[Federal Register: August 26, 2004 (Volume 69, Number 165)]
[Rules and Regulations]
[Page 52444-52448]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26au04-8]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 64
[WC Docket No. 03-225; FCC 04-182]
Default Compensation Rate for Dial-Around Calls From Payphones
Increased to $.494
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: By this document, the Commission approves an increase from
$.24 to $.494 in the default compensation rate for dial-around calls
from payphones. This is the first increase in the dial-around default
rate in over five years. The intended effect of this order is to ensure
the widespread deployment of payphones and to provide fair compensation
to payphone service providers.
DATES: Effective September 27, 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.
FOR FURTHER INFORMATION CONTACT: Jon Stover, Wireline Competition
Bureau, Pricing Policy Division, (202) 418-0390.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order (Order), adopted on August 12, 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 Order may be
purchased from the Commission's duplicating contractor, Best Copy and
Printing Inc., Room CY-B402, 445 Twelfth Street, SW., Washington, DC
20554, telephone 202-488-5300, facsimile 202-488-5563 or e-mail at
FCC@BCPIweb.com.
Synopsis of Final Rule
1. The Order approves an increase from $.24 to $.494 in the
payphone dial-around default rate based on cost evidence submitted by
the American Public Communications Council (APCC), the RBOC Payphone
Coalition (BellSouth Public Communications, Inc., SBC Communications,
Inc., and the Verizon telephone companies) and numerous interexchange
(long-distance) carriers. The new rate of $.494 ensures that all
payphone service providers (PSPs) are fairly compensated for each and
every completed call as mandated by 47 U.S.C. 276.
2. According to cost studies submitted by APCC and the RBOC
Payphone Coalition and the Commission's analysis of those cost studies,
per-payphone costs have not changed dramatically since 1998, but
falling call volumes at payphones have caused a major increase in per-
call costs at marginal payphones. Thus, the Commission concluded that
[[Page 52445]]
the current dial-around compensation rate is no longer adequate to
ensure widespread deployment of payphones because $0.24 no longer
provides cost recovery for PSPs.
3. The proposed rate increase was opposed by six interexchange
carriers (IXCs) and the Attorney General of the State of Texas. They
contended that the Commission should not change the default
compensation rate because market forces by themselves are able to
determine the appropriate level of payphone deployment. The Commission
found that these IXCs did not persuasively demonstrate how PSPs can be
effectively compensated in a fully deregulated market.
4. The Commission received comments both on the general issue of
whether to prescribe a different payphone compensation rate and on the
specific issue of the amount of the rate. The Commission also received
comments on the APCC and RBOC Payphone Coalition (Coalition) cost
studies. Further, the Commission received comments on whether the
methodologies reflected in those studies are consistent with the rate
methodology the Commission used in Implementation of the Pay Telephone
Reclassification and Compensation Provisions of the Telecommunications
Act of 1996, CC Docket No. 96-128, Third Report and Order, 64 FR 13701,
March 22, 1999. The Commission also received comments on whether the
cost information presented in those studies accurately represents the
costs currently incurred by payphone service providers. The Commission
did not receive comments refuting the overwhelming majority of the
information presented in the APCC and Coalition studies.
6. In the Order, the Commission again concluded that the
methodology the Commission adopted in the Third Report and Order is the
appropriate methodology to use in reevaluating the default dial-around
compensation rate. The decision to use that methodology was affirmed by
the United States Court of Appeals for the D.C. Circuit.
7. Based on the evidence in the record, the Commission concluded
that an increase in the dial-around rate would is not so elastic that
an increase in dial-around rates will suppress demand to the point of
decreasing revenues. Moreover, the Commission found that the IXCs
failed to present sufficient evidence to determine elasticities. Also,
because monthly call volume is a key driver in determining the per-call
compensation rate, the Commission sought comment on the efficacy and
merit of the use in the APCC and Coalition cost studies of marginal
payphone monthly call volumes of 233.9 and 219, respectively. Based on
the evidentiary record, the Commission concluded that use of the APCC
and Coalition volumes was reasonable.
8. The Commission sought comment on whether the particular inputs
the Commission adopted in the Third Report and Order for various cost
categories continued to be appropriate or whether there are changed
conditions that warrant modifications of the particular inputs used in
1999. After reviewing the record, the Commission concluded that use of
the Third Report and Order cost inputs for setting the rate in this
proceeding was reasonable.
9. The Commission sought comment on whether additional cost
categories are needed beyond those identified in the Third Report and
Order. Specifically, the APCC and Coalition cost studies add an element
for collection costs specific to dial-around compensation, and the
Coalition study adds an element for uncollectibles. In the Third Report
and Order, the Commission declined to include these costs in setting
the dial-around rate, finding that the record in that docketed
proceeding contained insufficient information to determine the extent
to which administration costs vary when the number of coinless calls
increases relative to coin calls. AT&T and others argue that the Third
Report and Order methodology precludes the inclusion of an element for
bad debt. Upon reviewing the record evidence, the Commission concluded
that the addition of cost inputs reflecting collection costs and bad
debt was reasonable.
10. The Commission sought comment on whether and how the Commission
should consider the revenues and costs associated with the provision of
additional services and activities in conjunction with payphones, such
as Internet access or rental of advertising space. The Commission
decided that these ``incidental'' revenues are relevant and should be
subtracted from the the overall payphone revenue requirement.
11. Sprint urged the Commission to reconsider adopting a ``caller-
pays'' compensation scheme, in which the caller would deposit coins or
other forms of advance payment before making a dial-around call. In the
Third Report and Order, the Commission noted that some economists would
argued that a caller-pays methodology forms the basis for the purest
market-based approach. The Commission rejected this approach based on
evidence that Congress disapproved of a caller-pays methodology. For
this reason, the Commission tentatively concluded in this NPRM that it
should not adopt a ``caller-pays'' methodology. The Commission sought
comment on this tentative conclusion.
12. In concluding that while it was legally possible to fashion a
caller-pays system, the Commission decided that it did not make sense
to increase the inconvenience to consumers of dial-around calling (by
requiring the deposit of coins), and that nothing in Section 276
superseded 47 U.S.C. 226(e) effective prohibition of any form of an
advance payment system. Thus, even if the convenience of coinless
calling may come at a high price to the consumer, the Commission found
that the record was devoid of any evidence supporting a new impediment
to toll free calling.
Paperwork Reduction Act Analysis
13. This Order contains no new or modified information collections
subject to the Paperwork Reduction Act of 1995, Pub. L. 104-13.
Congressional Review Act
14. The Commission will send a copy of this Report and Order in a
report to be sent to Congress and the Government Accountability Office
(GAO) pursuant to the Congressional Review Act, see 5 U.S.C. 801
(a)(1)(A).
Final Regulatory Flexibility Act Analysis
15. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C.
603, the Commission incorporated an Initial Regulatory Flexibility
Analysis (IRFA) of the possible significant economic impact on small
entities by the policies and rule(s) in the Notice of Proposed
Rulemaking (NPRM). No public comments were submitted on this IRFA.
16. This present Final Regulatory Flexibility Act analysis conforms
to the RFA, as amended. See 5 U.S.C. 604. The RFA, 5 U.S.C. 601 et
seq., has been amended by the Contract with America Advancement Act of
1996, Pub. L. 104-121, 110 Stat. 847 (1996) (CWAA). Title II of the
CWAA is the Small Business Regulatory Enforcement Fairness Act of 1996
(SBREFA). The Commission will send a copy of this Order, including this
RFA, to the Chief Counsel for Advocacy of the Small Business
Administration. See 5 U.S.C. 604(b).
Need for, and Objective of the Rule
17. In adopting section 276 in 1996, Public Law 104-104, 110 Stat.
56 (1996) (codified at 47 U.S.C. 276), Congress mandated inter alia
that the Commission ``establish a per call compensation plan to ensure
that all payphone service providers are fairly
[[Page 52446]]
compensated for each and every completed intrastate and interstate call
using their payphone * * * .'' In this Order, the Commission reexamined
the default payphone compensation rate the Commission prescribed in
1999, and prescribed a new default payphone compensation rate of $.494.
Legal Basis
18. The proposed action is supported by 47 U.S.C. 151, 152, 154(i)-
(j), 201, 226 and 276, as well as 47 CFR 1.1, 1.48, 1.411, 1.412,
1.415, 1.419, and 1.1200-1216.
Description and Estimate of the Number of Small Entities to Which Rule
Applies
19. The RFA directs agencies to provide a description of, and an
estimate of, the number of small entities that may be affected by the
rule adopted herein, where feasible. 5 U.S.C. 604(a)(3). The RFA
generally defines ``small entity'' as having the same meaning as the
terms ``small business,'' ``small organization,'' and ``small
governmental jurisdiction.'' 5 U.S.C. 601(6). In addition, the term
``small business'' has the same meaning as the term ``small business
concern'' under the Small Business Act, unless the Commission has
developed one or more definitions that are more appropriate to its
activities. 5 U.S.C. 601(3) (incorporating by reference the definition
of ``small business concern'' in 5 U.S.C. 632). Under the Small
Business Act, a ``small business concern'' is one that: (1) Is
independently owned and operated; (2) is not dominant in its field of
operation; and (3) meets any additional criteria established by the
Small Business Administration (SBA). 5 U.S.C. 632. Pursuant to 5 U.S.C.
601(3), the statutory definition of a small business applies ``unless
an agency after consultation with the Office of Advocacy of the Small
Business Administration and after opportunity for public comment,
establishes one or more definitions of such term which are appropriate
to the activities of the agency and publishes such definition in the
Federal Register.''
20. The Commission included small incumbent local exchange carriers
(LECs) in this IRFA 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 telephone communications business
having 1,500 or fewer employees), and ``is not dominant in its field of
operation.'' 5 U.S.C. 601(3). 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. See Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA,
to Chairman William E. Kennard, FCC (May 27, 1999). The Small Business
Act contains a definition of ``small business concern,'' which the RFA
incorporates into its own definition of ``small business.'' See 5
U.S.C. 632(a) (Small Business Act); 5 U.S.C. 601(3) (RFA). SBA
regulations interpret ``small business concern'' to include the concept
of dominance on a national basis. 13 CFR 121.102(b). The Commission
therefore included small incumbent LECs in this RFA analysis, although
the Commission emphasizes that this RFA has no effect on the
Commission's analyses and determinations in other, non-RFA contexts.
21. 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.
13 CFR 121.201, NAICS code 513310 (changed to 717110 in October of
2002). According to Census Bureau data for 1997, there were 2,225 firms
in this category, total, that operated for the entire year. U.S. Census
Bureau, 1997 Economic Census, Subject Series: Information,
``Establishment and Firm Size (Including Legal Form of Organization),''
Table 5, NAICS code 513310 (issued October of 2000). 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. Id. The Commission
notes that the census data do not provide a more precise estimate of
the number of firms that have employment of 1,500 or fewer employees;
the largest category provided is ``Firms with 1,000 employees or
more.'' Under the size standard of 1,500 or fewer employees, the great
majority of Wired Telecommunications Carriers can be considered small.
22. Incumbent Local Exchange Carriers. 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 the SBA rules is for Wired Telecommunications
Carriers. Under that size standard, such a business is small if it has
1,500 or fewer employees. 13 CFR 121.201, North American Industry
Classification System (NAICS) code 513310 (changed to 517110 in October
of 2002). According to Commission data, 1,329 carriers reported that
they were engaged in the provision of local exchange services. FCC,
Wireline Competition Bureau, Industry Analysis and Technology Division,
Trends in Telephone Service (May 2002) (hereinafter Telephone Trends
Report), Table 5.3. Of these 1,329 carriers, an estimated 1,024 have
1,500 or fewer employees and 305 have more than 1,500 employees. Id.
Consequently, the Commission estimates that most providers of local
exchange service are small businesses that may be affected by the
rule(s) and policies proposed herein.
23. Competitive Local Exchange Carriers (CLECs). Neither the
Commission nor the SBA has developed a size standard for small
businesses specifically applicable to providers of competitive local
exchange services or to competitive access providers (CAPs) or to
``Other Local Exchange Carriers,'' all of which are discrete categories
under which Telecommunications Relay Service (TRS) data are collected.
The closest applicable size standard under the SBA rules is for Wired
Telecommunications Carriers. Under that SBA size standard, such a
business is small if it has 1,500 or fewer employees. 13 CFR 121.201,
NAICS code 513310 (changed to 517110 in October of 2002). According to
Commission data, 532 companies reported that they were engaged in the
provision of either competitive access provider services or competitive
local exchange carrier services. Telephone Trends Report, Table 5.3. Of
these 532 companies, an estimated 411 have 1,500 or fewer employees and
121 have more than 1,500 employees. Id. In addition, 55 carriers
reported that they were ``Other Local Exchange Carriers.'' Id. Of the
55 ``Other Local Exchange Carriers,'' an estimated 53 have 1,500 or
fewer employees and two have more than 1,500 employees. Id.
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 rule(s) and policies proposed herein.
24. Local Resellers. The SBA has developed a size standard for
small businesses within the category of Telecommunications Resellers.
Under that SBA size standard, such a business is small if it has 1,500
or fewer employees. 13 CFR 121.201, NAICS code 513330 (changed to
517310 in October of 2002). According to the Commission data, 134
companies reported that they were engaged in the provision of local
resale services. Telephone Trends Report, Table 5.3. Of these 134
companies, an estimated 131
[[Page 52447]]
have 1,500 or fewer employees and three have more than 1,500 employees.
Id. Consequently, the Commission estimates that the great majority of
local resellers are small entities that may be affected by the rules
and policies proposed herein.
25. Toll Resellers. The SBA has developed a size standard for small
businesses within the category of Telecommunications Resellers. Under
that SBA size standard, such a business is small if it has 1,500 or
fewer employees. 13 CFR 121.201, NAICS code 513330 (changed to 517310
in October of 2002). According to the Commission's most recent
Telephone Trends Report data, 576 companies reported that they were
engaged in the provision of toll resale services. Telephone Trends
Report, Table 5.3. Of these 576 companies, an estimated 538 have 1,500
or fewer employees and 38 have more than 1,500 employees. Id.
Consequently, the Commission estimates that the great majority of toll
resellers are small entities that may be affected by the rules and
policies proposed herein.
26. Payphone Service Providers. Neither the Commission nor the SBA
has developed a size standard for small businesses specifically
applicable to payphone service providers (PSPs). The closest applicable
size standard under the SBA rules is for Wired Telecommunications
Carriers. Under that standard, such a business is small if it has 1,500
or fewer employees. 13 CFR 121.201, NAICS code 513310 (changed to
517110 in October of 2002). According to the Commission's most recent
Telephone Trends Report data, 936 PSPs reported that they were engaged
in the provision of payphone services. Telephone Trends Report, Table
5.3. Of these 936 PSPs, an estimated 933 have 1,500 or fewer employees
and three have more than 1,500 employees. Id. Consequently, the
Commission estimates that the great majority of PSPs are small entities
that may be affected by the rules and policies proposed herein.
27. Interexchange Carriers (IXCs). Neither the Commission nor the
SBA has developed a size standard for small businesses specifically
applicable to providers of interexchange services. The closest
applicable size standard under the SBA rules is for Wired
Telecommunications Carriers. Under that standard, such a business is
small if it has 1,500 or fewer employees. 13 CFR 121.201, NAICS code
513310 (changed to 517110 in October of 2002). According to Commission
data, 229 carriers reported that their primary telecommunications
service activity was the provision of interexchange services. Telephone
Trends Report, Table 5.3. Of these 229 companies, an estimated 181 have
1,500 or fewer employees and 48 have more than 1,500 employees. Id.
Consequently, the Commission estimates that the majority of
interexchange carriers are small entities that may be affected by the
rules and policies proposed herein.
28. Operator Service Providers. 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 the SBA rules is for Wired Telecommunications Carriers.
Under that standard, such a business is small if it has 1,500 or fewer
employees. 13 CFR 121.201, NAICS code 513310 (changed to 517110 in
October of 2002). According to Commission data, 22 companies reported
that they were engaged in the provision of operator services. Telephone
Trends Report, Table 5.3. Of these 22 companies, an estimated 20 have
1,500 or fewer employees and two have more than 1,500 employees. Id.
Consequently, the Commission estimates that the great majority of
operator service providers are small entities that may be affected by
the rules and policies proposed herein.
29. Prepaid Calling Card Providers. The SBA has developed a size
standard for small businesses within the category of Telecommunications
Resellers. Under that SBA size standard, such a business is small if it
has 1,500 or fewer employees. 13 CFR 121.201, NAICS code 513330
(changed to 517310 in October of 2002). According to Commission data,
32 companies reported that they were engaged in the provision of
prepaid calling cards. Telephone Trends Report, Table 5.3. Of these 32
companies, an estimated 31 have 1,500 or fewer employees and one has
more than 1,500 employees. Id. Consequently, the Commission estimates
that the great majority of prepaid calling card providers are small
entities that may be affected by the rules and policies proposed
herein.
30. 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
the SBA rules is for Wired Telecommunications Carriers. Under that
standard, such a business is small if it has 1,500 or fewer employees.
13 CFR 121.201, NAICS code 513310 (changed to 517110 in October of
2002). According to Commission data, 42 companies reported that their
primary telecommunications service activity was the provision of
``Other Toll'' services. Telephone Trends Report, Table 5.3. Of these
42 companies, an estimated 37 have 1,500 or fewer employees and five
have more than 1,500 employees. Id. Consequently, the Commission
estimates that most ``Other Toll Carriers'' are small entities that may
be affected by the rules and policies proposed herein.
Description of Projected Reporting, Recordkeeping, and Other Compliance
Requirements
31. The Commission finds that the new rate adopted herein does not
increase existing reporting, recordkeeping or other compliance
requirements.
Steps Taken To Minimize Significant Economic Impact on Small Entities,
and Significant Alternatives Considered
32. 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
performance, rather than design, standards; and (4) an exemption from
coverage of the rule, or any part thereof, for small entities. 5 U.S.C.
603(c).
33. The overall objective of this proceeding was to evaluate
whether changes needed to be made to the current default rate of
compensation for dial-around calls originating at payphones, in order
to ensure that payphone service providers are fairly compensated,
promote payphone competition, and promote the widespread deployment of
payphone services. The Order solely adopted a new level of dial-around
compensation.
Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
34. None.
Ordering Clauses
35. Accordingly, it is ordered that, pursuant to the authority
contained in 47 U.S.C. 151, 154, 201-205, 215, 218,
[[Page 52448]]
219, 220, 226, 276 and 405, that this Report and Order is adopted.
36. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Report and Order, including the Final Regulatory
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
Business Administration.
List of Subjects in 47 CFR Part 64
Communications common carriers, Telecommunications, Telephone.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Rules Changes
0
The Federal Communications Commission amends 47 CFR part 64 as follows:
PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS
0
1. The authority citation for part 64 continues to read as follows:
Authority: 47 U.S.C. 154, 254(k); secs. 403(b)(2)(B), (c), Pub.
L. 104-104, 110 Stat. 56. Interpret or apply 47 U.S.C. 201, 218,
225, 226, 228, and 254(k) unless otherwise noted.
0
2. Revise Sec. 64.1300(c) to read as follows:
Sec. 64.1300 Payphone compensation obligation.
* * * * *
(c) In the absence of an agreement as required by paragraph (a) of
this section, the carrier is obligated to compensate the payphone
service provider at a per-call rate of $.494.
[FR Doc. 04-19464 Filed 8-25-04; 8:45 am]
BILLING CODE 6712-01-P