[Federal Register: June 24, 2004 (Volume 69, Number 121)]
[Rules and Regulations]
[Page 35258-35270]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24jn04-14]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 61
[CC Docket No. 96-262; FCC 04-110]
Access Charge Reform; Reform of Access Charges Imposed by
Competitive Local Exchange Carriers
AGENCY: Federal Communications Commission.
ACTION: Final rule; petitions for reconsideration and clarification.
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SUMMARY: By this document, the Commission denies a number of petitions
for reconsideration of the tariff rules governing the charges for
interstate switched access services provided by competitive local
exchange carriers (LECs). Although the Commission denies the petitions
for reconsideration, it addresses a number of issues raised in
petitions for clarification and amends the rules accordingly. The
Commission also concludes that it is not necessary to immediately cap
competitive LEC access rates for toll-free traffic at the rate of the
competing incumbent LEC. With this decision, the Commission retains the
benchmark regime governing interstate switched access services provided
by competitive LECs and clarifies application of the regime in several
respects.
DATES: Effective July 26, 2004.
ADDRESSES: All filings must be sent to the Commission's Secretary,
Marlene H. Dortch, Office of the Secretary, Federal Communications
Commission, Room TW-A325, 445 Twelfth Street SW., Washington, DC 20554.
In addition to filing comments with the Secretary, a copy of any
comments on the information collections contained herein must be
submitted to Judith Boley Herman, Federal Communications Commission,
Room 1-C804, 445 Twelfth Street SW., Washington, DC 20554, or via the
Internet to Judith-B.Herman@fcc.gov, and to Kim A. Johnson, OMB Desk
Officer, Room 10236 NEOB, 725 17th Street NW., Washington, DC 20503, or
via the Internet to Kim_A._Johnson@omb.eop.gov.
FOR FURTHER INFORMATION CONTACT: Victoria Schlesinger, Wireline
Competition Bureau, Pricing Policy Division, (202) 418-7353.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Eighth
Report and Order and Fifth Order on Reconsideration in CC Docket No.
96-262, adopted on May 13, 2004, and released on May 18, 2004. The
complete text of this Order is available for public inspection Monday
through Thursday from 8 a.m. to 4:30 p.m. and Friday from 8 a.m. to
11:30 a.m. in the Commission's Consumer and Governmental Affairs
Bureau, Reference Information Center, Room CY-A257, 445 Twelfth Street,
SW., Washington, DC 20554. The complete text is available also on the
Commission's Internet site at http://www.fcc.gov. Alternative formats
are available to persons with disabilities by contacting Brian Millin
at (202) 418-7426 or TTY (202) 418-7365. The complete text of the
decision may be purchased from the Commission's duplicating contractor,
Best Copying and Printing, Inc., Room CY-B402, 445 Twelfth Street, SW.,
Washington, DC 20554, telephone 202-863-2893, facsimile 202-863-2898,
or e-mail at http://www.bcpiweb.com.
Synopsis of Order on Reconsideration and Report and Order
1. In 2001, the Commission adopted new rules governing the charges
for
[[Page 35259]]
interstate switched access services provided by competitive LECs,
Access Charge Reform, Reform of Access Charges Imposed by Competitive
Local Exchange Carriers, CC Docket No. 96-262, Seventh Report and
Order, 66 FR 27892, May 21, 2001, and Further Notice of Proposed
Rulemaking, 66 FR 27927, May 21, 2001 (CLEC Access Reform Order). These
rules established a regime whereby tariffed competitive LEC access
rates cannot exceed a specified benchmark rate, 47 CFR 61.26(b). Under
this regime, competitive LECs may not generally tariff interstate
access charges above the competing incumbent LEC rate, 47 CFR 61.26(c).
2. In order to avoid too great a disruption for competitive
carriers, however, the Commission established a three-year transition
period. During the transition, competitive LECs are permitted to charge
rates higher than those charged by the competing incumbent LEC, but
their tariffed rates cannot exceed specific benchmark rates set by the
Commission and contained in Sec. 61.26(c) of the Commission's rules,
47 CFR 61.26(c). Under Sec. 61.26(d) of the Commission's rules, 47 CFR
61.26(d), these transition rates are not available to competitive LECs
in new markets where they began serving end-users after the effective
date of the CLEC Access Reform Order. This three-year transition period
ends on June 21, 2004, 47 CFR 61.26(c). The Commission also adopted a
rural exemption, pursuant to which rural competitive LECs meeting
certain criteria are permitted to tariff rates up to the highest rate
band in the NECA tariff, 47 CFR 61.26(a) and (e).
3. With this decision, the Commission disposes of several petitions
for reconsideration of the tariff rules adopted in the CLEC Access
Reform Order. Although the Commission denies the petitions for
reconsideration, it addresses several issues raised in petitions for
clarification of the current rules. First, the Commission clarifies
that a competitive LEC is entitled to charge the full benchmark rate if
it provides an IXC with access to the competitive LEC's own end-users.
It finds that the rate a competitive LEC charges for access components
when it is not serving the end-user should be no higher than the rate
charged by the competing incumbent LEC for the same functions. Second,
the Commission provides guidance on the meaning of the appropriate
switching rate used in determining the ``competing ILEC rate'' after
the three-year transition period to the competing incumbent LEC rate
ends. Third, the Commission clarifies that any pre-subscribed
interexchange carrier charge (PICC) imposed by a competitive LEC
qualifying for the rural exemption may be assessed in addition to the
rural benchmark rate if and only to the extent that the competing
incumbent LEC charges a PICC. Fourth, it identifies permissible ways in
which competitive LECs may structure their rates if they serve a
geographic area with more than one incumbent LEC. Fifth, the Commission
clarifies the source of its authority to impose IXC interconnection
obligations under section 201(a) and it denies a pending petition for
waiver of the CLEC new markets rule. Finally, the Commission declines
to set a separate access rate for originating toll-free (8YY) traffic
and allows it to be governed by the same declining benchmark as other
competitive LEC interstate access traffic.
Accounting for Services Still Provided by the Incumbent LEC
4. Section 61.26(b) of the Commission's rules, 47 CFR 61.26(b),
provides that a competitive LEC's tariffed rate for ``its interstate
switched exchange access services'' cannot exceed the benchmark. Under
Sec. 61.26(a)(3), 47 CFR 61.26(a)(3) the term interstate switched
exchange access services ``shall include the functional equivalent of
the ILEC interstate exchange access services typically associated with
the following rate elements: Carrier common line (originating); carrier
common line (terminating); local end office switching; interconnection
charge; information surcharge; tandem switched transport termination
(fixed); tandem switched transport facility (per mile); tandem
switching.'' The rate elements identified in Sec. 61.26(a)(3), reflect
those services needed to originate or terminate a call to a LEC's end-
user. When a competitive LEC originates or terminates traffic to its
own end-users, it is providing the functional equivalent of those
services, even if the call is routed from the competitive LEC to the
IXC through an incumbent LEC tandem.
5. The Commission is aware of a number of disputes regarding the
appropriate compensation to be paid by IXCs when a competitive LEC
handles interexchange traffic that is not originated or terminated by
the competitive LEC's own end-users. Because neither the CLEC Access
Reform Order nor other applicable precedent addressed the appropriate
rate in this scenario, the Commission now clarifies that the benchmark
rate established in the CLEC Access Reform Order is available only when
a competitive LEC provides an IXC with access to the competitive LEC's
own end-users. The Commission explains that a competitive LEC that
provides access to its own end-users is providing the functional
equivalent of the services associated with the rate elements listed in
Sec. 61.26(a)(3) and therefore is entitled to the full benchmark rate.
6. Because of the many disputes related to the rates charged by
competitive LECs when they act as intermediate carriers, the Commission
concludes that it is necessary to adopt a new rule to address these
situations. The Commission amends Sec. 61.26 of the Commission's
rules, 47 CFR 61.26, on a prospective basis, to specify that the rate
that a competitive LEC charges for access components when it is not
serving the end-user should be no higher than the rate charged by the
competing incumbent LEC for the same functions. The Commission explains
that regulation of these rates is necessary because an IXC may have no
choice but to accept traffic from an intermediate competitive LEC
chosen by the originating or terminating carrier and that it is
necessary to constrain the ability of competitive LECs to exercise this
monopoly power.
7. Neither the CLEC Access Reform Order nor other applicable
precedent addressed the appropriate rate a competitive LEC may charge
when it is not serving the end-user. Further, the Commission
established only a single rate for each year of the transition period
and did not state that this rate was available only if a competitive
LEC served the end-user on a particular call. Therefore, prior to this
decision, the Commission finds that it would not have been unreasonable
for a competitive LEC to charge the tariffed benchmark rate for traffic
to or from end-users of other carriers, provided that the carrier
serving the end-user did not also charge the IXC and provided that the
competitive LEC's charges were otherwise in compliance with and
supported by its tariff.
8. Under the existing rules, tariffed competitive LEC access rates
must decrease over time until they reach the rate charged by the
competing incumbent LEC, subject to some exceptions. In order to avoid
litigation and uncertainty, the Commission clarifies the meaning of the
competing incumbent LEC rate used to determine the benchmark. The
Commission finds that the competing incumbent LEC switching rate is the
end office switching rate when a competitive LEC originates or
terminates calls to end-users and the tandem switching rate when a
competitive LEC passes calls between two other carriers. Competitive
LECs also have, and always had, the ability to charge for common
transport when they provide it, including when
[[Page 35260]]
they subtend an incumbent LEC tandem switch. Competitive LECs that
impose such charges should calculate the rate in a manner that
reasonably approximates the competing incumbent LEC rate.
The CLEC New Markets Rule
9. Under Sec. 61.26(d) of the Commission's rules (the CLEC new
markets rule), 47 CFR 61.26(d), competitive LECs may not tariff a rate
higher than the competing incumbent LEC rate in metropolitan
statistical areas (MSAs) where the competitive LEC initiated service
after the effective date of the CLEC Access Reform Order. The
Commission declines to modify the rule as requested in petitions for
reconsideration. In adopting the benchmark system for competitive LEC
access charges, the Commission intended to limit the subsidy flowing
from IXCs and the long distance market to competitive LECs and their
end-users, and to do so with a bright line mechanism that is objective
and easy to enforce. Modifying the rule as the competitive LECs suggest
could substantially increase the amount by which IXCs subsidize
competitors in the local-service market and would create ongoing
incentives for economically inefficient entry in new markets.
10. The Commission also denies claims that it violated the
Administrative Procedure Act because it did not provide notice that it
was considering a different rule for new markets and did not provide
any opportunity for parties to comment on it. The Commission
specifically sought comment on the competing incumbent LEC rate as a
benchmark in an earlier Further Notice of Proposed Rulemaking in CC
Docket No. 96-262, Access Charge Reform, CC Docket No. 96-262, Further
Notice of Proposed Rulemaking, 64 FR 51280 (1999). Thus, the Commission
concludes that it should have been apparent to any interested party
that the Commission was contemplating a benchmark at the competing
incumbent LEC rate for at least some markets. That the Commission
ultimately decided to adopt a transition mechanism for some parties
does not in any way render the notice provided to parties defective.
11. Moreover, the Commission clarifies that the CLEC new markets
rule does not apply if the competitive LEC would otherwise qualify for
the rural exemption contained in Sec. 61.26(e) of the Commission's
rules. The rural exemption rate is a substitute for the incumbent LEC
rate that would otherwise be used as the benchmark rate. The Commission
agrees that this is the correct interpretation of the Commission's CLEC
Access Reform Order, and amends Sec. 61.26(e) accordingly to read
``Notwithstanding paragraphs (b) through (d) of this section * * *.''
The Rural Exemption
12. Under Sec. 61.26(f) of the Commission's rules (the rural
exemption), 47 CFR 61.26(f), qualifying competitive LECs competing with
non-rural incumbent LECs may tariff rates up to the rate prescribed in
the NECA access tariff, assuming the highest rate band for local
switching and the transport interconnection charge minus the NECA
tariff's carrier common line (CCL) charge if the competing incumbent
LEC is subject to certain access rates. The Commission retains the
rural exemption and declines requests to broaden its applicability
based on the record. In adopting the rural exemption, the Commission
intended to keep the exemption as narrow as possible to minimize the
strain it placed on the interexchange market. The Commission also
emphasized the need for administrative simplicity, and noted that it
would apply only to a small number of carriers serving a small portion
of the nation's access lines.
13. The Commission also declines to revise the rural exemption to
allow competitive LECs to charge the CCL portion of the NECA rate.
Excluding the NECA tariff's CCL charge when the competitive LEC
competes with a CALLS incumbent LEC promotes parity between the
competing carriers. Because both the CCL charge and transport
interconnection charge have since been eliminated, the Commission
revises Sec. 61.26(e) of the rules to remove any references to the CCL
and the transport interconnection charge.
14. The Commission further clarifies that a PICC may be imposed by
a rural competitive LEC in addition to the rural exemption rate if and
only to the extent that the competing incumbent LEC assesses a PICC,
and revises Sec. 61.26(e) of the Commission's rules accordingly. As
the Commission found in the CLEC Access Reform Order, the ability of
rural competitive LECs to assess a multi-line business PICC obviated,
in part, the need for a CCL charge because the PICC provided a
potential revenue source.
Structure of the Benchmark
15. The Commission also rejects a specific proposal to modify the
benchmark scheme to allow competitive LECs to charge higher access
rates in lower density markets. In creating exemptions to the general
benchmark scheme, the Commission emphasized the need for administrative
simplicity and narrow application. The proposal considered would not
meet these goals. Moreover, the proposed proxies for density would be
ill-suited to the job, and additional arguments made in support of this
proposal rely on the assumption that there has been some regulated
determination of competitive LEC costs, which is not the case.
Multiple Incumbent LECs in a Service Area
16. The Commission further specifies what access rate applies when
more than one incumbent LEC operates within a competitive LEC's service
area. It states that competitive LECs serving an area with multiple
incumbent LECs can qualify for the safe harbor by charging different
rates for access to particular end-users based on the access rate that
would have been charged by the incumbent LEC in whose service area that
particular end-user resides. The record suggests, however, that some
competitive LECs may prefer to charge IXCs a blended access rate when
more than one incumbent LEC operates within a competitive LEC's service
area. The Commission confirms that one alternative for competitive LECs
is to negotiate a blended access rate with the IXCs. If a competitive
LEC charges a blended access rate other than a negotiated rate,
however, the Commission finds that such a rate must reasonably
approximate the rate that an IXC would have paid to the competing
incumbent LECs for access to the competitive LEC's customers.
Billing Name Information
17. The Commission also declines to condition the IXCs' section
201(a) duty to accept competitive LEC access services on the provision
of billing name and address (BNA) information that the IXC deems
sufficient. The Commission considered the issue of LEC obligations to
provide BNA information in the context of an extensive rulemaking
proceeding, and determined that, in some cases, LECs are required to
provide billing information under tariff. Moreover, competitive LECs
persuasively argue that this proposal would encourage IXCs to find
inadequacies with competitive LECs' BNA information in order to avoid
accepting (and paying for) access service. This could create a loophole
in the 201(a) obligation that the Commission imposed and would thereby
again endanger the ubiquity of the network, a consideration that
substantially animated the CLEC Access Reform Order.
[[Page 35261]]
Other Matters
18. The Commission also declines to addresses several other
specific requests contained in petitions for reconsideration and
clarification. For instance, the Commission declines to address whether
past refusals of AT&T to continue providing service without authority
from the Commission violate section 214 and section 203(c) of the Act.
The Commission finds that whether the prior actions of AT&T violated
the Act depends on fact-specific findings that are more appropriately
handled in the context of an enforcement proceeding. Similarly, the
Commission finds that any claims of violations of section 202(a) or
section 203(c) should be decided on a case-by-case basis because such
claims depend on fact-specific circumstances. Moreover, the Commission
rejects a request to impose a negotiation or arbitration requirement on
IXCs and permit competitive LECs to tariff rates above the benchmark if
cost-justified. The Commission observes that this request assumes
incorrectly that the Commission adopted a cost-based approach to
competitive LEC access charges in its CLEC Access Reform Order.
19. Further, in the CLEC Access Reform Order, the Commission
determined that section 201(a) of the Act places certain limitations on
an IXC's ability to refuse competitive LEC access service. In
determining these limitations, the Commission focused on the first
clause of section 201(a), which requires common carriers to furnish
communication service upon reasonable request therefor. In this
discussion, the Commission also referenced the second clause of section
201(a), which empowers the Commission, after a hearing and
determination of the public interest, to order common carriers to
establish physical connections with other carriers, and to establish
through routes and charges for certain communications. The Commission
did not, however, explicitly rely on this portion of section 201(a) in
imposing limitations on an IXC's ability to refuse service. The
Commission now finds it necessary to clarify its intent to rely on the
second clause of section 201(a) to support such limitations.
Accordingly, the Commission finds that an IXC's refusal to accept
competitive LEC access service at rates at or below the benchmark would
run afoul of the second clause of section 201(a).
20. Finally, the Commission denies a Petition for Temporary Waiver
of Commission rule in 47 CFR 61.26(d), the CLEC new markets rule, as
applied to certain MSAs that Z-Tel was capable of serving as of the
petition date. The Commission denies the petition because the arguments
made by Z-Tel and other parties in support of a waiver are identical to
those considered and rejected in this decision. The Commission also
denies the petition for the separate reason that Z-Tel failed to
demonstrate any special circumstances necessary to support a waiver of
the Commission's rules.
Eighth Report and Order
21. In the Further Notice of Proposed Rulemaking issued with the
CLEC Access Reform Order, the Commission raised various questions
relating to toll-free (8YY) traffic originating on competitive LEC
networks. The Commission concludes that it is not necessary immediately
to cap competitive LEC access rates for 8YY traffic at the rate of the
competing incumbent LEC, and allows it to be governed by the same
declining benchmark rate to which other competitive LEC access traffic
is subject. The Commission is not convinced that the revenue-sharing
arrangements that competitive LECs may have entered into with 8YY
generators necessarily affect the level of traffic that these
customers, typically universities and hotels, generate. The IXCs have
failed to demonstrate that commission payments to 8YY generators such
as universities or hotels translate effectively into incentives for the
individuals who actually use those facilities to place excessive or
fraudulent 8YY calls. Moreover, even if the Commission were persuaded
that there was an incentive for 8YY traffic generation, the fact that
competitive LEC access rates are now subject to the declining benchmark
should eliminate any harm to IXCs from this traffic.
22. The Commission also rejects AT&T's request that we adopt a
separate competitive LEC access rate for outbound 8YY traffic carried
over dedicated local access facilities. The Commission finds that the
record does not support adoption of a separate lower benchmark rate
based on the incumbent LEC local switching rate. To the extent that
AT&T is concerned that it is paying two carriers for originating a
call, the Commission addresses that concern by clarifying that the rate
that a competitive LEC charges for access components when it is not
serving the end-user should be no higher than the rate charged by the
competing incumbent LEC for the same functions. When there are no
intermediate carriers between the competitive LEC and the end-user, the
fact that the end-user may provide some portion of the facilities would
seem to be irrelevant.
Supplemental Final Regulatory Flexibility Analysis
23. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the 1999 Further Notice of Proposed Rulemaking (FNPRM)
in CC Docket No. 96-262, 64 FR 51280, September 22, 1999. The
Commission sought written public comment on the proposals in that
FNPRM, including comment on the IRFA. A Final Regulatory Flexibility
analysis was provided in the Sixth Report and Order, 65 FR 38684, June
21, 2000, as well as the Seventh Report and Order, 66 FR 27892, May 21,
2001, and Further Notice of Proposed Rulemaking, 66 FR 27927, May 21,
2001 (CLEC Access Reform Order). This present Supplemental Final
Regulatory Flexibility Act Analysis conforms to the RFA. To the extent
that any statement in this Supplemental FRFA is perceived as creating
ambiguity with respect to Commission rules or statements made in the
sections of these orders preceding the Supplemental FRFA, the rules and
statement set forth in those preceding sections are controlling.
Need for, and Objectives of, the Rules
24. In the CLEC Access Reform Order, the Commission revised its
tariff rules more closely to align tariffed competitive LEC access
rates with those of incumbent LECs. Specifically, the Commission
limited to a declining benchmark the amounts that competitive LECs may
tariff for interstate access services; restricted the interstate access
rates of competitive LECs entering new markets to the rates of the
competing incumbent local exchange carrier (incumbent LEC); and
established a rural exemption permitting qualifying carriers to charge
rates above the benchmark for their interstate access services. In
adopting these rules, the Commission sought to ensure, by the least
intrusive means possible, that competitive LEC access charges are just
and reasonable. The Commission also sought to reduce existing
regulatory arbitrage opportunities, spur efficient local competition,
and avoid disrupting the development of competition in the local
telecommunications market.
25. With this order, the Commission disposes of seven petitions for
reconsideration or clarification of these rules, and a related waiver
request. Specifically, the Commission rejects each of the
reconsideration requests and related request for waiver, but makes
[[Page 35262]]
several clarifications. In response to an issue raise by Qwest in a
petition for clarification or, in the alternative, reconsideration, the
Commission clarifies that the benchmark rate is available only when a
competitive LEC provides an IXC with access to the competitive LEC's
own end-users. The Commission finds that the rate that a competitive
LEC charges for access components when it is not serving the end-user
should be no higher than the rate charged by the competing incumbent
LEC for the same functions, and we amend the current rules in
accordance with this finding. The Commission also clarifies that the
competing incumbent LEC rate is the end office switching rate when a
competitive LEC originates or terminates calls to end-users and the
tandem switching rate when a competitive LEC passes calls between two
other carriers. The Commission concludes that the regulation of these
rates is necessary for all the same reasons the Commission identified
in the CLEC Access Reform Order.
26. The Commission also responds to a request by the Rural
Independent Competitive Alliance (RICA) to clarify whether PICCs may be
tariffed in addition to the rural exemption rate specified in Sec.
61.26(e) of the Commission's rules and whether PICCs may be tariffed
when the competing incumbent LEC does not have a PICC. In this order,
the Commission clarifies that any PICC imposed by a competitive LEC
qualifying for the rural exemption may be assessed in addition to the
rural benchmark rate if and only to the extent that the competing
incumbent LEC charges a PICC. In the CLEC Access Reform Order, the
Commission found that the ability of rural competitive LECs to assess a
multi-line business PICC obviated, in part, the need for a CCL charge
because the PICC provided a potential revenue source. This
clarification will ensure that rural competitive LECs are able to
assess a PICC on IXCs as intended by the Commission, but if and only to
the extent that the competing incumbent LEC charges a PICC. Further,
this clarification is necessary to more closely align tariffed
competitive LEC access rates with those of incumbent LECs.
27. In a separate petition for clarification, U.S. TelePacific asks
the Commission to clarify and establish a simple methodology by which
the benchmark rate will be set where a competitive LEC service area
includes territory served by more than a single incumbent LEC. In this
order, the Commission confirms that competitive LECs serving an area
with multiple incumbent LECs can qualify for the safe harbor by
charging different rates for access to particular end-users based on
the access rate that would have been charged by the incumbent LEC in
whose service area that particular end-user resides. As an alternative
method, the Commission will permit a competitive LEC to charge an IXC a
blended access rate only if that rate reasonably approximates the rate
that an IXC would have paid to the competing incumbent LECs for access
to the competitive LEC's customers. By permitting an alternative
methodology based on a blended rate, the Commission seeks to ensure
that the competitive LEC access rates are just and reasonable, and, at
the same time, to minimize the burdens associated with establishing
several different rates within a competitive LEC's service area.
Legal Basis
28. These orders are adopted pursuant to sections 1-5, 201-205,
214, 218-220, 254, 303(r), 403, 405, 502 and 503 of the Communications
Act of 1934, as amended, 47 U.S.C. 151-155, 201-205, 214, 218-220, 254,
303(r), 403, 405, 502 and 503.
Description and Estimate of the Number of Small Entities to Which the
Rules Will Apply
29. The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that may be
affected by the rules adopted herein. The RFA generally defines the
term ``small entity'' as having the same meaning as the terms ``small
business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small business concern'' under the Small Business
Act. A small business concern is one which: (1) Is independently owned
and operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the Small Business
Administration (SBA).
30. In this section, we further describe and estimate the number of
small entity licensees and regulatees that may also be indirectly
affected by rules adopted pursuant to this Order. The most reliable
source of information regarding the total numbers of certain common
carrier and related providers nationwide, as well as the number of
commercial wireless entities, appears to be the data that the
Commission publishes in its Trends in Telephone Service report. The SBA
has developed small business size standards for wireline and wireless
small businesses within the three commercial census categories of Wired
Telecommunications Carriers, Paging, and Cellular and Other Wireless
Telecommunications. Under these categories, a business is small if it
has 1,500 or fewer employees. Below, using the above size standards and
others, we discuss the total estimated numbers of small businesses that
might be affected by our actions.
31. We have included small incumbent LECs in this present RFA
analysis. As noted above, a ``small business'' under the RFA is one
that, inter alia, meets the pertinent small business size standard
(e.g., a wired telecommunications carrier having 1,500 or fewer
employees), and ``is not dominant in its field of operation.'' The
SBA's Office of Advocacy contends that, for RFA purposes, small
incumbent LECs are not dominant in their field of operation because any
such dominance is not ``national'' in scope. We have therefore included
small incumbent LECs in this RFA analysis, although we emphasize that
this RFA action has no effect on Commission analyses and determinations
in other, non-RFA contexts.
32. Wired Telecommunications Carriers. The SBA has developed a
small business size standard for Wired Telecommunications Carriers,
which consists of all such companies having 1,500 or fewer employees.
According to Census Bureau data for 1997, there were 2,225 firms in
this category, total, that operated for the entire year. Of this total,
2,201 firms had employment of 999 or fewer employees, and an additional
24 firms had employment of 1,000 employees or more. Thus, under this
size standard, the majority of firms can be considered small.
33. Incumbent Local Exchange Carriers (LECs). Neither the
Commission nor the SBA has developed a size standard for small
businesses specifically applicable to incumbent local exchange
services. The closest applicable size standard under SBA rules is for
Wired Telecommunications Carriers. Under that size standard, such a
business is small if it has 1,500 or fewer employees. According to
Commission data, 1,337 carriers reported that they were engaged in the
provision of local exchange services. Of these 1,337 carriers, an
estimated 1,032 have 1,500 or fewer employees and 305 have more than
1,500 employees. Consequently, the Commission estimates that most
providers of incumbent local exchange service are small businesses that
may be affected by the rules and policies adopted herein.
34. Competitive Local Exchange Carriers (CLECs), Competitive Access
[[Page 35263]]
Providers (CAPs), and ``Other Local Exchange Carriers.'' Neither the
Commission nor the SBA has developed a size standard for small
businesses specifically applicable to providers of competitive exchange
services or to competitive access providers or to ``Other Local
Exchange Carriers,'' all of which are discrete categories under which
TRS data are collected. The closest applicable size standard under SBA
rules is for Wired Telecommunications Carriers. Under that size
standard, such a business is small if it has 1,500 or fewer employees.
According to Commission data, 609 companies reported that they were
engaged in the provision of either competitive access provider services
or competitive local exchange carrier services. Of these 609 companies,
an estimated 458 have 1,500 or fewer employees and 151 have more than
1,500 employees. In addition, 35 carriers reported that they were
``Other Local Service Providers.'' Of the 35 ``Other Local Service
Providers,'' an estimated 34 have 1,500 or fewer employees and one has
more than 1,500 employees. Consequently, the Commission estimates that
most providers of competitive local exchange service, competitive
access providers, and ``Other Local Exchange Carriers'' are small
entities that may be affected by the rules and policies adopted herein.
35. Interexchange Carriers (IXCs). Neither the Commission nor the
SBA has developed a size standard for small businesses specifically
applicable to interexchange services. The closest applicable size
standard under SBA rules is for Wired Telecommunications Carriers.
Under that size standard, such a business is small if it has 1,500 or
fewer employees. According to Commission data, 261 companies reported
that their primary telecommunications service activity was the
provision of interexchange services. Of these 261 companies, an
estimated 223 have 1,500 or fewer employees and 38 have more than 1,500
employees. Consequently, the Commission estimates that the majority of
interexchange service providers are small entities that may be affected
by the rules and policies adopted herein.
36. Operator Service Providers (OSPs). Neither the Commission nor
the SBA has developed a size standard for small businesses specifically
applicable to operator service providers. The closest applicable size
standard under SBA rules is for Wired Telecommunications Carriers.
Under that size standard, such a business is small if it has 1,500 or
fewer employees. According to Commission data, 23 companies reported
that they were engaged in the provision of operator services. Of these
23 companies, an estimated 22 have 1,500 or fewer employees and one has
more than 1,500 employees. Consequently, the Commission estimates that
the majority of operator service providers are small entities that may
be affected by the rules and policies adopted herein.
37. Payphone Service Providers (PSPs). Neither the Commission nor
the SBA has developed a size standard for small businesses specifically
applicable to payphone service providers. The closest applicable size
standard under SBA rules is for Wired Telecommunications Carriers.
Under that size standard, such a business is small if it has 1,500 or
fewer employees. According to Commission data, 761 companies reported
that they were engaged in the provision of payphone services. Of these
761 companies, an estimated 757 have 1,500 or fewer employees and four
have more than 1,500 employees. Consequently, the Commission estimates
that the majority of payphone service providers are small entities that
may be affected by the rules and policies adopted herein.
38. Prepaid Calling Card Providers. The SBA has developed a size
standard for a small business within the category of Telecommunications
Resellers. Under that SBA size standard, such a business is small if it
has 1,500 or fewer employees. According to Commission data, 37
companies reported that they were engaged in the provision of prepaid
calling cards. Of these 37 companies, an estimated 36 have 1,500 or
fewer employees and one has more than 1,500 employees. Consequently,
the Commission estimates that the majority of prepaid calling card
providers are small entities that may be affected by the rules and
policies adopted herein.
39. Other Toll Carriers. Neither the Commission nor the SBA has
developed a size standard for small businesses specifically applicable
to ``Other Toll Carriers.'' This category includes toll carriers that
do not fall within the categories of interexchange carriers, operator
service providers, prepaid calling card providers, satellite service
carriers, or toll resellers. The closest applicable size standard under
SBA rules is for Wired Telecommunications Carriers. Under that size
standard, such a business is small if it has 1,500 or fewer employees.
According to Commission's data, 92 companies reported that their
primary telecommunications service activity was the provision of other
toll carriage. Of these 92 companies, an estimated 82 have 1,500 or
fewer employees and ten have more than 1,500 employees. Consequently,
the Commission estimates that most ``Other Toll Carriers'' are small
entities that may be affected by the rules and policies adopted herein.
40. Paging. The SBA has developed a small business size standard
for Paging, which consists of all such firms having 1,500 or fewer
employees. According to Census Bureau data for 1997, in this category
there was a total of 1,320 firms that operated for the entire year. Of
this total, 1,303 firms had employment of 999 or fewer employees, and
an additional seventeen firms had employment of 1,000 employees or
more. Thus, under this size standard, the majority of firms can be
considered small.
41. Cellular and Other Wireless Telecommunications. The SBA has
developed a small business size standard for Cellular and Other
Wireless Telecommunication, which consists of all such firms having
1,500 or fewer employees. According to Census Bureau data for 1997, in
this category there was a total of 977 firms that operated for the
entire year. Of this total, 965 firms had employment of 999 or fewer
employees, and an additional twelve firms had employment of 1,000
employees or more. Thus, under this size standard, the majority of
firms can be considered small.
42. Broadband Personal Communications Service. The broadband
Personal Communications Service (PCS) spectrum is divided into six
frequency blocks designated A through F, and the Commission has held
auctions for each block. The Commission defined ``small entity'' for
Blocks C and F as an entity that has average gross revenues of $40
million or less in the three previous calendar years. For Block F, an
additional classification for ``very small business'' was added and is
defined as an entity that, together with its affiliates, has average
gross revenues of not more than $15 million for the preceding three
calendar years.'' These standards defining ``small entity'' in the
context of broadband PCS auctions have been approved by the SBA. No
small businesses, within the SBA-approved small business size standards
bid successfully for licenses in Blocks A and B. There were 90 winning
bidders that qualified as small entities in the Block C auctions. A
total of 93 small and very small business bidders won approximately 40
percent of the 1,479 licenses for Blocks D, E, and F. On March 23,
1999, the Commission re-
[[Page 35264]]
auctioned 347 C, D, E, and F Block licenses. There were 48 small
business winning bidders. On January 26, 2001, the Commission completed
the auction of 422 C and F Broadband PCS licenses in Auction No. 35. Of
the 35 winning bidders in this auction, 29 qualified as ``small'' or
``very small'' businesses. Based on this information, the Commission
concludes that the number of small broadband PCS licenses will include
the 90 winning C Block bidders, the 93 qualifying bidders in the D, E,
and F Block auctions, the 48 winning bidders in the 1999 re-auction,
and the 29 winning bidders in the 2001 re-auction, for a total of 260
small entity broadband PCS providers, as defined by the SBA small
business size standards and the Commission's auction rules. We note
that, as a general matter, the number of winning bidders that qualify
as small businesses at the close of an auction does not necessarily
represent the number of small businesses currently in service. Also,
the Commission does not generally track subsequent business size
unless, in the context of assignments or transfers, unjust enrichment
issues are implicated.
43. Narrowband Personal Communications Services. To date, two
auctions of narrowband personal communications services (PCS) licenses
have been conducted. For purposes of the two auctions that have already
been held, ``small businesses'' were entities with average gross
revenues for the prior three calendar years of $40 million or less.
Through these auctions, the Commission has awarded a total of 41
licenses, out of which 11 were obtained by small businesses. To ensure
meaningful participation of small business entities in future auctions,
the Commission has adopted a two-tiered small business size standard in
the Narrowband PCS Second Report and Order. A ``small business'' is an
entity that, together with affiliates and controlling interests, has
average gross revenues for the three preceding years of not more than
$40 million. A ``very small business'' is an entity that, together with
affiliates and controlling interests, has average gross revenues for
the three preceding years of not more than $15 million. The SBA has
approved these small business size standards. In the future, the
Commission will auction 459 licenses to serve Metropolitan Trading
Areas (MTAs) and 408 response channel licenses. There is also one
megahertz of narrowband PCS spectrum that has been held in reserve and
that the Commission has not yet decided to release for licensing. The
Commission cannot predict accurately the number of licenses that will
be awarded to small entities in future actions. However, four of the 16
winning bidders in the two previous narrowband PCS auctions were small
businesses, as that term was defined under the Commission's Rules. The
Commission assumes, for purposes of this analysis, that a large portion
of the remaining narrowband PCS licenses will be awarded to small
entities. The Commission also assumes that at least some small
businesses will acquire narrowband PCS licenses by means of the
Commission's partitioning and disaggregation rules.
44. 220 MHz Radio Service--Phase I Licensees. The 220 MHz service
has both Phase I and Phase II licenses. Phase I licensing was conducted
by lotteries in 1992 and 1993. There are approximately 1,515 such non-
nationwide licensees and four nationwide licensees currently authorized
to operate in the 220 MHz band. The Commission has not developed a
small business size standard for small entities specifically applicable
to such incumbent 220 MHz Phase I licensees. To estimate the number of
such licensees that are small businesses, we apply the small business
size standard under the SBA rules applicable to ``Cellular and Other
Wireless Telecommunications'' companies. This standard provides that
such a company is small if it employs no more than 1,500 persons.
According to Census Bureau data for 1997, there were 977 firms in this
category, total, that operated for the entire year. Of this total, 965
firms had employment of 999 or fewer employees, and an additional 12
firms had employment of 1,000 employees or more. If this general ratio
continues in the context of Phase I 220 MHz licensees, the Commission
estimates that nearly all such licensees are small businesses under the
SBA's small business size standard.
45. 200 MHz Radio Service--Phase II Licensees. The 220 MHz service
has both Phase I and Phase II licenses. The Phase II 220 MHz service is
a new service, and is subject to spectrum auctions. In the 220 MHz
Third Report and Order, we adopted a small business size standard for
``small'' and ``very small'' businesses for purposes of determining
their eligibility for special provisions such as bidding credits and
installment payments. This small business size standard indicates that
a ``small business'' is an entity that, together with its affiliates
and controlling principals, has average gross revenues not exceeding
$15 million for the preceding three years. A ``very small business'' is
an entity that, together with its affiliates and controlling
principals, has average gross revenues that do not exceed $3 million
for the preceding three years. The SBA has approved these small
business size standards. Auctions of Phase II licenses commenced on
September 15, 1998, and closed on October 22, 1998. In the first
auction, 908 licenses were auctioned in three different-sized
geographic areas: three nationwide licenses, 30 Regional Economic Area
Group (EAG) Licenses, and 875 Economic Area (EA) Licenses. Of the 908
licenses auctioned, 693 were sold. Thirty-nine small businesses won
licenses in the first 220 MHz auction. The second auction included 225
licenses: 216 EA licenses and 9 EAG licenses. Fourteen companies
claiming small business status won 158 licenses.
46. 800 MHz and 900 MHz Specialized Mobile Radio Licenses. The
Commission awards ``small entity'' and ``very small entity'' bidding
credits in auctions for Specialized Mobile Radio (SMR) geographic area
licenses in the 900 MHz bands to firms that had revenues of no more
than $15 million in each of the three previous calendar years, or that
had revenues of no more than $3 million in each of the previous
calendar years. The SBA has approved these size standards. The
Commission awards ``small entity'' and ``very small entity'' bidding
credits in auctions for Specialized Mobile Radio (SMR) geographic area
licenses in the 800 MHz bands to firms that had revenues of no more
than $40 million in each of the three previous calendar years, or that
had revenues of no more than $15 million in each of the previous
calendar years. These bidding credits apply to SMR providers in the 800
MHz and 900 MHz bands that either hold geographic area licenses or have
obtained extended implementation authorizations. The Commission does
not know how many firms provide 800 MHz or 900 MHz geographic area SMR
service pursuant to extended implementation authorizations, nor how
many of these providers have annual revenues of no more than $15
million. One firm has over $15 million in revenues. The Commission
assumes, for purposes here, that all of the remaining existing extended
implementation authorizations are held by small entities, as that term
is defined by the SBA. The Commission has held auctions for geographic
area licenses in the 800 MHz and 900 MHz SMR bands. There were 60
winning bidders that qualified as small or very small entities in the
900 MHz SMR auctions. Of the 1,020 licenses won in the 900 MHz auction,
bidders qualifying as small or very small entities won 263 licenses. In
[[Page 35265]]
the 800 MHz auction, 38 of the 524 licenses won were won by small and
very small entities. We note that, as a general matter, the number of
winning bidders that qualify as small businesses at the close of an
auction does not necessarily represent the number of small businesses
currently in service. Also, the Commission does not generally track
subsequent business size unless, in the context of assignments or
transfers, unjust enrichment issues are implicated.
47. Private and Common Carrier Paging. In the Paging Third Report
and Order, we developed a small business size standard for ``small
businesses'' and ``very small businesses'' for purposes of determining
their eligibility for special provisions such as bidding credits and
installment payments. A ``small business'' is an entity that, together
with its affiliates and controlling principals, has average gross
revenues not exceeding $15 million for the preceding three years.
Additionally, a ``very small business'' is an entity that, together
with its affiliates and controlling principals, has average gross
revenues that are not more than $3 million for the preceding three
years. The SBA has approved these size standards. An auction of
Metropolitan Economic Area licenses commenced on February 24, 2000, and
closed on March 2, 2000. Of the 985 licenses auctioned, 440 were sold.
Fifty-seven companies claiming small business status won. At present,
there are approximately 24,000 Private-Paging site-specific licenses
and 74,000 Common Carrier Paging licenses. According to the most recent
Trends in Telephone Service, 471 carriers reported that they were
engaged in the provision of either paging and messaging services or
other mobile services. Of those, the Commission estimates that 450 are
small, under the SBA business size standard specifying that firms are
small if they have 1,500 or fewer employees.
48. 700 MHz Guard Band Licensees. In the 700 MHz Guard Band Order,
we adopted a small business size standard for ``small businesses'' and
``very small businesses'' for purposes of determining their eligibility
for special provisions such as bidding credits and installment
payments. A ``small business'' as an entity that, together with its
affiliates and controlling principals, has average gross revenues not
exceeding $15 million for the preceding three years. Additionally, a
``very small business'' is an entity that, together with its affiliates
and controlling principals, has average gross revenues that are not
more than $3 million for the preceding three years. An auction of 52
Major Economic Area (MEA) licenses commenced on September 6, 2000, and
closed on September 21, 2000. Of the 104 licenses auctioned, 96
licenses were sold to nine bidders. Five of these bidders were small
businesses that won a total of 26 licenses. A second auction of 700 MHz
Guard Band licenses commenced on February 13, 2001 and closed on
February 21, 2001. All eight of the licenses auctioned were sold to
three bidders. One of these bidders was a small business that won a
total of two licenses.
49. Rural Radiotelephone Service. The Commission has not adopted a
size standard for small businesses specific to the Rural Radiotelephone
Service. A significant subset of the Rural Radiotelephone Service is
the Basic Exchange Telephone Radio System (BETRS). The Commission uses
the SBA's small business size standard applicable to ``Cellular and
Other Wireless Telecommunications,'' i.e., an entity employing no more
than 1,500 persons. There are approximately 1,000 licensees in the
Rural Radiotelephone Service, and the Commission estimates that there
are 1,000 or fewer small entity licensees in the Rural Radiotelephone
Service that may be affected by the rules and policies adopted herein.
50. Air-Ground Radiotelephone Service. The Commission has not
adopted a small business size standard specific to the Air-Ground
Radiotelephone Service. We will use SBA's small business size standard
applicable to ``Cellular and Other Wireless Telecommunications,'' i.e.,
an entity employing no more than 1,500 persons. There are approximately
100 licensees in the Air-Ground Radiotelephone Service, and we estimate
that almost all of them qualify as small under the SBA small business
size standard.
51. Aviation and Marine Radio Services. Small businesses in the
aviation and marine radio services use a very high frequency (VHF)
marine or aircraft radio and, as appropriate, an emergency position-
indicating radio beacon (and/or radar) or an emergency locator
transmitter. The Commission has not developed a small business size
standard specifically applicable to these small businesses. For
purposes of this analysis, the Commission uses the SBA small business
size standard for the category ``Cellular and Other
Telecommunications,'' which is 1,500 or fewer employees. Most
applicants for recreational licenses are individuals. Approximately
581,000 ship station licensees and 131,000 aircraft station licensees
operate domestically and are not subject to the radio carriage
requirements of any statute or treaty. For purposes of our evaluations
in this analysis, we estimate that there are up to approximately
712,000 licensees that are small businesses (or individuals) under the
SBA standard. In addition, between December 3, 1998 and December 14,
1998, the Commission held an auction of 42 VHF Public Coast licenses in
the 157.1875-157.4500 MHz (ship transmit) and 161.775-162.0125 MHz
(coast transmit) bands. For purposes of the auction, the Commission
defined a ``small'' business as an entity that, together with
controlling interests and affiliates, has average gross revenues for
the preceding three years not to exceed $15 million. In addition, a
``very small'' business is one that, together with controlling
interests and affiliates, has average gross revenues for the preceding
three years not to exceed $3 million. There are approximately 10,672
licensees in the Marine Coast Service, and the Commission estimates
that almost all of them qualify as ``small'' businesses under the above
special small business size standards.
52. Fixed Microwave Services. Fixed microwave services include
common carrier, private operational-fixed, and broadcast auxiliary
radio services. At present, there are approximately 22,015 common
carrier fixed licensees and 61,670 private operational-fixed licensees
and broadcast auxiliary radio licensees in the microwave services. The
Commission has not created a size standard for a small business
specifically with respect to fixed microwave services. For purposes of
this analysis, the Commission uses the SBA small business size standard
for the category ``Cellular and Other Telecommunications,'' which is
1,500 or fewer employees. The Commission does not have data specifying
the number of these licensees that have more than 1,500 employees, and
thus is unable at this time to estimate with greater precision the
number of fixed microwave service licensees that would qualify as small
business concerns under the SBA's small business size standard.
Consequently, the Commission estimates that there are up to 22,015
common carrier fixed licensees and up to 61,670 private operational-
fixed licensees and broadcast auxiliary radio licensees in the
microwave services that may be small and may be affected by the rules
and policies adopted herein. We noted, however, that the common carrier
microwave fixed licensee category includes some large entities.
53. Offshore Radiotelephone Service. This service operates on
several UHF television broadcast channels that are
[[Page 35266]]
not used for television broadcasting in the coastal areas of states
bordering the Gulf of Mexico. There are presently approximately 55
licensees in this service. We are unable to estimate at this time the
number of licensees that would qualify as small under the SBA's small
business size standard for ``Cellular and Other Wireless
Telecommunications'' services. Under that SBA small business size
standard, a business is small if it has 1,500 or fewer employees.
54. Wireless Communications Services. This service can be used for
fixed, mobile, radiolocation, and digital audio broadcasting satellite
uses. The Commission established small business size standards for the
wireless communications services (WCS) auction. A ``small business'' is
an entity with average gross revenues of $40 million for each of the
three preceding years, and a ``very small business'' is an entity with
average gross revenues of $15 million for each of the three preceding
years. The SBA has approved these small business size standards. The
Commission auctioned geographic area licenses in the WCS service. In
the auction, there were seven winning bidders that qualified as ``very
small business'' entities, and one that qualified as a ``small
business'' entity. We conclude that the number of geographic area WCS
licensees affected by this analysis includes these eight entities.
55. 39 GHz Service. The Commission created a special small business
size standard for 39 GHz licenses--an entity that has average gross
revenues of $40 million or less in the three previous calendar years.
An additional size standard for ``very small business'' is: an entity
that, together with affiliates, has average gross revenues of not more
than $15 million for the preceding three calendar years. The SBA has
approved these small business size standards. The auction of the 2,173
39 GHz licenses began on April 12, 2000 and closed on May 8, 2000. The
18 bidders who claimed small business status won 849 licenses.
Consequently, the Commission estimates that 18 or fewer 39 GHz
licensees are small entities that may be affected by the rules and
policies adopted herein.
56. Multipoint Distribution Service, Multichannel Multipoint
Distribution Service, and ITFS. Multichannel Multipoint Distribution
Service (MMDS) systems, often referred to as ``wireless cable,''
transmit video programming to subscribers using the microwave
frequencies of the Multipoint Distribution Service (MDS) and
Instructional Television Fixed Service (ITFS). In connection with the
1996 MDS auction, the Commission established a small business size
standard as an entity that had annual average gross revenues of less
than $40 million in the previous three calendar years. The MDS auctions
resulted in 67 successful bidders obtaining licensing opportunities for
493 Basic Trading Areas (BTAs). Of the 67 auction winners, 61 met the
definition of a small business. MDS also includes licensees of stations
authorized prior to the auction. In addition, the SBA has developed a
small business size standard for Cable and Other Program Distribution,
which includes all such companies generating $12.5 million or less in
annual receipts. According to Census Bureau data for 1997, there were a
total of 1,311 firms in this category, total, that had operated for the
entire year. Of this total, 1,180 firms had annual receipts of under
$10 million and an additional 52 firms had receipts of $10 million or
more but less than $25 million. Consequently, we estimate that the
majority of providers in this service category are small businesses
that may be affected by the rules and policies adopted herein. This SBA
small business size standard also appears applicable to ITFS. There are
presently 2,032 ITFS licensees. All but 100 of these licenses are held
by educational institutions. Educational institutions are included in
this analysis as small entities. Thus, we tentatively conclude that at
least 1,932 licensees are small businesses.
57. Local Multipoint Distribution Service. Local Multipoint
Distribution Service (LMDS) is a fixed broadband point-to-multipoint
microwave service that provides for two-way video telecommunications.
The auction of the 1,030 Local Multipoint Distribution Service (LMDS)
licenses began on February 18, 1998 and closed on March 25, 1998. The
Commission established a small business size standard for LMDS licenses
as an entity that has average gross revenues of less than $40 million
in the three previous calendar years. An additional small business size
standard for ``very small business'' was added as an entity that,
together with its affiliates, has average gross revenues of not more
than $15 million for the preceding three calendar years. The SBA has
approved these small business size standards in the context of LMDS
auctions. There were 93 winning bidders that qualified as small
entities in the LMDS auctions. A total of 93 small and very small
business bidders won approximately 277 A Block licenses and 387 B Block
licenses. On March 27, 1999, the Commission re-auctioned 161 licenses;
there were 40 winning bidders. Based on this information, we conclude
that the number of small LMDS licenses consists of the 93 winning
bidders in the first auction and the 40 winning bidders in the re-
auction, for a total of 133 small entity LMDS providers.
58. 218-219 MHz Service. The first auction of 218-219 MHz spectrum
resulted in 170 entities winning licenses for 594 Metropolitan
Statistical Area licenses. Of the 594 licenses, 557 were won by
entities qualifying as a small business. For that auction, the small
business size standard was an entity that, together with its
affiliates, has no more than a $6 million net worth and, after federal
income taxes (excluding any carry over losses), has no more than $2
million in annual profits each year for the previous two years. In the
218-219 MHz Report and Order and Memorandum Opinion and Order, we
established a small business size standard for a ``small business'' as
an entity that, together with its affiliates and persons or entities
that hold interests in such an entity and their affiliates, has average
annual gross revenues not to exceed $15 million for the preceding three
years. A ``very small business'' is defined as an entity that, together
with its affiliates and persons or entities that hold interests in such
an entity and its affiliates, has average annual gross revenues not to
exceed $3 million for the preceding three years. The SBA has approved
these size standards. We cannot estimate, however, the number of
licenses that will be won by entities qualifying as small or very small
businesses under our rules in future auctions of 218-219 MHz spectrum.
59. 24 GHz--Incumbent Licensees. This analysis may affect incumbent
licensees who were relocated to the 24 GHz band from the 18 GHz band,
and applicants who wish to provide services in the 24 GHz band. The
applicable SBA small business size standard is that of ``Cellular and
Other Wireless Telecommunications'' companies. This category provides
that such a company is small if it employs no more than 1,500 persons.
According to Census Bureau data for 1997, there were 977 firms in this
category that operated for the entire year. Of this total, 965 firms
had employment of 999 or fewer employees, and an additional 12 firms
had employment of 1,000 employees or more. Thus, under this size
standard, the great majority of firms can be considered small. These
broader census data notwithstanding, we believe that there are only two
licensees in the 24 GHz band that were relocated from the
[[Page 35267]]
18 GHz band, Teligent and TRW, Inc. It is our understanding that
Teligent and its related companies have less than 1,500 employees,
though this may change in the future. TRW is not a small entity. Thus,
only one incumbent licensee in the 24 GHz band is a small business
entity.
60. 24 GHz--Future Licensees. With respect to new applicants in the
24 GHz band, the small business size standard for ``small business'' is
an entity that, together with controlling interests and affiliates, has
average annual gross revenues for the three preceding years not in
excess of $15 million. ``Very small business'' in the 24 GHz band is an
entity that, together with controlling interests and affiliates, has
average gross revenues not exceeding $3 million for the preceding three
years. The SBA has approved these small business size standards. These
size standards will apply to the future auction, if held.
61. Internet Service Providers. While internet service providers
(ISPs) are only indirectly affected by our present actions, and ISPs
are therefore not formally included within this present IRFA, we have
addressed them informally to create a fuller record and to recognize
their participation in this proceeding. The SBA has developed a small
business size standard for Online Information Services, which consists
of all such companies having $21 million or less in annual receipts.
According to Census Bureau data for 1997, there were 2,751 firms in
this category, total, that operated for the entire year. Of this total,
2,659 firms had annual receipts of $9,999,999 or less, and an
additional 67 had receipts of $10 million to $24,999,999. Thus, under
this size standard, the great majority of firms can be considered
small.
62. Satellite Service Carriers. The SBA has developed a size
standard for small businesses within the category of Satellite
Telecommunications. Under that SBA size standard, such a business is
small if it has 1,500 or fewer employees. According to Commission data,
31 carriers reported that they were engaged in the provision of
satellite services. Of these 31 carriers, an estimated 25 have 1,500 or
fewer employees and six, alone or in combination with affiliates, have
more than 1,500 employees. Consequently, the Commission estimates that
there are 31 or fewer satellite service carriers which are small
businesses that may be affected by the rules and policies proposed
herein.
Description of Projected Reporting, Recordkeeping, and Other Compliance
Requirements
63. In this order, the Commission finds that the rate that a
competitive LEC charges for access components when it is not serving
the end-user should be no higher than the rate charged by the competing
incumbent LEC for the same functions, and we amend the current rules in
accordance with this finding. This amendment requires competitive LECs
to review the federal tariff of the competing incumbent LEC to
determine the rate charged for various functions or services. Under the
current rules, after June 21, 2004, review of the competing incumbent
LEC's tariff is required to determine the ``competing ILEC rate.''
Therefore, this amendment does not modify the existing compliance
requirement.
64. Pursuant to a rule clarification adopted in this order, if a
competitive LEC eligible to charge a higher access rate pursuant to the
rural exemption chooses to also charge a PICC, the competitive LEC is
required to review the federal tariff of the competing incumbent LEC to
see if the incumbent LEC for that particular end-user charges a PICC,
and if so, the amount of that incumbent LEC's PICC. Under the current
rules, review of the competing incumbent LEC's tariff is required to
determine the rural exemption amount. Therefore, this clarification
does not modify the existing compliance requirement.
Steps Taken To Minimize Significant Economic Impact on Small Entities,
and Significant Alternatives Considered
65. The RFA requires an agency to describe any significant,
specifically small business, alternatives that it has considered in
reaching its proposed approach, which may include the following four
alternatives (among others): (1) The establishment of differing
compliance or reporting requirements or timetables that take into
account the resources available to small entities; (2) the
clarification, consolidation, or simplification of compliance or
reporting requirements under the rule for small entities; (3) the use
of performance, rather than design, standards; and (4) an exemption
from coverage of the rule, or any part thereof, for small entities.
66. Throughout this order, we seek to further resolve questions and
contentious issues that remain with respect to competitive LEC access
services. Because there are both small entity IXCs and small entity
competitive LECs--often with conflicting interests in this proceeding--
we expect that small entities will be affected by the clarifications
adopted in this decision. As discussed below, we conclude, based on a
consideration both of the steps needed to minimize significant economic
impact on small entities and of significant alternatives, that our
clarifications best balance the goals of removing opportunities for
regulatory arbitrage and minimizing the burdens placed on carriers.
67. In this order, the Commission clarifies that the benchmark rate
is available only when a competitive LEC provides an IXC with access to
the competitive LEC's own end-users. With this clarification, the
Commission will minimize the opportunity for regulatory arbitrage, and
ensure that small IXCs continue to pay just and reasonable rates for
competitive LEC switched access services. This clarification also
ensures that IXCs continue to accept and pay for competitive LEC access
services, thereby protecting universal connectivity.
68. In adopting this clarification, the Commission considers and
rejects the alternative approach advanced by some competitive LECs,
which would permit competitive LECs to charge the full benchmark rates
when they provide any component of the interstate switched access
services used in connecting an end-user to an IXC. We believe that an
approach in which rates are not tethered to the provision of particular
services would be an invitation to abuse because it would enable
multiple competitive LECs to impose the full benchmark rate on a single
call. This outcome would be inconsistent with the Commission's goal to
ensure just and reasonable competitive LEC access rates. The approach
advanced by competitive LECs also would enable competitive LECs to
discriminate among IXCs, including small entities, by providing varying
levels of service for the same price. Thus, we believe the
clarification provided will minimize the impact that excessive rates
and discriminatory behavior may have on IXCs, including any small
businesses.
69. The Commission finds that the rate that a competitive LEC
charges for access components when it is not serving the end-user
should be no higher than the rate charged by the competing incumbent
LEC for the same functions. We conclude that regulation of these rates
is necessary for all the reasons that we identified in the CLEC Access
Reform Order. Specifically, an IXC may have no choice but to accept
traffic from an intermediate competitive LEC chosen by the originating
or
[[Page 35268]]
terminating carrier and it is necessary to constrain the ability of
competitive LECs to exercise this monopoly power. At the same time, the
Commission declines to require a specific rate structure or rate
elements for the services provided by a competitive LEC in an effort to
minimize the regulatory burdens on competitive LECs, including small
businesses.
70. In addition, the Commission clarifies that the competing
incumbent LEC rate is the end office switching rate when a competitive
LEC originates or terminates calls to end-users and the tandem
switching rate when a competitive LEC passes calls between two other
carriers. In providing this clarification, the Commission considers and
rejects the proposal advanced by NewSouth because it would allow
competitive LECs to charge IXCs, including small entities, for services
they may not provide. We find that clarification of the competing
incumbent LEC rate is necessary to avoid litigation and uncertainty.
Eliminating the uncertainty surrounding the existing rules will benefit
both competitive LECs and IXCs, including small businesses, by
preventing potential billing disputes.
71. The Commission also clarifies the application of the multi-line
business PICC under the rural exemption. Although Sprint advances an
alternative interpretation of how the PICC is to be calculated under
the rural exemption, that interpretation would deprive competitive
LECs, including small entities, of additional revenues taken into
account when formulating the rural exemption in the CLEC Access Reform
Order. Under the clarification provided, a competitive LEC seeking to
charge a PICC under the rural exemption must determine whether the
competing incumbent LEC charges a PICC and the amount of that PICC.
Although this imposes a minimal additional burden on competitive LECs,
the additional burden is outweighed by the direct benefit of additional
access revenues in rural areas in prescribed circumstances.
72. Moreover, in this order, the Commission clarifies what access
rate applies when more than one incumbent LEC operates within a
competitive LEC's service area. The Commission agrees with competitive
LECs that, without such clarification of the current rules, competitive
LEC market entry will be delayed or possibly abandoned altogether
because of uncertainty about rates and the prospect of IXC refusal to
pay, or litigation. Eliminating the uncertainty surrounding the
existing rules will benefit both competitive LECs and IXCs, including
small businesses, by preventing potential billing disputes.
73. Further, in clarifying the applicable access rate in these
circumstances, the Commission determined that it would permit a
competitive LEC to charge an IXC a blended access rate if it does not
result in revenues that exceed those the competing incumbent LECs would
receive from IXCs for access to those customers. The Commission will
permit a blended rate in some circumstances because it recognizes that
requiring different rates for individual end-users within a service
area might be particularly burdensome for small entities. Although the
Commission considered specific alternative methods for determining the
blended rate, it declines to specify the precise manner in which a
competitive LEC must set its access rates when it serves the area of
multiple incumbent LECs. Rather, the Commission requires only that the
blended access rate reasonably approximate the rate that an IXC would
have paid to the competing incumbent LEC for access to the competitive
LEC's customers. The adopted approach balances the needs of small
entities for flexibility in formulating a blended rate, yet ensures
that the blended rate is just and reasonable in accordance with the
Act.
74. Overall, we believe that this order best balances the competing
goals that we have for our rules governing competitive LEC switched
access charges. Neither in CLEC Access Reform Order nor in
consideration of the petitions for reconsideration and clarification
has there been any identification of additional alternatives that would
have further limited the impact on all small entities while remaining
consistent with Congress' pro-competitive objectives set out in the
Act.
Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
75. None.
Final Regulatory Flexibility Certifications
76. The RFA requires that a regulatory flexibility analysis be
prepared for notice-and-comment rulemaking proceedings, unless the
agency certifies that ``the rule will not, if promulgated, have a
significant economic impact on a substantial number of small
entities.'' The RFA generally defines the term ``small entity'' as
having the same meaning as the terms ``small business,'' ``small
organization,'' and ``small governmental jurisdiction.'' In addition,
the term ``small business'' has the same meaning as the term ``small
business concern'' under the Small Business Act. A small business
concern is one which: (1) Is independently owned and operated; (2) is
not dominant in its field of operation; and (3) satisfies any
additional criteria established by the Small Business Administration
(SBA).
Fifth Order on Reconsideration
Background
77. In this Fifth Order on Reconsideration, the Commission
clarifies some rules in ways that are not expected to have a
significant economic impact on a substantial number of small entities.
Specifically, in addition to the clarifications discussed in the
supplemental FRFA above, the Commission clarifies the existing
relationship between the CLEC new markets rule and the rural exemption.
In particular, petitioners seek confirmation that new market rule does
not apply if the competitive LEC would otherwise qualify for the rural
exemption. The Commission agrees that this is the correct
interpretation of the existing rule and amends rule section 61.26(e) to
more clearly reflect the Commission's original intent. The Commission
also amends rule section 61.26(e) to remove references to rate elements
that have been eliminated by the Commission. Further, the Commission
clarifies the source of its authority to impose interconnection
obligations on IXCs under section 201(a).
Substantive Information
78. The amendment to Sec. 61.26(e) of the Commission rules simply
clarifies and codifies the existing relationship between the CLEC new
markets rule and the rural exemption, and removes references to rate
elements that have since been eliminated by the Commission. Because
there is no change to the meaning or impact of the existing rule, this
amendment will have no significant economic impact. Similarly, the
Commission's clarification concerning the source of its authority does
not change the meaning or impact of the existing rule on large and
small entities.
79. Therefore, we certify that these requirements will not have a
significant economic impact on a substantial number of small entities.
Eighth Report and Order
Background Information
80. In the Eighth Report and Order, the Commission declines to set
a separate access rate for originating toll free (8YY) traffic and
allows it to be
[[Page 35269]]
governed by the same declining benchmark that applies to other
competitive LEC interstate access traffic. In a further notice of
proposed rulemaking issued with the CLEC Access Reform Order, the
Commission raised questions relating to 8YY traffic originating on
competitive LEC networks. The Commission sought this information
because AT&T had asserted that abuses surrounding competitive LEC-
originated 8YY traffic justified immediately capping the access rate
for this category of traffic at the rate of the competing incumbent
LEC. The Commission determines that the record does not support IXCs'
claims that commission payments to 8YY generators translate effectively
into incentives for the individuals who actually use those facilities
to place excessive or fraudulent 8YY calls.
Substantive Information
81. Because competitive LECs currently charge IXCs the previously
established, declining benchmark rate for 8YY traffic, the Commission's
decision results in no change to existing competitive LEC access
charges for 8YY traffic. Thus, the Commission's decision will have no
significant economic impact on competitive LECs or IXCs, large and
small.
82. Therefore, we certify that these requirements will not have a
significant economic impact on a substantial number of small entities.
No Regulatory Flexibility Analysis or Certification Required
83. In the CLEC Access Reform Order, the Commission provided an
FRFA that conformed to the RFA. In this present order, the Commission
denies petitions for reconsideration and a petition for waiver. Because
the Commission promulgates no additional or revised final rules in
response to petitions for reconsideration or the petition for waiver,
our present action on these petitions is not an RFA matter.
Final Paperwork Reduction Act Analysis
84. This action contained herein contains no new or modified
information collections subject to the Paperwork Reduction Act of 1995
(PRA), Pub. L. 104-13.
Report to Congress
85. The Commission will send a copy of these orders, including this
Supplemental FRFA and FRFCs, in a report to be sent to Congress
pursuant to the Congressional Review Act. In addition, the Commission
will send a copy of these orders, including the Supplemental FRFA and
FRFCs, to the Chief Counsel for Advocacy of the Small Business
Administration. A copy of these orders and Supplemental FRFA (or
summaries thereof) and FRFCs will also be published in the Federal
Register.
Ordering Clauses
86. Accordingly, it is ordered that, pursuant to the authority
contained in sections 1-5, 201-205, 214, 218-220, 254, 303(r), 403,
405, 502 and 503 of the Communications Act of 1934, as amended, 47
U.S.C. 151-155, 201-205, 214, 218-220, 254, 303(r), 403, 405, 502 and
503, this eighth report and order and fifth order on reconsideration,
with all attachments, including revisions to part 61 of the
Commission's rules, 47 CFR part 61, is hereby adopted.
87. It is further ordered that these orders and rule revisions
adopted in these orders shall become effective July 26, 2004.
88. It is further ordered that the Commission's Consumer
Information Bureau, Reference Information Center, shall send a copy of
this eighth report and order and fifth order on reconsideration,
including the Supplemental Final Regulatory Flexibility Analysis and
Final Regulatory Flexibility Certifications, to the Chief Counsel for
Advocacy of the Small Business Administration.
89. It is further ordered that the Petitions for Reconsideration
and Petitions for Clarification filed by Focal Communications Corp. and
U.S. LEC Corp., Qwest Communications International, Inc., TDS Metrocom,
Inc., and Time Warner Telecom are denied.
90. It is further ordered that the Petition for Clarification filed
by U.S. TelePacific Corp. is denied in part and granted in part, to the
extent discussed herein.
91. It is further ordered that the Petitions for Reconsideration
and/or Clarification filed by the Minnesota CLEC Consortium and Rural
Independent Competitive Alliance are denied in part and granted in
part, to the extent discussed herein.
92. It is further ordered that the Petition of Z-Tel Communications
Inc., for Temporary Waiver of Commission rule in Sec. 61.26(d) is
denied.
93. It is futher ordered that the Petition of TDS Metrocom, Inc.
for Stay Pending Reconsideration is denied as moot.
94. It is further ordered that the Emergency Petition of Mpower
Communications Corp. and North County Communications, Inc. for Stay of
Order is denied as moot.
List of Subjects
47 CFR Part 61
Communications common carriers, Telephone.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Rules Changes
0
For the reasons discussed in the preamble, the Federal Communications
Commission amends 47 CFR part 61 to read as follows:
PART 61--TARIFFS
0
1. The authority citation for part 61 continues to read as follows:
Authority: Secs. 1, 4(i), 4(j), 201-205 and 403 of the
Communications Act of 1934, as amended; 47 U.S.C 151, 154(i),
154(j), 201-205 and 403, unless otherwise noted.
0
2. Section 61.26 is amended by revising paragraphs (a)(1) and (a)(2),
revising paragraph (e), and adding paragraph (f) to read as follows:
Sec. 61.26 Tariffing of competitive interstate switched exchange
access services.
(a) * * *
(1) CLEC shall mean a local exchange carrier that provides some or
all of the interstate exchange access services used to send traffic to
or from an end user and does not fall within the definition of
``incumbent local exchange carrier'' in 47 U.S.C. 251(h).
(2) Competing ILEC shall mean the incumbent local exchange carrier,
as defined in 47 U.S.C. 251(h), that would provide interstate exchange
access services, in whole or in part, to the extent those services were
not provided by the CLEC.
* * * * *
(e) Rural exemption. Notwithstanding paragraphs (b) through (d) of
this section, a rural CLEC competing with a non-rural ILEC shall not
file a tariff for its interstate exchange access services that prices
those services above the rate prescribed in the NECA access tariff,
assuming the highest rate band for local switching. In addition to that
NECA rate, the rural CLEC may assess a presubscribed interexchange
carrier charge if, and only to the extent that, the competing ILEC
assesses this charge.
(f) If a CLEC provides some portion of the interstate switched
exchange access services used to send traffic to or from an end user
not served by that CLEC, the rate for the access services provided may
not exceed the rate charged by the
[[Page 35270]]
competing ILEC for the same access services.
[FR Doc. 04-14329 Filed 6-23-04; 8:45 am]
BILLING CODE 6712-01-P