the terminating carrier) for a local call will usually be the calling customer's local service provider; the N- 1 carrier for an interexchange call will usually be the calling customer's interexchange carrier. 62 We believe that until a specific problem arises in determining the N- 1 carrier, it is premature to ask NANC to spend the time and resources it would take to develop scenarios for the many different types of intraLATA and EAS- type services throughout the country. We encourage the carriers to bring such specific issues to NANC, pursuant to NANC’s oversight of number portability administration, for a recommended resolution to be submitted by NANC to the Common Carrier Bureau as and when such issues arise in the context of the provision of number portability. 63 B. Costs of the Regional Databases 1. Billing and Collection Issues a. Background 18. In the Third Report and Order, we stated that, as part of its management duties under 57 See North American Numbering Council, Local Number Portability Administration Selection Working Group Report App. D (Architecture & Administrative Plan for Local Number Portability) (Apr. 25, 1997) (NANC Recommendation), adopted, Second Report and Order, 12 FCC Rcd at 12323, para. 73. 58 ORTC and TSTCI Joint Petition at 9. 59 Id. at 11. 60 Second Report and Order, 12 FCC Rcd at 12323, para. 73. 61 Third Report and Order, 13 FCC Rcd at 11711, para. 15; see also NANC Recommendation at 8. 62 Third Report and Order, 13 FCC Rcd at 11711, para. 15. 63 In the Second Report and Order, the Commission adopted the NANC's recommendation that it provide general oversight of number portability administration on an ongoing basis. Specifically, the Commission established a procedure whereby parties may bring matters regarding number portability administration to the NANC so that it may recommend a resolution of those matters to the Commission. Second Report and Order, 12 FCC Rcd at 12351, para. 128. 11 Federal Communications Commission FCC 02- 16 12 section 52.26 of the Commission's rules, 64 the local number portability administrator (LNPA) of each regional database must collect sufficient revenues to fund the operation and management of that database. 65 We required the LNPA to allocate the costs of each regional database among carriers in proportion to each carrier's intrastate, interstate, and international end- user telecommunications revenues attributable to that region. 66 We also noted that some carriers have already begun paying their regional database administrators based on temporary agreements negotiated between the regional limited liability corporations (LLCs) and the region's LNPA, despite the fact that all eligible carriers had not yet signed such agreements. 67 We permitted, but did not require, each regional administrator to adjust prospectively through a reasonable true- up mechanism the future bills of those carriers that participated in such agreements. 68 Such true- ups account for the period prior to the effective date of our rules and recognize that agreements might have included reasonable cost recovery mechanisms to recover regional database costs on a temporary basis pending the adoption of the Third Report and Order. 69 NeuStar has been selected the LNPA of each region. 70 19. A number of petitioners raised issues relating to billing and collection of LNPA costs. Specifically, petitioners seek reconsideration or clarification of: (1) the universe of carriers used to calculate cost recovery; (2) potential double recovery of shared database charges; (3) audits of the LNPA's costs; and (4) the scope of work that may be included in the administrators' shared costs. 71 In response to these concerns, NeuStar asserts that these billing and collection issues are premature and should not be addressed at this time. 72 NeuStar asserts that the "consultative process" occurring between it and the LLCs will provide an effective forum for establishing alternate billing and collection implementation approaches to address industry concerns, such as those raised by the commenters. 73 64 47 C. F. R. § 52.26. 65 Third Report and Order, 13 FCC Rcd at 11761, para. 116. 66 Id. 67 Id. at para. 117. 68 Id. 69 Id. 70 See id. at 11709- 10, para. 13. We note that on November 17, 1999 the Commission approved the transfer of Lockheed Martin IMS’s NANPA functions to NeuStar. See Request of Lockheed Martin Corporation and Warburg, Pincus & Co. for Review of the Transfer of Lockheed Martin Communications Industry Services Business, CC Docket No. 92- 237, Order, 14 FCC Rcd 19792 (1999). 71 See, e. g., WorldCom Petition at 7; see also AT& T Corp. Opposition at 15- 16. We note that WorldCom and MCI merged after the filing of the pleadings in this proceeding. 72 Lockheed Martin IMS Comments at 2. 73 Id. at 3. 12 Federal Communications Commission FCC 02- 16 13 b. Discussion 20. WorldCom requests that the Commission clarify that when NeuStar implements its true-up, it does so using all carriers as a basis of its cost recovery plan, not just those carriers that have already signed user agreements with the LNPA. 74 WorldCom believes that it would not be competitively neutral to allow NeuStar to bill the total costs of the regional database to only the small group of carriers that have signed user agreements, with the intention of somehow crediting those carriers if and when other carriers pay their proportionate share. 75 We agree with WorldCom and hereby clarify that LNPAs shall assess shared costs on all eligible carriers, not just carriers with existing long- term number portability contracts with an LLC. As we stated in the Third Report and Order, we require all telecommunications carriers to bear LNPA shared costs, and we recognize that some carriers have already begun paying their regional database administrators based on temporary agreements negotiated by the regional LLC. 76 We did not envision that such true- up would exempt carriers that have not yet signed long- term number portability contracts with the LLC, but rather would include such carriers in the cost allocation. We agree with WorldCom that although carriers without LLC contracts did not pay shared number portability costs from the start, they are not exempt from their responsibility to bear costs in a competitively neutral manner. 77 We also agree with AT& T that we did not intend to penalize carriers currently under contract with the LNPA. 78 21. However, we decline to adopt WorldCom's recommendation that we specify the manner in which NeuStar should implement true- ups, such as prohibiting NeuStar from requiring a few carriers to pay 100 percent of the costs, and crediting funds back as other payments flow in after other carriers are billed at a later date. 79 We do not believe that WorldCom has presented sufficient evidence to support its claim that this true- up method is discriminatory. 80 Also, we acknowledge NeuStar's need to create and maintain the number portability database, despite the fact that all carriers have not signed user agreements with NeuStar. We reiterate our earlier finding in the Second Report and Order, in which we held that the LLCs shall "provide immediate oversight and management of the local number portability administrators." 81 We strongly encouraged all parties to attempt to resolve issues regarding number portability 74 WorldCom Petition at 7; see also AT& T Corp. Opposition at 15- 16. 75 WorldCom Petition at 7. 76 Third Report and Order, 13 FCC Rcd at 11759- 61, paras. 113- 117. 77 WorldCom Petition at 6. 78 AT& T Corp. Opposition at 15- 16. 79 WorldCom Petition at 7. 80 See id. 81 Second Report and Order, 12 FCC Rcd at 12345, para. 114. We note that such oversight is to continue only until the Commission concludes further proceedings to examine the issue of local number portability administrator oversight and management. Id. at 12346- 47, para. 119; see also 47 C. F. R. § 52.26( b)( 2). 13 Federal Communications Commission FCC 02- 16 14 deployment among themselves and, if necessary, under the auspices of the NANC. 82 22. Vanguard asserts that WorldCom's request that all carriers must bear their proportionate share of the LNPA's shared costs may lead to double recovery. 83 Vanguard asserts that incumbent LECs performing queries for CMRS carriers are recovering their portion of the shared administrator's charges through query service charges, and any true- up adopted by administrators has to be sensitive to this particular potential for double recovery of costs, which would not be competitively neutral. 84 MCI responds that Vanguard's concern is over- recovery through query service charges, not double recovery, and such concerns should be addressed in the context of specific query service tariffs. 85 23. We agree with MCI that Vanguard's concern about double recovery is really an issue of potential over- recovery through query service charges. 86 Vanguard believes that CMRS providers will be double- paying their share of number portability costs by paying their regional LNPAs for their respective portion of the shared costs, as well as paying incumbent LECs for query service charges, through which incumbent LECs will pass on their own shared LNPA costs. First, we note that all carriers who contract out their querying services, not just CMRS carriers, will be in the identical position of paying both the regional LNPAs for shared costs, as well as query service charges. Second, we held in the Third Report and Order that each carrier's LNPA costs, once distributed, are carrier- specific costs directly related to number portability, 87 and that an incumbent LEC's carrier- specific costs directly related to number portability are to be recovered through tariffed charges. 88 We also held in the Cost Classification Order that carriers are to allocate their carrier- specific costs directly related to number portability between end- user charges and query service charges. 89 We clarify that incumbent LECs must allocate their shared administrative fees between the query service charge and the end- user charge. 90 If a carrier believes that an incumbent LEC is recovering its shared costs solely through query service charges rather than allocating such charges between end- user and query service charges, or recovering these costs through inflated query service charges, it should so state in the context of a carrier's tariff review process 91 or through the Commission's normal complaint procedures. 92 82 Second Report and Order, 12 FCC Rcd at 12352- 53, para. 130. 83 Vanguard Opposition at 5- 7. 84 Id. at 6- 7. 85 MCI Reply at 7- 8. 86 Id. 87 Third Report and Order, 13 FCC Rcd at 11745, para. 87. 88 Id. at 11773- 74, para. 135. 89 See Cost Classification Order, 13 FCC Rcd at 24511, para. 40. 90 See id. 91 47 U. S. C. § 204. 14 Federal Communications Commission FCC 02- 16 15 We will investigate a specific carrier's tariff and rates and examine them for over- recovery via the query service charge at that time. 24. WorldCom asks the Commission to clarify that shared LNPA costs include shared database costs, future statement of work modifications, and porting charges. 93 We agree with WorldCom that the LNPAs may include database costs and modifications. We have previously concluded that number portability costs include initial costs as well as costs due to subsequent changes in the number portability database. 94 Like all other shared costs, these costs should be distributed among all carriers. 95 However, the meaning of WorldCom’s statement that the LNPA should be allowed to assess "porting charges" is unclear. We note that in the Third Report and Order, we stated that acceptable LNPA shared costs that could be distributed to telecommunications carriers include "nonrecurring, recurring, upload, and download costs." 96 If WorldCom is referring to such uploading and downloading costs, and such costs meet the "but for" test for number portability cost recovery, 97 then we agree that such charges should be included in the LNPA’s shared costs. 25. WorldCom also asks the Commission to clarify that if number portability implementation causes public safety concerns that must be addressed on a technical or operational level, any LNPA charges related to resolving those public safety concerns also should be billed as shared costs. 98 We held in the First Report and Order that, as a general matter, any long- term number portability must not "result in unreasonable degradation in service quality or network reliability when implemented," 99 and recognized that consumers "rely on the public switched telephone network for their livelihood, health and safety." 100 In the Third Report and Order, we adopted the tentative definition of shared costs as "costs incurred by the industry as a whole, such as those incurred by third- party administrator to build, operate, and maintain the databases needed to provide number portability." 101 As we have already established a definition of "shared costs" that commenters to the Third Report and Order found to be (Continued from previous page) 92 Id. at § 208. 93 WorldCom Petition at 10. 94 Third Report and Order, 13 FCC Rcd at 11725, para. 38. 95 Id. at 11759- 61, paras. 113- 117. 96 Id. at 11745, para. 87. 97 Cost Classification Order, 13 FCC Rcd at 24500, para. 10. 98 WorldCom Petition at 10. 99 First Report and Order, 11 FCC Rcd at 8378, para. 48. 100 Id. at 8382, para. 55. 101 Third Report and Order, 13 FCC Rcd at 11738- 11739, para. 69. 15 Federal Communications Commission FCC 02- 16 16 workable, we decline to expand on that definition in the abstract. 102 26. In the Third Report and Order, we reserved the right to audit each LNPA's costs. 103 PCIA asserts that the Commission should clarify which of the regional database administrator's costs are recoverable and should implement a procedural mechanism for affected entities to review and comment on the administrator's annual budget. 104 In opposition, AT& T comments that such procedure would add a new layer of administrative complexity for the Commission, introduce a new source of delays, and increase the costs of both the LNPAs and the carriers. 105 NeuStar asserts that it was awarded the number portability regional contracts through a vigorously competitive selection process designed to ensure the lowest possible prices in the industry, which renders additional Commission oversight of its budget unnecessary. 106 NeuStar also believes that public disclosure of its budget would unfairly harm it in competitive bidding for any future third party contracts. 107 NeuStar states that it has committed to make its fees available for audits pursuant to existing number portability administration contracts. 108 AT& T also notes that the Second Report and Order instructed carriers that they could pursue complaints to NANC or the Commission if the LNPAs are not meeting Commission requirements. 109 27. We agree with AT& T that adding an additional audit requirement would add administrative complexity and cost without a commensurate benefit. As AT& T noted, the Commission stated in the Second Report and Order that the LLCs "provide immediate oversight and management of the local number portability administrators." 110 The record does not support PCIA's contention that additional provisions for public comment on NeuStar's annual budget are necessary, especially because the specifics of NeuStar's budget have been agreed upon in the context of contractual negotiations, and because carriers may request an audit of NeuStar's budget pursuant to LNPA contracts. We therefore deny PCIA's request to implement a procedural mechanism to review and comment on the administrator’s annual budget. 102 See WorldCom Petition at 10. 103 Third Report and Order, 13 FCC Rcd at 11763- 64, para. 121. 104 PCIA Petition at 3- 5; see also UTC Comments at 5. 105 AT& T Opposition at 14- 15. 106 Lockheed Martin IMS Comments at 4. 107 Id. 108 Id. 109 AT& T Opposition at 14- 15. 110 Second Report and Order, 12 FCC Rcd at 12345, para. 114. 16 Federal Communications Commission FCC 02- 16 17 2. Revenues to be Included in the Allocator a. Background 28. In the Third Report and Order, we decided that the number portability regional database administrator would allocate the costs of each number portability regional database among all telecommunications carriers in proportion to each carrier's intrastate, interstate, and international end- user telecommunications revenues attributable to that region. 111 Our decision to use the end-user revenue allocator was based on our conclusion that it meets the two- prong competitive neutrality test in that: (1) the allocator will not give one service provider an appreciable, incremental cost advantage when competing for a subscriber; and (2) allocating shared costs in proportion to end- user revenues will prevent the shared costs from disparately affecting the ability of carriers to earn a normal return. 112 29. MCI challenges the end- user revenue allocator adopted by the Commission. MCI asserts that the end- user revenue allocator is over- inclusive because it captures services that are completely unrelated to number portability, that neither use numbering resources nor impose any costs on the Number Portability Administration Center (NPAC) system, and receive no benefits from local competition or local number portability. 113 MCI requests that we exclude from the regional database cost allocator revenues from services such as private lines, virtual private networks, toll free, and outbound international services. 114 b. Discussion 30. We affirm our decision in the Third Report and Order that the number portability regional database administrator will allocate the costs of each number portability regional database among all telecommunications carriers in proportion to each carrier's intrastate, interstate, and international end- user telecommunications revenues attributable to that region. We disagree with MCI that the end- user revenue allocator is over- inclusive. Section 251( e)( 2) requires that number portability costs "be borne by all telecommunications carriers on a competitively neutral basis as determined by the Commission." 115 The statutory language mandates that the costs of number portability be shared by all telecommunications carriers in a competitively neutral manner, and does not limit the application of the shared costs to telecommunications services that use numbering resources. The Commission determined that the end- user revenues allocator is competitively neutral in part because it spreads the costs of number portability among all telecommunications carriers rather than imposing the costs 111 Third Report and Order, 13 FCC Rcd at 11754- 55 and 11759, paras. 105 and 113. 112 Id. at 11755- 56, paras. 106- 07. 113 MCI Petition at 3. 114 Id. at 1- 6. 115 47 U. S. C. § 251( e)( 2). 17 Federal Communications Commission FCC 02- 16 18 disproportionately on any particular class or classes of carriers. 116 31. In this light, the Commission determined that the end- user revenue allocator would not give one service provider any appreciable, incremental cost advantage when competing for a subscriber. 117 The Commission reasoned that because the allocator would distribute the shared costs of the regional databases to each carrier in proportion to that carrier's end- user revenues, carriers would incur approximately the same increase in shared costs to win a specific customer. 118 32. Moreover, the Commission concluded that allocating shared costs in proportion to end-user revenues would prevent the shared costs from disparately affecting the ability of carriers to earn a normal return. 119 The Commission reasoned that because allocations of the shared costs would vary directly with end- user revenues, a carrier’s share of the regional database costs would increase in proportion to its customer base. 120 Thus, no carrier's portion of the shared costs would be excessive in relation to its expected revenues, and its allocated share would only increase as it increases its revenue stream. 121 33. MCI argues that administrative efficiency is not a valid reason for adopting an allocator that imposes cost recovery obligations on carriers where there is no relationship between the service -- number portability -- and the services from which the carrier realizes revenues. 122 We disagree. As discussed above, Congress mandated that the Commission establish a competitively neutral mechanism for the recovery of number portability costs. 123 In seeking to establish a revenue allocator, the Commission not only sought one that satisfied this 116 Third Report and Order, 13 FCC Rcd at 11755- 56, paras. 106- 107. 117 Id. at 11755, para. 106. 118 The Commission provided the following example as explanation: if one of two LECs wins a third LEC's subscriber, whichever of the two LECs who wins the subscriber will win the end- user revenue that subscriber generates. This will increase the winning LEC’s allocated portion of the shared costs. Because the subscriber is likely to use approximately the same amount of local service regardless of which of the two competing LECs provides service to the subscriber, the incremental shared cost one of the two LECs would experience if it had won the subscriber would be about the same as the incremental shared cost the other would experience if it won the subscriber. This increase would also approximately equal the decrease in the shared costs the third carrier would experience, having lost the subscriber. These amounts may not be exactly the same because each of the three carriers may have different rates and may not collect exactly the same revenue from that subscriber. The Commission reasoned that any difference would not be significant enough to create an appreciable, incremental cost disadvantage. Id. 119 Id. at 11755- 56, para. 107. 120 Id. 121 Id. 122 MCI Petition at 4. 123 47 U. S. C. § 251( e)( 2). 18 Federal Communications Commission FCC 02- 16 19 Congressional mandate, but one that would be relatively simple for telecommunications carriers to apply. In this light, the Commission adopted the end- user telecommunications revenue allocator for three reasons. First, because it met the Congressional competitive neutrality mandate. 124 Second, because it would be administratively efficient for telecommunications carriers to apply because they already track their sales to end users for billing purposes. 125 And, third, because telecommunication carriers are familiar with the end- user revenues allocator from its use for universal service support contributions. 126 34. We agree with Bell Atlantic that if we begin excluding revenues from the allocation process, other carriers will likely seek to exclude revenues from other services, resulting in little change in allocation, but a great deal of extra bookkeeping. 127 We also believe that allowing carriers to exclude revenues associated with particular services would result in unnecessary administrative work for not only the telecommunications carriers, but also for the LNPA. Reducing the bookkeeping and reporting burdens on the telecommunications industry is one of the goals of the Commission's recent Streamlined Contributor Reporting Requirements Order. 128 We continue to believe that the application of the end- user revenues allocator fulfills our congressional mandate of ensuring that the costs of number portability are shared on a competitively neutral basis by all telecommunications carriers. Thus, we affirm our end- user revenues allocator and deny MCI's request for reconsideration. 3. National and Multi- Regional Carriers a. Background 35. In the Third Report and Order, we determined that the costs of the number portability regional databases should be allocated among all telecommunications carriers operating in each of the seven number portability regions in proportion to each carrier's end- user revenues as determined by the end- user revenues collected by all telecommunications carriers in that 124 Third Report and Order, 13 FCC at 11755, para. 106. 125 Id. at 11765, para. 107. 126 Id. Since that time, we have modified our rules for contributions to the Telecommunications Relay Services (TRS) and North American Numbering Plan (NANP) so that the contributions are now based on end- user telecommunications revenues. See 1998 Biennial Regulatory Review -- Streamlined Contributor Reporting Requirements Associated with Administration of Telecommunications Relay Services, North American Numbering Plan, Local Number Portability, and Universal Service Support Mechanisms, CC Docket No. 98- 171, Report and Order, 14 FCC Rcd 16602, 16630- 35, paras. 59- 70 (1999) (Streamlined Contributor Reporting Requirements Order). 127 Bell Atlantic Response at 3- 4. 128 One of the goals of the Streamlined Contribution Reporting Requirement Order is to reduce carriers' and service providers' burdens by combining the reporting requirements of the TRS Fund, federal universal support mechanisms, NANP, and local number portability administration into one consolidated form, the Telecommunications Reporting Worksheet. See Streamlined Contributor Reporting Requirements Order, 14 FCC Rcd at 16603, para. 1. 19 Federal Communications Commission FCC 02- 16 20 region. 129 To facilitate the cost allocation of the regional databases, the local number portability administrator for each regional database may collect end- user revenue information for all telecommunications carriers once each year. 130 36. Commenters argue that compliance with section 52.32( a)( 2) of our rules will require national and multi- regional carriers to change the manner in which they record revenues. 131 WorldCom requests that the Commission allow national and multi- regional carriers to report total end- user revenues, and then divide these figures among the seven regional databases. 132 MCI suggests that the Commission permit carriers to attribute end- user revenues on a pro- rata or other reasonable basis, rather than being required to develop new revenue attribution systems only for number portability. 133 In response, NeuStar notes that it is engaged in discussions with the LLC for each region on the very issues raised by MCI and WorldCom. 134 NeuStar argues that it would be premature for the Commission to address these issues at this time. 135 Moreover, in separately filed petitions for waiver, Williams Communications, Inc. (Williams) and AMSC Subsidiary Corporation (AMSC) request waiver of section 52.32 of our rules on similar grounds. 136 b. Discussion 37. We recognize the inherent difficulties some national and multi- regional carriers will experience in attempting to determine end- user revenue by regional database area. We agree with WorldCom that the use of an estimate can reduce an otherwise onerous data collection paperwork burden. 137 We also agree with MCI that requiring national and multi- regional carriers 129 Third Report and Order, 13 FCC Rcd at 11761, para. 116. 130 Id. See 47 C. F. R. § 52.32( a)( 2). We note that NeuStar, the database administrator for all seven regions, requested this information from all telecommunications carriers through FCC Form 487, the LNP 1998 Worksheet. FCC Form 499- A replaced FCC Form 487 in July 1999 and is now used to collect this information. See Streamlined Contributor Reporting Requirements Order, 14 FCC Rcd 16602. 131 WorldCom Petition at 8- 9; MCI Petition at 8- 9; MCI Reply at 2 n. 4. 132 WorldCom Petition at 8. 133 MCI Petition at 8- 9; MCI Reply at 2 n. 4. 134 Lockheed Comments at 2- 3, 5. NeuStar also notes that each local number portability region has an established limited liability company (LLC), which has existing contracts with the LNPA to provide local number portability database services. Id. at 1 n. 2. 135 Id. at 2- 3. 136 See Williams Communications Petition for Expedited Waiver (filed Mar. 29, 1999) (Williams Petition) and AMSC Subsidiary Corporation Waiver Request (filed Apr. 13, 1999) (AMSC Waiver). 137 See WorldCom Petition at 8. 20 Federal Communications Commission FCC 02- 16 21 to develop region- specific attribution systems for all of its end- user services may be costly and administratively burdensome. 138 The use of a proxy based on the percentage of subscribers a carrier serves in a particular region is a reasonable means of reaching an estimate and of reducing the administrative burden on the carriers. Therefore, we will allow national and multi-region carriers to use a proxy to allocate, on a good faith basis, their end- user revenues to the appropriate regional LNP administrator. Those carriers that submit, with their LNP Worksheet, an attestation certifying that they are unable to precisely divide their traffic and resulting end-user revenue among the seven LNPA regions identified in the LNP worksheet will be allowed to divide their end- user revenue among these regions based on the percentage of subscribers served in each region. Carriers may use their billing databases to identify subscriber location. 139 38. We acknowledge that subscriber percentages may not be the only satisfactory proxy for end- user revenue. Accordingly, national and multi- region carriers that cannot make a proxy certification based upon subscriber percentages may request a waiver of section 52.32 of our rules based on other reasonable proxy methods. 39. Neither AMSC nor Williams propose to allocate their revenue based upon number of subscribers served in the regions in which they provide service. AMSC would divide its end-user revenue equally between the LNP regions. 140 Williams proposes to report its revenue derived from services rendered in or between two or more regions, based on a “good- faith estimate” as to which portions of those revenues are derived from each of the seven regions, but it does not explain its proposed methodology. 141 Williams requests a waiver only until such time as the Commission issues rules, guidelines or policies which instruct carriers how to apportion revenue between regions, for long- term number portability cost recovery purposes, which we have now done. AMSC does not limit its waiver request in this fashion, but rather seems to request permission to permanently adopt its alternative allocation system. 40. In evaluating these petitions, we recognize that both AMSC and Williams, in all likelihood, 138 See MCI Petition at 8- 9. 139 See Local Competition and Broadband Reporting, CC Docket No. 99- 301, Report and Order, 15 FCC Rcd 7717, 7745, 7757, paras. 52, 85 (2000). 140 See AMSC Waiver at 1. AMSC requests waiver of section 52.32 on the ground that it operates a mobile satellite service system that provides two- way mobile voice and data through out the United States using five slightly overlapping beams. AMSC states that when a customer is using one of its mobile terminals, AMSC cannot identify which of the five beams the customer is using. Moreover, as beams cover thousands of square miles, AMSC argues that there is no simple or precise way to divide its traffic and end- user revenue between the regions identified in the LNP worksheet. ANSC requests that the Commission allow it to divide its end- user revenue on FCC Form 499- A equally between the LNP regions. 141 See Williams Petition at 2. Williams seeks waiver of section 52.32 on the grounds that it derives a substantial portion of its revenue from services that are provided to large business customers in two or more regions, and that it is not able to assign revenue from many of its customers to a single region. Williams requests that the Commission allow it to report its revenue derived from services rendered in or between two or more regions, based on a good- faith estimate as to which portions of those revenues are derived from each of the seven regions. 21 Federal Communications Commission FCC 02- 16 22 have already begun paying their regional database administrators. Although we find that the particular allocation proxy we permit above is preferable to either of the allocation alternatives set forth in the AMSC or Williams petitions, we are also mindful of the potential administrative costs that may be incurred were we to conclude that the alternatives proposed by petitioners could not be used for those periods for which filings have already been submitted. Therefore, taking into account all these circumstances, we grant both waivers to the limited extent that the alternative revenue allocations have been submitted by AMSC or Williams on or before the release date of this Order. On a going- forward basis, we further conclude that although the proxy we adopt today provides a better allocation method than those in the petitions, we would consider alternative allocation methods that these companies might propose in waiver petitions for prospective periods, based upon their particular circumstances. With respect to future worksheets, therefore, Williams and AMSC may either (1) file an attestation certifying that they are unable to precisely divide their traffic and resulting end- user revenue among the seven LNPA regions identified in the worksheet and accordingly will divide their end- user revenue among these regions based on the percentage of subscribers served in each region, consistent with this Order; or (2) request in a timely manner a waiver to use another appropriate proxy. If petitioners choose the latter alternative, we encourage them to file their waiver requests expeditiously. C. Recovery of Carrier- Specific Costs Directly Related to Providing Number Portability 1. Independent and Rural Incumbent LECs a. Background 41. In the First Reconsideration Order, the Commission determined that carriers outside the 100 largest Metropolitan Statistical Areas (MSAs) would only be required to provide local number portability within six months of a request from a carrier offering competitive local service. 142 In the Third Report and Order, the Commission allowed but did not require incumbent LECs to recover their carrier specific costs directly related to providing number portability through a federally tariffed end- user charge. 143 At that time, the Commission determined that recovery of these costs from end users would not begin until the end users were reasonably able to begin receiving the direct benefits of long- term number portability. 144 The Commission allowed an incumbent LEC to assess the monthly end- user charge only on end users in the 100 largest MSAs, and end users it serves outside the 100 largest metropolitan statistical areas from a number portability- capable switch. 145 Because carriers may make any switch number portability- capable, the Commission determined that this approach would encourage 142 See Telephone Number Portability, CC Docket No. 95- 116, First Memorandum Opinion and Order on Reconsideration, 12 FCC Rcd 7236, 7266, 7298, paras. 48, 107 (1997) (First Reconsideration Order). 143 Third Report and Order, 13 FCC Rcd at 11773- 74, para. 135. 144 Id. at 11776, para. 142. 145 Id. at 11776, para. 143. 22 Federal Communications Commission FCC 02- 16 23 carriers to install number portability and ensure that end users were assessed number portability charges only where they were reasonably likely to benefit from number portability. 146 Petitioners contend that carriers that are not required to be number portability- capable at this time, are, nevertheless, incurring costs associated with number portability. 147 Petitioners argue that the Third Report and Order fails to provide a mechanism for carriers, in this situation, to recover their costs related to number portability. 148 42. Specifically, petitioners request that an alternative recovery mechanism be established for incumbent LECs who are not required to be number portability- capable at this time. 149 Petitioners note that once shared costs are allocated to each telecommunications carrier, that carrier's portion of the shared cost is treated as a "carrier- specific cost" directly related to providing number portability. Under the rules set forth in the Third Report and Order, however, incumbent LECs who are not number portability- capable cannot recover these costs. Petitioners argue that this places small and independent incumbent LECs at a competitive disadvantage. 150 43. Petitioners further argue that the Third Report and Order fails to provide a recovery mechanism for the costs that will be incurred for query services by those incumbent LECs that have no number portability capability. 151 USTA argues that the Commission should allow incumbent LECs without long- term number portability capability to book and recover these costs though the regular accounting and separations process. 152 44. NECA and NTCA both note that because of joint local calling agreements between small incumbent LECs and larger incumbent LECs for the provision of number portability database query services, the larger incumbent LECs will assess smaller incumbent LECs a charge for performing query services. NECA and NTCA further point out that because of these agreements, most of their pool participants, as N- 1 carriers, will incur query service costs whenever any number in an NXX their customers call, has been ported. 153 NTCA further argues 146 Id. 147 See NECA Petition at 1- 4; NTCA Petition at 3; ORTC and TSTCI Petition at 3- 4; see also Petition for Expedited Interim Waiver ( filed March 19, 1999) (NECA Waiver) (NECA, NRTA, NTCA, OPATSCO, and USTA are parties to the interim waiver request). 148 See NECA Petition at 1- 4; NTCA Petition at 3; ORTC and TSTCI Petition at 3- 4; Third Report and Order, 13 FCC Rcd at 11776, para. 143. 149 NECA Petition at 5; NTCA Petition at 5; ORTC and TSTCI Joint Petition at 4. 150 See NECA Petition at 5; NTCA Petition at 5; ORTC and TSTCI Joint Petition at 4. 151 USTA Petition at 5; NECA Petition at 4- 5; NTCA Petition at 5; ORTC and TSTCI Joint Petition at 4; NECA Reply at 3, 5. 152 USTA Petition at 5- 6. 153 NECA Petition at 3- 4; NTCA Petition at 5- 6. 23 Federal Communications Commission FCC 02- 16 24 that since the benefits of number portability accrue to interexchange carriers, the Commission should consider recovery through access charges as long as the mechanism it establishes is competitively neutral. 154 b. Discussion 45. In the Third Report and Order, we required that all shared costs 155 be allocated among all telecommunications carriers based on the requirement of section 251( e)( 2) of the Act that the costs of establishing number portability "shall be borne by all telecommunications carriers on a competitively neutral basis." 156 After distribution, each carrier's portion of shared costs is treated as a carrier- specific cost directly related to providing local number portability. 157 To ensure that there would be sufficient revenues to fund the operation and management of the databases, we concluded that it was necessary to allocate the costs of each regional database among carriers in proportion to each carrier's intrastate, interstate, and international end- user telecommunications revenues attributable to that region. 158 46. NTCA argues that if no alternative recovery mechanism is made available to incumbent LECs outside the 100 largest MSAs, they will be forced to either upgrade their systems and assess charges on their end users, or contribute to the costs of the regional databases with no method of cost recovery. They contend that both options create a "significant expense" for these carriers even though they have not received a request for portability. 159 47. Petitioners further argue that many of the carriers outside the top 100 MSAs face no local competition in the near future, and do not have immediate long- term portability deployment obligations. 160 Petitioners further contend that it would be unfair to begin charging end users when there is no facilities- based local competition and end users receive no direct benefit from number portability. 161 For this reason, petitioners suggest that non- portability 154 NTCA Reply at 3. 155 Shared costs are costs incurred by the industry as a whole, such as those incurred by the third- party administrator to build, operate and maintain the databases needed to provide number portability. See Third Report and Order, 13 FCC Rcd at 11738- 39, para. 69. 156 See Third Report and Order, 13 FCC Rcd at 11759, para. 113 (quoting 47 U. S. C. § 251( e)( 2)). 157 Id. at 11745, para. 87. 158 Id. at 11754, para. 105. 159 NTCA Petition at 4. 160 NTCA points out that "[ u] nder the current cost- recovery rules, the small and rural LECs are forced to either: (1) upgrade their systems and assess charges on their end- users; or (2) contribute to the costs of the regional database with no method of cost- recovery" and no provisions made for compensating affected carriers. Id. 161 See, e. g., NECA Waiver at 3- 4; ORTC and TSTCI Joint Petition at 2- 3. NECA suggests that those customers may be faced with substantial local rate increases as a result of other, unrelated Commission decisions in the areas of access reform, separations reform and universal service. NECA Petition at 4 n. 10. 24 Federal Communications Commission FCC 02- 16 25 capable carriers should be permitted to treat carrier- specific local number portability costs in the same manner that other, similar network costs are currently treated i. e., through normal accounting and separations processes, 162 or allowed to recover the costs through access charges. 163 48. In opposition, both AT& T and MCI urge the Commission to reject proposals which allow incumbent LECs to shift costs to competitors via access charges. 164 AT& T recognizes that petitioners do not explicitly advocate including local number portability costs in access charges, but argues that incumbent LECs should not be allowed to recover such costs through the regular separations process, as this approach would result in increased access charges to IXCs. 165 MCI states that in principle it has no objections to the creation of an alternative cost recovery mechanism for these small and rural incumbent LECs to recover long- term number portability related costs. However, MCI urges the Commission not to allow recovery of query costs from other carriers through access charges. 166 49. In the alternative, petitioners suggest that small and rural incumbent LECs be allowed to pool their costs. 167 NECA specifically urges the Commission to allow these carriers to use a pooling method similar to that allowed for data base query charges associated with calls to "800" and "900" numbers." 168 NECA argues that this type of pooling arrangement would allow carriers to recover their local number portability costs before being local number portability-capable because costs are included in central office expense accounts and are then allocated between jurisdictions on the same basis as central office investment. 169 50. We agree with AT& T that the Third Report and Order does not allow recovery of long-term number portability costs through the normal accounting and separations process. We also note that MCI objects to the recovery of query services costs from other carriers, but not to the creation of some viable alternative recovery mechanism. 51. We believe that competitive neutrality is essential to sustain continued deployment of the long- term number portability service. We have mandated that a carrier may only recover long- term number portability shared costs through a federal tariff. Recovery must, therefore, be 162 NECA Petition at 5, 9; ORTC and TSTCI Joint Petition at 4; USTA Petition at 5- 6. 163 NECA Waiver at 4. 164 AT& T Opposition at 13- 14; MCI Response at 7- 8. 165 AT& T Opposition at 13 n. 31. 166 MCI Response at 7- 8. 167 See NECA Petition at 5; ORTC and TSTCI Joint Petition at 4. 168 NECA Petition at 5. 169 Id. at n. 11. 25 Federal Communications Commission FCC 02- 16 26 sought through a federal recovery process. We agree, however, with the petitioners that certain small carriers who do not currently have long- term number portability- capable switches, but are incurring long- term number portability shared costs and additional query costs as a result of their participation in an EAS calling plan would be financially disadvantaged if they were not allowed recovery of these costs. For this reason, we reconsider the issue of whether non- LNP capable carriers serving areas outside the 100 largest MSAs may recover their eligible number portability costs through the federal mechanisms that are available to other carriers. 52. The information provided in support of the expedited petition for interim waiver shows that a significant number of end users are located in areas adjacent to the 100 largest MSAs and areas where number portability is available. These end users also participate in EAS calling plans through their local service providers and make calls to numbers in extended calling areas that are served by number portability- capable switches. The terminating carriers query these calls in order to determine whether the called party has ported a number. The cost of these queries is passed on to the non- LNP capable LECs as query charges. In this instance, the queries are a direct result of the implementation of number portability in the neighboring area located within the EAS area. We find that the costs the non- LNP capable LECs incur for queries to areas within EAS calling plan areas are costs incurred as a result of the implementation of number portability and are also the costs of doing business within the EAS area. 53. We also find that the non- number portability capable LECs’ customers, in this situation, receive direct benefits from the implementation of number portability in EAS calling plan areas. These customers’ EAS calls are completed by a number portability- capable switch located within the EAS area; even though the non- number portability- capable LECs do not own the number portability- capable switches, the switches are a part of the EAS networks that complete calls from the non- number portability- capable LECs’ customers. The query charges paid by the non- number portability- capable LECs recover the cost of performing the query and a portion of the number portability- capable LECs’ implementation costs. 170 Moreover, these customers would have difficulty completing their calls within the EAS calling plan area without access to the number portability- capable switch. The benefits of number portability, therefore, extend to customers other than those of the number portability- capable LEC. We conclude, therefore, that a non- LNP capable LEC that participates in an EAS calling plan with any one of the 100 largest MSAs or with an adjacent number portability- capable LEC, may recover its costs for payment of query charges as eligible number portability costs through an end- user charge as set out in the Third Report and Order and explained in the Cost Classification Order. 171 We will not create a special category of cost recovery for small and rural carriers, and remain consistent with our decision in this regard as stated in the Third Report and Order. 54. We also allow these non- number portability- capable LECs to recover their LNPA charges through an end- user charge. Their customers also benefit from the creation and 170 Cost Classification Order, 13 FCC Rcd at 24511, paras. 40, 41 (Allocation of joint costs should be based on the capacity set aside to handle default, prearranged, and database queries). 171 Third Report and Order, 13 FCC Rcd at 11773, para. 135; Cost Classification Order, 13 FCC Rcd at 24498- 99, para. 6. 26 Federal Communications Commission FCC 02- 16 27 maintenance of the number portability administration database. Accurate location routing number (LRN) information promotes call completion for the customers of the non- number portability- capable LECs in EAS calling plan areas. These carriers are also distinct from competing local exchange carriers (CLECs) and the other unregulated telecommunications companies that pay LNPA charges because they lack an alternative method of recovering these costs and cannot include the cost in the price of another service. Although we are clarifying the language of the Third Report and Order, we are compelled, however, to affirm our prior decision that number portability costs should not be recovered through access charges. 172 We decline to allow the non- number portability- capable LECs to recover their eligible number portability costs in access charges as requested by the NECA because recovery through access charges would not be competitively neutral as stated in the Third Report and Order. 173 55. Our decision on this issue emphasizes the statement in the Third Report and Order that incumbent LECs are to recover carrier- specific number portability costs through end- user charges only when and where the end users are reasonably able to begin receiving the direct benefits of number portability. Those receiving direct benefits of number portability include the customers of small and rural incumbent LECs located within EAS calling plan areas that encompass portions of one of the 100 largest MSAs and/ or other areas served by number portability- capable switches. 174 We also elaborate on the statement in the Third Report and Order that incumbent LECs may also assess a monthly charge only on end users it serves in the 100 largest MSAs, and end users it serves outside the 100 largest MSAs from a number portability- capable switch, by adding that the small and rural incumbent LECs that provide service through EAS calling plan agreements and are located adjacent to number portability-capable areas may assess a monthly charge on their end users. As parties to the EAS calling plan agreements, these carriers provide service to customers within their study areas in a number portability environment and calls from these customers are completed by number portability-capable switches located in the neighboring LEC’s service area of the EAS calling plan area. The customers in the small and rural LECs’ study areas, therefore, are connected to the number portability network through the EAS calling plans, and receive the direct benefit of completing their calls using the number portability- capable switches. The small and rural incumbent LECs are, thus, authorized to recover their query and LNPA costs that were incurred after our decision mandating LNP for a period of five- years using the same method that other incumbent LECs use to recover their costs. 56. Our decision also complies with the congressional mandate that number portability cost recovery mechanisms must be competitively neutral. Allowing the small and rural carriers located within EAS calling plan areas to recover their number portability costs prior to becoming number portability- capable does not give these carriers an incremental cost advantage over other 172 Third Report and Order, 13 FCC Rcd at 11773, para. 135. 173 Id. at 11725- 26, 11773, paras. 39, 135. Cf. NECA Ex Parte Letter from Regina McNeil, NECA Senior Attorney, to Magalie Roman Salas, Secretary, FCC (filed Mar. 24, 2000) at 4; NECA Waiver at 4. 174 Third Report and Order at 11776, paras. 142- 143. 27 Federal Communications Commission FCC 02- 16 28 carriers when competing for customers. 175 Once the carriers add number portability to their networks, they can recover the costs of establishing number portability, for a five- year period, through the same end- user charge through which they recover the query and LNPA costs. The small and rural carriers’ costs will vary directly in proportion to the number of customers each carrier serves and the number of EAS calls their customers make to number portability- capable exchanges of adjoining LECs. In addition, our decision does not in any way affect competing service providers and, therefore, does not disparately affect the ability of the competing service providers to earn a normal return. 176 57. NECA also suggests that a Fifth Amendment "takings" issue is presented by the Third Report and Order. 177 NECA notes that the Third Report and Order requires carriers "to contribute to the support of number portability in adjacent regions” while “at the same time specifically forbids carriers from recovering those costs in their rates." 178 We disagree with NECA; this issue was addressed, and rejected, in the Third Report and Order. 179 58. We consider the issue of whether the small and rural LECs should be allowed to recover costs that may be incurred to implement number portability functionality through a second end-user charge after or while these LECs recover the query and LNPA costs through an initial end-user charge. In order to comply with Congress’ competitive neutrality requirement, we conclude that these carriers must be allowed an opportunity to recover all eligible LNP costs through the five- year federal cost recovery mechanism established in the Third Report and Order. We considered the costs associated with equipping a network with number portability functionality in the context of the tariff investigations and recognized in the Third Report and Order that the most significant portion of a carrier’s cost will be incurred for this purpose. 180 To limit these companies to recovering only their query and LNPA costs may give other carriers an appreciable cost advantage over them or significantly impact their ability to earn a normal return. Incumbent LECs may recover query and LNPA costs through an end- user charge collected over one five- year period and may recover the costs of equipping their networks with number portability functions through an end- user charge collected over a different five- year period. 181 These five- year periods may run either consecutively or concurrently, in whole or in part, as may be determined by the Commission. 175 Id. at 11731- 32, para. 53. 176 Id. at 11731- 32, 11774, paras. 53, 136. 177 NECA Petition at 4 n. 8. 178 Id. 179 Third Report and Order, 13 FCC Rcd at 11779, para. 149. 180 See id., 13 FCC Rcd at 11774, para. 137. 181 This depends on when a carrier that participates in an EAS calling arrangement begins to equip its network with number portability functionality. 28 Federal Communications Commission FCC 02- 16 29 2. Recovery of Number Portability Costs from Other Carriers a. Background 59. In the Third Report and Order the Commission determined that incumbent LECs may assess a monthly number portability end- user charge on resellers of the incumbent LEC's local service, as well as on purchasers of switching ports as unbundled network elements under section 251 of the Communications Act. 182 We reasoned that allowing the incumbent LECs to assess this charge was competitively neutral "because the reseller and the purchaser of the switch port will incur the [end- user] charge in lieu of costs they would otherwise incur in obtaining long- term number portability functionality elsewhere." 183 We noted that the unregulated reseller and purchaser of the switch port may recover in any lawful manner the charges the incumbent LEC assesses on them. 184 60. A number of petitioners seek clarification or reconsideration of issues relating to the manner in which incumbent LECs recover their number portability costs from other carriers. MCI seeks clarification that any costs associated with a number portability charge to carriers purchasing unbundled switching be calculated based on Total Element Long Run Incremental Cost (TELRIC), and that costs for number portability charged to resellers be based on avoided costs. 185 MCI claims that, to comport with the costing requirements of the 1996 Act, charges assessed on carriers purchasing unbundled switching or resale must be cost- based, citing section 251( c)( 3) and (4). 186 Comcast seeks clarification that incumbent LECs may not recover their number portability costs through interconnection charges or add- ons to interconnection charges to their carrier "customers," and that incumbent LECs may not seek to recover carrier- specific costs through interconnection charges to other carriers where no number portability functionality is provided. 187 PCIA requests that the Commission affirm that paging providers are co- carriers for purposes of cost recovery, not end- users, and, for this reason, should not be assessed end- user fees. 188 PCIA asserts that the Commission has held in past orders that all CMRS providers, including paging providers, are to be treated by LECs as co- carriers. 189 182 Third Report and Order, 13 FCC Rcd at 11778, para. 146. 183 Id. 184 Id. 185 MCI Petition at 6- 7. 186 Id. at 6. 187 Comcast Petition at 2- 6. 188 PCIA Petition at 5- 7. 189 PCIA Petition at 6- 7. 29 Federal Communications Commission FCC 02- 16 30 b. Discussion 61. In our view, MCI’s request for clarification addresses prices for unbundled network elements and resale, and not the mechanism established by the Commission in the Third Report and Order by which incumbent LECs may recover their costs of implementing long- term number portability. 190 The statutory language relating to number portability costs differs from the sections governing the pricing of unbundled network elements and resale rates. Section 251( e)( 2), which the Commission applied in the Third Report and Order to create the LNP end user charge, provides that “[ t] he cost of establishing telecommunications numbering administration arrangements and number portability shall be borne by all telecommunications carriers on a competitively neutral basis as determined by the Commission.” By contrast, the Commission has found that section 251( c)( 3) requires incumbent LECs to price unbundled network elements under the TELRIC pricing methodology, 191 and that section 251( c)( 4) requires that resale rates be set at the retail rate minus any avoided costs. 192 Although the Commission decided in the Third Report and Order to permit carriers to impose end user surcharges on purchasers of unbundled switching ports and resellers, it did not find that these surcharges thereby became an element of the UNE or resale rates. 193 Our decision to permit the imposition of end user surcharges on purchasers of unbundled switching ports and resellers was, instead, based upon the conclusion that, although incumbent LECs will provide the underlying number portability functionality in such situations, they will no longer have a direct relationship with the end users. 194 Instead, the purchaser of the unbundled switch port and the reseller receive all their number portability functionality from the incumbent through these arrangements. 195 190 See generally Third Report and Order, 13 FCC Rcd at 11731- 32, 11738- 41, 11773- 79, paras. 53, 68- 77, 135- 47. 191 See 47 C. F. R. §§ 51.501- 09. Although the U. S. Court of Appeals for the Eighth Circuit stayed the Commission’s pricing rules in 1996, Iowa Utils Bd. v. FCC, 120 F. 3d 753, 800, 804, 805- 06 (8 th Cir. 1997), the Supreme Court restored the Commission’s pricing authority and remanded to the Eighth Circuit for consideration of the challenged rules. AT& T v. Iowa Utils. Bd., 525 U. S. 366, 385 (1999). On remand from the Supreme Court, the Eighth Circuit concluded that while TELRIC is an acceptable method for determining costs, certain specific rules contained within the Commission’s pricing rules were contrary to congressional intent. Iowa Utils. Bd. v. FCC, 219 F. 3d 744 (8 th Cir. 2000), cert. granted sub nom., Verizon Communications v. FCC, 531 U. S. 1124 (2001). The Eighth Circuit has stayed the issuance of its mandate, Iowa Utils Bd. v. FCC, No. 96- 3321, et al. (8 th Cir. Sept. 25, 2000), pending appeal before the Supreme Court, which has granted certiorari in the case. Verizon Communications v. FCC, 531 U. S. 1124 (2001). Accordingly, the Commission’s rules continue in effect at this time. 192 In Iowa Utilities Bd. v. FCC, see n. 191, supra, the Eighth Circuit concluded that section 252( d)( 3) of the Communications Act requires costs that are actually avoided, not those costs that could be avoided, be excluded from wholesale rates offered to resellers. Iowa Utilities Bd. v. FCC, 219 F. 3d at 755. 193 Id., 13 FCC Rcd at 11778, para. 146. 194 Id. at 11778, para. 146. 195 Id. The unregulated reseller and purchaser of the unbundled switch port can, in turn, recover in any lawful manner the charges the incumbent assesses on them. 30 Federal Communications Commission FCC 02- 16 31 Moreover, we believe that application of the TELRIC standard would be inappropriate because the LNP end- user charge is intended to recover the short- term costs of number portability, 196 whereas TELRIC is designed to recover long- run costs. Accordingly, we conclude that the LNP end- user charges for number portability associated with unbundled switching ports and resellers are not part of the rate elements for these services. We therefore deny MCI’s request that the LNP costs associated with unbundled switch ports and resale be based on the statutory standards set forth in sections 251( c)( 3) and 251( c)( 4), respectively, and reaffirm that they are governed by the competitively neutral standard set forth in section 251( e)( 2). 62. We agree with Comcast that incumbent LECs may not recover any number portability costs through interconnection charges or add- ons to interconnection charges to their carrier "customers," nor may they recover carrier- specific costs through interconnection charges to other carriers where no number portability functionality is provided. 197 To the extent necessary, we clarify our decision accordingly. The Third Report and Order allows incumbent LECs to assess number portability charges in limited circumstances and only where the incumbent LEC provides number portability functionality: (1) on resellers of the incumbent LEC's local service; (2) on purchasers of switching ports as unbundled network elements under section 251; and, (3) on other carriers for whom the LEC provides query services. 198 Allowing the incumbent LECs to assess an end- user charge on resellers and on purchasers of switching ports as unbundled network elements is competitively neutral because the reseller and the purchaser of the switch port will incur the charge in lieu of costs they would otherwise incur in obtaining long- term number portability functionality elsewhere. 199 63. In considering the issue of recovery of costs through charges on other carriers, Comcast asks that we recognize that we have not fully addressed how wireless providers and other non-incumbent LECs will recover their carrier- specific costs. 200 Comcast argues that, for technical reasons, wireless providers cannot perform queries for themselves or for other carriers and, accordingly, must recover their carrier- specific costs through end- user charges. Comcast further asserts that the inability of wireless providers to recover any of their costs from other telecommunications providers means that the current cost recovery scheme creates a cost advantage for incumbent LECs, who can recover their costs both through query charges and end- 196 See Third Report and Order, 13 FCC Rcd at 11777, para. 144. This cost recovery method limits the ability of carriers to impose costs on other carriers. Indeed, a cost structure for LNP may not be competitively neutral if it permits a carrier to shift a disproportionate share of costs onto another carrier. See para. 11, supra. 197 Comcast Petition at 3. 198 Third Report and Order, 13 FCC Rcd at 11778- 79, paras. 146- 147; see also Bell Atlantic Response at 3 (pointing out that the Third Report and Order allows incumbent LECs to 1) pass the end user charge to resellers and unbundled network element purchasers, and 2) charge other carriers for number portability query service). 199 Third Report and Order, 13 FCC Rcd at 11778, para. 146. 200 Comcast Reply at 3. 31 Federal Communications Commission FCC 02- 16 32 user charges. 201 64. We disagree. First, we note that the Commission has fully addressed the issue of how other carriers, including non- incumbent LECs and wireless carriers, may recover their costs of number portability. Specifically, we held that carriers not subject to rate regulation -- such as competitive LECs, CMRS providers and non- dominant IXCs -- may recover their carrier-specific costs directly related to providing number portability in any lawful manner consistent with their obligations under the Communications Act. 202 Second, we disagree that CMRS carriers are at a competitive disadvantage because they cannot perform, and charge other carriers for, query services. In filing number portability tariffs, incumbent LECs must allocate their carrier- specific costs incurred only to provide portability functions for end- users to that service and costs incurred specifically to provide only one particular type of query service to that service. 203 Remaining eligible costs should be allocated on the basis of the capacity requirements for each type of service. 204 Requiring carriers to allocate their costs in this manner ensures that incumbent LECs will not use their query service charges to other carriers for the recovery of the costs of providing number portability service to end- users, thereby achieving a lower end- user charge. 205 Moreover, although we recognized in the Third Report and Order that some small LECs and CMRS providers may find that their smaller customer bases might make adding number portability capability in their own networks uneconomical, we also recognized that such carriers have other options for achieving economies of scale similar to those of the larger incumbent LECs. For example, such carriers could arrange for another carrier to perform queries for them, enter into cooperative agreements with other small carriers, or install number portability in their own networks and use excess number portability capacity to provide query services to other carriers. 206 Thus, we affirm our conclusion that our competitive neutrality 201 Id. at 3- 4. 202 Third Report and Order, 13 FCC Rcd at 11774, para. 136. 203 Id., 13 FCC Rcd at 11778- 79, para. 147; Cost Classification Order, 13 FCC Rcd at 24511, para. 40. 204 Cost Classification Order, 13 FCC Rcd at 24511, para. 41. 205 We distinguish, however, the situation where an incumbent LEC incurs costs for query services that other carriers or third parties provide. As with other carrier- specific costs directly related to providing number portability to end users, incumbent LECs may recover such costs with a five- year monthly charge on the end- users it serves from a number portability capable switch. See Third Report and Order, 13 FCC Rcd at 11776- 77, para. 143. If an incumbent LEC in such a situation does not have a number portability- capable switch, it should keep track of the query costs it incurs from other carriers or third parties. The incumbent LEC may begin recovering those costs from its end users when it begins to serve them from a number portability- capable switch. In the case of incumbent LECs serving carriers in EAS, these carriers may recover their query costs and LNP administration charges through an end- user charge as discussed in Section III. C. 1 of this of this order for a limited period of five years from the date of the first end- user charge. Any costs the incumbent LEC incurs subsequently for implementation of a number portability network may also be recovered for a limited five- year period in accordance with section. These five- year periods may run consecutively or concurrently. Incumbent LECs may recover for each type of LNP cost during only one five- year period. 206 Id. at 11775, para. 138. 32 Federal Communications Commission FCC 02- 16 33 standard is met if we leave unregulated those carriers not subject to rate regulation. 207 We, therefore, decline to establish a federal recovery mechanism for these carriers. 65. Moreover, we clarify that CMRS providers and paging providers are co- carriers with incumbent LECs for the purpose of number portability cost recovery, and should not be assessed end- user charges. 208 In the recent investigation of the number portability tariff filings of Ameritech, GTE, and SBC, the Commission found unlawful Ameritech's imposition of number portability surcharges on CMRS providers' Type 1 DID/ DOD Trunks. 209 In making that decision, the Commission reasoned that, as in the context of access charges, CMRS providers and paging providers are carriers, not end users, for purposes of number portability. 210 Our number portability rules specify that monthly number portability surcharges may be assessed only on end users, not carriers. 211 We also agree with Arch's assertion that incumbent LECs may not impose a monthly end- user charge on all Type 1 interconnections by analogizing such connections to a PBX- type service, on which LECs may impose monthly surcharges. 212 As we stated in Bell Atlantic Cellular, "it is clear that PBX service is quite different than that of [radio common carrier] interconnections." 213 The most notable difference is that a PBX trunk connects an end- user premise and a LEC switch, while a Type 1 connection links the LEC to the Mobile Telephone Switching Office (MTSO), which is not an end- user premise. 214 We thus agree with PCIA and Arch that, because CMRS providers and paging companies are co- carriers and not end- users, they should not be assessed an end- user charge by LECs. Moreover, we conclude that an interpretation that our orders and rules governing local number portability permit incumbent LECs to impose an end- user charge on all Type 1 interconnections is unreasonable. We find that 207 Id. at 11774, para. 136. 208 Pursuant to our rules, incumbent LECs may "assess each end user it serves . . . one monthly number- portability charge per line . . . ." 47 C. F. R. § 52.33( a)( 1)( i). 209 See Long- Term Number Portability Tariff Filings of Ameritech, et al., CC Docket No. 99- 35, Memorandum Opinion and Order, 14 FCC Rcd 11883, 11933, para. 109 (1999) (LNP Investigation Order). In addition to discussing this issue in their Comments in that proceeding, Arch and PCIA filed a Petition for Reconsideration of the LNP Designation Order requesting clarification that CMRS carriers are co- carriers, not end users, and may not be assessed monthly surcharges. Arch asserted that its local exchange provider, Ameritech, was billing Arch a "Service Provider Number Portability Monthly Charge" on all of Arch's Type I Wireless Interconnection trunks. See Petition for Partial Reconsideration of Order Designating Issues for Investigation (filed Mar. 26, 1999) (Arch Petition); Long-Term Telephone Number Portability Tariff Filings of Ameritech, et al., CC Docket No. 99- 35, Order Designating Issues for Investigation (LNP Designation Order), 14 FCC Rcd 3367 (1999). 210 LNP Investigation Order, 14 FCC Rcd at 11934, paras. 110- 111. 211 47 C. F. R. § 52.33( a)( 1)( i). 212 Arch Petition at 11. 213 Bell Atlantic Telephone Companies, Transmittal No. 418, Order, 6 FCC Rcd 4794, 4795, para. 10 (1991) (Bell Atlantic Cellular). 214 Id. 33 Federal Communications Commission FCC 02- 16 34 our orders clearly prohibit carriers from imposing their end- user query costs on other carriers, except in very limited circumstances where the incumbent LEC also provides the number portability functionality. 3. Recovery of Number Portability Costs from Feature Group A Access Lines a. Background 66. Feature Group A is a local exchange service that is used to provide interstate access service to IXCs and end users. 215 Feature Group A access provides IXCs with dedicated transmission facilities from the IXC's Point of Presence (POP) to a LEC central office. 216 Within Local Access and Transport Areas (LATAs) in which an IXC takes Feature Group A service, a caller reaches the IXC's POP by dialing a Feature Group A ten- digit number, plus an authorization code and the ten digit number the customer wishes to reach. 217 The caller must pay any local toll charges incurred to reach the IXC's POP, in addition to the IXC's toll charges; when the LEC terminates a call through a Feature Group A arrangement, however, the LEC generally will carry the call anywhere within the receiving service area without assessing additional toll charges. 218 Feature Group A service is also used by non- carrier entities as part of an interstate Foreign Exchange (FX) or Off Network Access Line (ONAL) arrangement. 219 In this type of arrangement, the Feature Group A customer obtains from a LEC a combination of local exchange service and dedicated interoffice transport facilities linking the LEC dial tone office to an IXC POP. 220 The IXC POP is linked to the out- of- state Feature Group A customer by an interstate private line, which enables end users in the dial tone office area to reach out- of-state Feature Group A customers without incurring interstate toll charges. 221 The dial tone office processes the call originating in its service area as a local call and delivers it to the dedicated trunked transport and, ultimately, to the IXC's interstate private line for transmission to the Feature Group A customer. 222 67. Several petitioners request that the Commission revise or clarify the Commission's new 215 See AT& T Communications Tariff F. C. C. Nos. 9 and 11, CC Docket No. 94- 120, Memorandum Opinion and Order, 10 FCC Rcd 4288, 4289- 91, paras. 2- 6 (1995). 216 Id. at 4289- 90, paras. 2- 3. 217 See id. at 4290, para. 4. 218 Id. 219 Id. at para. 5. 220 Id. 221 Id. 222 Id. 34 Federal Communications Commission FCC 02- 16 35 rule, found at section 52.33( a)( 1)( ii), to allow incumbent LECs to assess a surcharge on Feature Group A lines. 223 The petitioners assert that because Feature Group A lines are used as a form of access lines and the telephone numbers associated with them are portable, the Commission should clarify or find upon reconsideration that carriers may charge Feature Group A end users and carriers an LNP monthly end- user surcharge. 224 The petitioners assert that such surcharge should be allowed, notwithstanding that the service is obtained through an access tariff and the Commission specifically prohibits the recovery of number portability costs through access charges. 225 In opposition, parties assert that a surcharge should not be assessed purchasers of Feature Group A access, because number portability costs can be recovered from other carriers only through query charges, not through surcharges. 226 Parties opposed to the request assert that the request is an attempt to circumvent the Commission's decision that carriers should not be required to pay other carriers' LNP costs. 227 Additionally, some commenters assert that carriers are already paying access fees for Feature Group A service and should not also be charged an end- user surcharge. 228 b. Discussion 68. In the Third Report and Order, we determined that incumbent LECs may assess end- user surcharges on resellers as well as purchasers of switching ports as unbundled network elements, 229 based on our conclusion that incumbent LECs will provide the underlying number portability functionality in such situations, although they will no longer have a direct relationship with the end- users. 230 We did not allow incumbent LECs to assess surcharges on carriers that purchase only their local loops as unbundled network elements, however, because the unbundled local loop does not contain the number portability functionality. 231 Accordingly, the purchaser of the unbundled loop still will be responsible for providing such functionality and, thus, incurring elsewhere the corresponding cost. 232 223 Ameritech Petition at 13; Bell Atlantic Petition at 1; SBC Reply at 1- 2. 224 See Ameritech Petition at 13. 225 Id. 226 See AT& T Opposition at 12- 13; Ameritech Reply at 2. 227 MCI Response at 8; Vanguard Opposition at 4- 5. 228 See MCI Response at 8. 229 Third Report and Order, 13 FCC Rcd at 11778, para. 146. 230 Id. 231 Id. 232 Id. 35 Federal Communications Commission FCC 02- 16 36 69. We clarify, however, that carriers who offer Feature Group A access lines may assess a monthly surcharge on such lines. We conclude that this clarification is consistent with our decision in the Third Report and Order that incumbent LECs may impose a monthly surcharge on resellers as well as on purchasers of switching ports as unbundled network elements. We will amend section 52.33( a)( 1)( ii) of our rules to reflect this clarification. We agree with the parties' assertion that the LEC providing the Feature Group A line also provides the underlying number portability functionality, and should be allowed to recover its number portability costs through a surcharge on the Feature Group A line. 233 Our conclusion is based on the determination that the Feature Group A line, whether providing access to the end- user's private network or a connection between an end office and the IXC's POP, connects to the end office switch and uses that switch in the same manner that an end- user line does. 234 Because a Feature Group A line connects to the end office switch, uses the switch in the same manner as an ordinary end- user line, and uses a ten- digit telephone number that is portable, 235 the incumbent LEC is responsible for providing the underlying number portability functionality and may thus recover its permissible incremental costs through a monthly surcharge on the Feature Group A line. 70. We disagree with AT& T's assertion that when Feature Group A lines are used to connect a LEC end office and an IXC's POP, allowing a LEC to assess a number portability surcharge on the IXC would result in double billing. 236 Incumbent LECs may only assess one end- user charge per line. 237 Additionally, as discussed below, incumbent LECs may not recover their number portability costs through increased access charges. Therefore, allowing incumbent LECs to assess one end- user surcharge on Feature Group A lines does not result in double billing. 71. We disagree with Vanguard's assertion that we are "reclassifying" carriers who purchase Feature Group A lines as end users in order to allow incumbent LECs to assess end- user surcharges. 238 We merely find that such carriers are in a situation similar to end users and incumbent LECs may recover their number portability costs in such a situation. As discussed