[Federal Register: May 24, 2001 (Volume 66, Number 101)]
[Proposed Rules]
[Page 28718-28725]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24my01-24]

-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket Nos. 96-45, 98-171, 90-571, 92-237, 99-200, 95-116; FCC 01-
145]

Federal-State Joint Board on Universal Service.

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: In this document, the Commission seeks comment on how to
streamline and reform both the manner in which the Commission assesses
carrier contributions to the universal service fund and the manner in
which carriers may recover those costs from their customers.

DATES: Comments are due on or before June 25, 2001. Reply comments are
due on or before July 9, 2001. Written

[[Page 28719]]

comments by the public on the proposed and/or modified information
collections discussed in this Notice of Proposed Rulemaking are due on
or before June 25, 2001. Written comments must be submitted by the
Office of Management and Budget (OMB) on the proposed and/or modified
information collections on or before July 23, 2001.

ADDRESSES: All filings must be sent to the Commission's Secretary,
Magalie Roman Salas, Office of the Secretary, Federal Communications
Commission, 445 12th Street, S.W., Washington, D.C. 20554. In addition
to filing comments with the Secretary, a copy of any comments on the
information collection(s) contained herein should be submitted to Judy
Boley, Federal Communications Commission, Room 1-C804, 445 12th Street,
SW, Washington, DC 20554, or via the Internet to jboley@fcc.gov and to
Edward C. Springer, OMB Desk Officer, 10236 NEOB, 725 17th Street,
N.W., Washington, DC 20503, or via the Internet to vhuth@omb.eop.gov.
Parties should also send three paper copies of their filings to Sheryl
Todd, Accounting Policy Division, Common Carrier Bureau, Federal
Communications Commission, 445 Twelfth Street, S.W., Room 5-B540,
Washington, D.C. 20554. Parties who choose to file by paper should also
submit their comments on diskette. These diskettes should be submitted
to Sheryl Todd, Accounting Policy Division, Common Carrier Bureau,
Federal Communications Commission, 445 Twelfth Street, S.W., Room 5-
B540, Washington, D.C. 20554. In addition, commenters must send
diskette copies to the Commission's copy contractor, International
Transcription Services, Inc., 1231 20th Street, N.W., Washington, D.C.
20037.

FOR FURTHER INFORMATION CONTACT: Paul Garnett, Attorney, Common Carrier
Bureau, Accounting Policy Division, (202) 418-7400.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice
of Proposed Rulemaking (NPRM) in CC Docket Nos. 96-45, 98-171, 90-571,
92-237, 99-200, 95-116 released on May 8, 2001. The full text of this
document is available for public inspection during regular business
hours in the FCC Reference Center, Room CY-A257, 445 Twelfth Street,
S.W., Washington, D.C., 20554.
This NPRM contains proposed information collection(s) subject to
the Paperwork Reduction Act of 1995 (PRA). It has been submitted to the
Office of Management and Budget (OMB) for review under the PRA. OMB,
the general public, and other Federal agencies are invited to comment
on the proposed information collections contained in this proceeding.

Paperwork Reduction Act

The NPRM contains a proposed information collection. The
Commission, as part of its continuing effort to reduce paperwork
burdens, invites the general public and OMB to comment on the
information collection(s) contained in this NPRM, as required by the
PRA, Public Law 104-13. Public and agency comments on the proposed and/
or modified information collections discussed in this Notice of
Proposed Rulemaking are due on or before June 25, 2001. Written
comments must be submitted by the Office of Management and Budget (OMB)
on the proposed and/or modified information collections on or before
July 23, 2001.
Comments should address: (a) Whether the proposed collection of
information is necessary for the proper performance of the functions of
the Commission, including whether the information shall have practical
utility; (b) the accuracy of the Commission's burden estimates; (c)
ways to enhance the quality, utility, and clarity of the information
collected; and (d) ways to minimize the burden of the collection of
information on the respondents, including the use of automated
collection techniques or other forms of information technology.
OMB Control Number: 3060-0855.
Title: Telecommunications Reporting Worksheet and Associated
Requirements, CC Docket No. 96-45.
Form No.: FCC Form 499.
Type of Review: Proposed Revised Collection.
Respondents: Business or other for-profit.

----------------------------------------------------------------------------------------------------------------
Number of Est. time per Total annual
Title respondents response burden
----------------------------------------------------------------------------------------------------------------
1. Assessment on a Revenue Basis................................ 5,000 9.5* 81,250
---------------
Total Annual Burden:........................................ .............. .............. 81,250
Cost to Respondents: $0.
----------------------------------------------------------------------------------------------------------------
* 9.5 hours for respondents that file the annual filing and 6 hours for respondent that file the quarterly
filing.

----------------------------------------------------------------------------------------------------------------
* 6 hours for respondents that file the annual filing and 3 hours for respondent that file the quarterly filing.

----------------------------------------------------------------------------------------------------------------
Number of Est. time per Total annual
Title respondents response burden
----------------------------------------------------------------------------------------------------------------
3. Recovery of Universal Service Contributions--Lifeline 5,000 1* 7,500
Exception......................................................
---------------
Total Annual Burden:........................................ .............. .............. 7,500
Cost to Respondents: $0.
----------------------------------------------------------------------------------------------------------------
* 1 hour for respondents that file the annual filing and .5 hour for respondent that file the quarterly filing.

Needs and Uses: In this Notice of Proposed Rulemaking, we seek
comment on how to streamline and reform both the manner in which the
Commission assesses carrier contributions to the universal service

[[Page 28720]]

fund and the manner in which carriers may recover those costs from
their customers. Section 254 of the Communications Act of 1934, as
amended by the Telecommunications Act of 1996, requires carriers
providing interstate telecommunications services to contribute to
universal service. Under the current universal service rules, carriers'
contributions are assessed as a percentage of their interstate and
international end-user telecommunications revenues. The Universal
Service Administrative Company would use information filed on carrier
revenues, line counts, or number of accounts to determine the quarterly
universal service contribution factor.

Synopsis of NPRM

I. Introduction

1. In this Notice of Proposed Rulemaking (NPRM), we seek comment on
how to streamline and reform both the manner in which the Commission
assesses carrier contributions to the universal service fund and the
manner in which carriers may recover those costs from their customers.
Section 254 of the Communications Act of 1934, as amended by the
Telecommunications Act of 1996 (the Act), requires carriers providing
interstate telecommunications services to contribute to universal
service. Under the current universal service rules, carriers'
contributions are assessed as a percentage of their interstate and
international end-user telecommunications revenues. For carriers
electing to recover their universal service contributions from their
customers, the Commission generally has not specified a particular
method of recovery. Rather, the Commission has required that
contributors not shift more than an equitable share of their
contributions to any customer or group of customers, and that carriers
provide accurate, truthful, and complete information regarding the
nature of the charge.
2. In this NPRM, we seek comment on whether and how to streamline
and reform the universal service contribution methodology. We seek
comment on specific proposals to require carriers to contribute based
on a percentage of collected revenues, or to contribute on the basis of
a flat-fee charge, such as a per-line charge. Additionally, we seek
comment on limiting the manner in which carriers recover their
contribution costs from their customers. If carriers choose to recover
universal service contributions from their customers through line
items, we propose to require carriers to do so through a uniform
universal service line item that corresponds to the contribution
assessment on the carrier.
3. We believe that we may need to revisit the concepts underlying
the existing contribution system, in light of current market trends, to
ensure that providers of interstate telecommunications services
continue to ``contribute, on an equitable and nondiscriminatory basis,
to the specific, predictable, and sufficient mechanisms established by
the Commission to preserve and advance universal service.'' Since the
Commission's initial implementation of section 254 of the Act in 1997,
we have seen many significant developments in the interstate
telecommunications marketplace. We have witnessed the entry of new
providers into the long distance market, including Regional Bell
Operating Companies (RBOCs) that have received approval under section
271 of the Act to provide interstate telecommunications. We also are
seeing certain wireline interexchange carriers suffer declining
revenues in light of growing competition. Growth in the wireless
telecommunications sector, as well as the advent of Internet Protocol
(IP) telephony, has changed the dynamics of the interstate
telecommunications market. Furthermore, many carriers are bundling
services together in creative ways, such as offering flat-rate packages
that include both interstate and intrastate telecommunications and non-
telecommunications products and services.
4. Changes to the universal service contribution methodology may be
necessary to simplify and streamline the contribution process for
carriers. For example, although not mandated by the Commission, many
carriers choose to recover most, if not all, of their universal service
contributions through line items on their customers' bills. Even though
the Commission sets a uniform contribution factor for universal
service, carriers may decide to boost this factor in order to account
for ``uncollectible'' revenue and other variables. We believe that this
process may require carriers to engage in complex calculations in order
to fully recover their contribution costs through a line item on
customer bills.
5. We also have concerns about the extent to which the universal
service line item fee varies from one carrier to the next, even though
the contribution factor set by the Commission is uniform across
carriers. For example, in the fourth quarter 2000, the Commission
established a contribution factor of 5.6688 percent. The major
interexchange carriers, however, imposed line-item fees on residential
and business customers ranging from approximately 5.9 percent to 8.6
percent. For the second quarter of 2001, after the Commission
established a contribution factor of 6.8823%, one interexchange carrier
raised its residential line item to 12%. This discrepancy between the
contribution factor and the amount carriers charge consumers is
inexplicable to the casual observer. Moreover, it appears that some
carriers have chosen to recover universal service contributions through
a line item on only certain classes of customers. Some carriers may be
recovering universal service contributions from pre-subscribed
customers through line items that are well in excess of the
contribution factor, while recovering, through service rates, an
unidentified amount of such costs from other customers of services such
as pre-paid calling cards or dial-around service. The end result may be
that certain customer classes are bearing a disproportionate share of
the carrier's cost of universal service contributions, which could, in
some circumstances, be inconsistent with the Commission's directive
that contributors not shift more than an equitable share of their
contributions to any customer or group of customers.
6. The Commission has an obligation to ensure that the universal
service contribution system remains consistent with the statute, is
reflective of current market trends, is simple for carriers to
administer, and does not shift more than an equitable share of carrier
contributions to any class of customers. We therefore conclude that we
should revisit the issue of how contributions to the universal service
fund are assessed on carriers and how carriers may recover such
contribution costs from consumers. In this NPRM, we seek comment on how
to streamline the assessment and recovery of universal service
contributions, especially in light of recent developments in the
telecommunications marketplace, while maintaining a universal service
fund that is consistent with the requirements of the Act. We welcome
input from all segments of the industry, consumer groups, state
commissions, and the members of the Federal-State Joint Board on
Universal Service (Joint Board).

II. Procedural Issues

A. Ex Parte

7. This is a non-restricted notice and comment rulemaking
proceeding. Ex parte presentations are permitted,

[[Page 28721]]

except during the Sunshine Agenda period, provided they are disclosed
as provided in the Commission's rules.

B. Initial Paperwork Reduction Act of 1995 Analysis

8. This NPRM contains either a proposed or modified information
collection. As part of a continuing effort to reduce paperwork burdens,
we invite the general public and the Office of Management and Budget
(OMB) to take this opportunity to comment on the information
collections contained in this NPRM, as required by the Paperwork
Reduction Act of 1995, Public Law 104-13. Public and agency comments
are due at the same time as other comments on this NPRM; OMB comments
are due July 23, 2001. Comments should address: (a) Whether the
proposed collection of information is necessary for the proper
performance of the functions of the Commission, including whether the
information shall have practical utility; (b) the accuracy of the
Commission's burden estimates; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burden of the collection of information on the
respondents, including the use of automated collection techniques or
other forms of information technology.

C. Initial Regulatory Flexibility Act Analysis

9. As required by the Regulatory Flexibility Act (RFA), the
Commission has prepared this Initial Regulatory Flexibility Analysis
(IRFA) of the possible significant economic impact on small entities by
the policies and rules proposed in this Notice of Proposed Rulemaking.
Written public comments are requested on this IRFA. Comments must be
identified as responses to the IRFA and must be filed by the deadlines
for comments on the NPRM provided. The Commission will send a copy of
the NPRM, including this IRFA, to the Chief Counsel for Advocacy of the
Small Business Administration. In addition, the NPRM and IRFA (or
summaries thereof) will be published in the Federal Register.
1. Need for and Objectives of the Proposed Rules
10. The Commission seeks comment in this NPRM as a part of its
implementation of the Act's mandate that ``[e]very telecommunications
carrier that provides interstate telecommunications services shall
contribute, on an equitable and nondiscriminatory basis, to the
specific, predictable, and sufficient mechanisms established by the
Commission to preserve and advance universal service.'' Specifically,
we seek comment on how to streamline and reform both the manner in
which the Commission assesses carrier contributions to the universal
service fund and the manner in which carriers may recover those costs
from their customers. We seek comment on whether and how to revise the
universal service contribution methodology. We seek comment on specific
proposals to require carriers to contribute based on a percentage of
collected revenues, or to contribute on the basis of a flat-fee charge,
such as a per-line charge. Additionally, we seek comment on limiting
the manner in which carriers recover contribution costs from end users.
If carriers choose to recover universal service contributions from
their end users through line items, we propose to require carriers to
do so through a uniform universal service line item that corresponds to
the contribution assessment on the carrier.
2. Legal Basis
11. The legal basis as proposed for this NPRM is contained in
sections 4(i), 4(j), 201-205, 254, and 403 of the Communications Act of
1934, as amended by the Telecommunications Act of 1996, 47 U.S.C. 4(i),
4(j), 201-205, 254, 403.
3. Description and Estimate of the Number of Small Entities to Which
Rules Will Apply
12. The Commission's contributor reporting requirements apply to a
wide range of entities, including all telecommunications carriers and
other providers of interstate telecommunications services that offer
telecommunications services for a fee. Thus, we expect that the rules
adopted in this proceeding could have a significant economic impact on
a substantial number of small entities. Of the estimated 5,000 filers
of the Telecommunications Reporting Worksheet, FCC Form 499, we do not
know how many are small entities, but we offer a detailed estimate of
the number of small entities within each of several major carrier-type
categories.
13. To estimate the number of small entities that could be affected
by these proposed rules, we first consider the statutory definition of
``small entity'' under the RFA. 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 that: (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). A small organization is generally ``any not-for-
profit enterprise which is independently owned and operated and is not
dominant in its field.''
14. The SBA has defined a small business for Standard Industrial
Classification (SIC) categories 4812 (Radiotelephone Communications)
and 4813 (Telephone Communications, Except Radiotelephone) to be small
entities when they have no more than 1,500 employees. We first discuss
the number of small telephone companies falling within these SIC
categories, then attempt to refine further those estimates to
correspond with the categories of telecommunications companies that are
commonly used under our rules.
15. 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.'' 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.
16. The most reliable source of information regarding the total
numbers of common carrier and related providers nationwide, including
the numbers of commercial wireless entities, appears to be data the
Commission publishes annually in its Trends in Telephone Service
report. According to data in the most recent report, there are 4,822
interstate carriers. These carriers include, inter alia, incumbent
local exchange carriers, competitive local exchange carriers,
competitive access providers, interexchange carriers, other wireline
carriers and service providers (including shared-tenant service
providers and private carriers), operator service providers, pay
telephone operators, providers of telephone toll service, wireless
carriers and services providers, and resellers.
17. Total Number of Telephone Companies Affected. The United States
Bureau of the Census (``the Census Bureau'') reports that, at the end
of 1992, there were 3,497 firms engaged in

[[Page 28722]]

providing telephone services, as defined therein, for at least one
year. This number contains a variety of different categories of
carriers, including local exchange carriers, interexchange carriers,
competitive access providers, cellular carriers, mobile service
carriers, operator service providers, pay telephone operators, PCS
providers, covered SMR providers, and resellers. It seems certain that
some of those 3,497 telephone service firms may not qualify as small
entities or small incumbent LECs because they are not ``independently
owned and operated.'' For example, a PCS provider that is affiliated
with an interexchange carrier having more than 1,500 employees would
not meet the definition of a small business. It seems reasonable to
conclude, therefore, that fewer than 3,497 telephone service firms are
small entity telephone service firms or small incumbent LECs that may
be affected by the decisions and rules adopted in this Order.
18. Wireline Carriers and Service Providers. SBA has developed a
definition of small entities for telephone communications companies
other than radiotelephone companies. The Census Bureau reports that,
there were 2,321 such telephone companies in operation for at least one
year at the end of 1992. According to SBA's definition, a small
business telephone company other than a radiotelephone company is one
employing no more than 1,500 persons. All but 26 of the 2,321 non-
radiotelephone companies listed by the Census Bureau were reported to
have fewer than 1,000 employees. Thus, even if all 26 of those
companies had more than 1,500 employees, there would still be 2,295
non-radiotelephone companies that might qualify as small entities or
small incumbent LECs. Although it seems certain that some of these
carriers are not independently owned and operated, we are unable at
this time to estimate with greater precision the number of wireline
carriers and service providers that would qualify as small business
concerns under SBA's definition. Consequently, we estimate that there
are fewer than 2,295 small entity telephone communications companies
other than radiotelephone companies that may be affected by the
decisions and rules adopted in this Order.
19. Local Exchange Carriers, Interexchange Carriers, Competitive
Access Providers, Operator Service Providers, Payphone Providers, and
Resellers. Neither the Commission nor SBA has developed a definition
particular to small local exchange carriers (LECs), interexchange
carriers (IXCs), competitive access providers (CAPs), operator service
providers (OSPs), payphone providers or resellers. The closest
applicable definition for these carrier-types under SBA rules is for
telephone communications companies other than radiotelephone (wireless)
companies. The most reliable source of information regarding the number
of these carriers nationwide of which we are aware appears to be the
data that we collect annually on the Form 499-A. According to our most
recent data, there are 1,335 incumbent LECs, 349 CAPs, 204 IXCs, 21
OSPs, 758 payphone providers and 541 resellers. Although it seems
certain that some of these carriers are not independently owned and
operated, or have more than 1,500 employees, we are unable at this time
to estimate with greater precision the number of these carriers that
would qualify as small business concerns under SBA's definition.
Consequently, we estimate that there are fewer than 1,335 incumbent
LECs, 349 CAPs, 204 IXCs, 21 OSPs, 758 payphone providers, and 541
resellers that may be affected by the decisions and rules adopted in
this Order.
20. Cellular Licensees. Neither the Commission nor the SBA has
developed a definition of small entities applicable to cellular
licensees. The applicable definition of small entity is the definition
under the SBA rules applicable to radiotelephone (wireless) companies.
This provides that a small entity is a radiotelephone company employing
no more than 1,500 persons. According to the Bureau of the Census, only
twelve radiotelephone firms from a total of 1,178 such firms which
operated during 1992 had 1,000 or more employees. Even if all twelve of
these firms were cellular telephone companies, nearly all cellular
carriers were small businesses under the SBA's definition. In addition,
we note that there are 1,758 cellular licenses; however, a cellular
licensee may own several licenses. According to the most recent Trends
Report, 806 carriers reported that they were engaged in the provision
of either cellular service or Personal Communications Service (PCS)
services, which are placed together in the data. We do not have data
specifying the number of these carriers that are not independently
owned and operated or have more than 1,500 employees, and are unable at
this time to estimate with greater precision the number of cellular
service carriers that would qualify as small business concerns under
the SBA's definition. We estimate that there are fewer than 806 small
cellular service carriers that may be affected by the proposed rules,
if adopted.
21. 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
definition of 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 definition under the SBA rules
applicable to Radiotelephone Communications companies. This definition
provides that a small entity is a radiotelephone company employing no
more than 1,500 persons. According to the Bureau of the Census, only 12
radiotelephone firms out of a total of 1,178 such firms which operated
during 1992 had 1,000 or more employees. If this general ratio
continues in the context of Phase I 220 MHz licensees, we estimate that
nearly all such licensees are small businesses under the SBA's
definition.
22. 220 MHz Radio Service--Phase II Licensees. The Phase II 220 MHz
service is a new service, and is subject to spectrum auctions. In the
220 MHz Third Report and Order, 62 FR 16004, April 3, 1997, we adopted
criteria for defining small and very small businesses for purposes of
determining their eligibility for special provisions such as bidding
credits and installment payments. We have defined 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. A very small business is defined as 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 definitions. An
auction of Phase II licenses commenced on September 15, 1998, and
closed on October 22, 1998. Two auctions of Phase II licenses have been
conducted. In the first auction, nine hundred and eight (908) licenses
were auctioned in 3 different-sized geographic areas: three nationwide
licenses, 30 Regional Economic Area Group Licenses, and 875 Economic
Area (EA) Licenses. Of the 908 licenses auctioned, 693 were sold.
Companies claiming small business status won: One of the Nationwide
licenses, 67% of the Regional licenses, and 54% of the EA licenses. The
second auction included 225 licenses: 216 EA licenses and 9 EAG

[[Page 28723]]

licenses. Fourteen companies claiming small business status won 158
licenses.
23. Private and Common Carrier Paging. In the Paging Third Report
and Order, we adopted criteria for defining small businesses and very
small businesses for purposes of determining their eligibility for
special provisions such as bidding credits and installment payments. We
have defined 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 defined as 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 definitions. An auction of Metropolitan Economic Area
(MEA) 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
Report, 427 carriers reported that they were engaged in the provision
of paging and messaging services. We do not have data specifying the
number of these carriers that are not independently owned and operated
or have more than 1,500 employees, and therefore are unable at this
time to estimate with greater precision the number of paging carriers
that would qualify as small business concerns under the SBA's
definition. Consequently, we estimate that there are fewer than 427
small paging carriers that may be affected by the decisions and rules
adopted in this Order. We estimate that the majority of private and
common carrier paging providers would qualify as small entities under
the SBA definition.
24. Broadband Personal Communications Service (PCS). The broadband
PCS spectrum is divided into six frequency 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 less than $40 million 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 their
affiliates, has average gross revenues of not more than $15 million for
the preceding three calendar years. These regulations defining ``small
entity'' in the context of broadband PCS auctions have been approved by
the SBA. No small businesses within the SBA-approved definition 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%
of the 1,479 licenses for Blocks D, E, and F. On March 23, 1999, the
Commission re-auctioned 347 C, D, E, and F Block licenses; there were
48 small business winning bidders. Based on this information, we
conclude that the number of small broadband PCS licensees will include
the 90 winning C Block bidders and the 93 qualifying bidders in the D,
E, and F blocks, plus the 48 winning bidders in the re-auction, for a
total of 231 small entity PCS providers as defined by the SBA and the
Commission's auction rules. 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.
25. Narrowband PCS. To date, two auctions of narrowband PCs
licenses have been conducted. Through these auctions, the Commission
has awarded a total of 41 licenses, out of which 11 were obtained by
small businesses. For purposes of the two auctions that have already
been held, small businesses were defined as entities with average gross
revenues for the prior three calendar years of $40 million or less. To
ensure meaningful participation of small business entities in the
auctions, the Commission adopted a two-tiered definition of small
businesses in the Narrowband PCS Second Report and Order, 65 FR 35875,
June 6, 2000. 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. These definitions have been approved by the
SBA. In the future, the Commission will auction 459 licenses to serve
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 auctions. 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 IRFA, 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.
26. Rural Radiotelephone Service. The Commission has not adopted a
definition of small entity specific to the Rural Radiotelephone
Service. A significant subset of the Rural Radiotelephone Service is
the Basic Exchange Telephone Radio Systems (BETRS). We will use the
SBA's definition applicable to radiotelephone companies, i.e., an
entity employing no more than 1,500 persons. There are approximately
1,000 licensees in the Rural Radiotelephone Service, and we estimate
that almost all of them qualify as small entities under the SBA's
definition.
27. Air-Ground Radiotelephone Service. The Commission has not
adopted a definition of small entity specific to the Air-Ground
Radiotelephone Service. We will use the SBA's definition applicable to
radiotelephone companies, 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 definition.
28. Specialized Mobile Radio (SMR). Pursuant to 47 CFR
90.814(b)(1), the Commission has defined ``small business'' for
purposes of auctioning 900 MHz SMR licenses, 800 MHz SMR licenses for
the upper 200 channels, and 800 MHz SMR licenses for the lower 230
channels on the 800 MHz band, as a firm that has had average annual
gross revenues of $15 million or less in the three preceding calendar
years. The SBA has approved this small business size standard for the
800 MHz and 900 MHz auctions. Sixty winning bidders for geographic area
licenses in the 900 MHz SMR band qualified as small business under the
$15 million size standard. The auction of the 525 800 MHz SMR
geographic area licenses for the upper 200 channels began on October
28, 1997, and was completed on December 8, 1997. Ten winning bidders
for geographic area licenses for the upper 200 channels in the 800 MHz
SMR band qualified as small businesses under the $15 million size
standard. An auction of 800 MHz SMR geographic area licenses for the
General Category channels began on August 16, 2000 and

[[Page 28724]]

was completed on September 1, 2000. Of the 1,050 licenses offered in
that auction, 1,030 licenses were sold. Eleven winning bidders for
licenses for the General Category channels in the 800 MHz SMR band
qualified as small business under the $15 million size standard. In an
auction completed on December 5, 2000, a total of 2,800 EA licenses in
the lower 80 channels of the 800 MHz SMR service were sold. Of the 22
winning bidders, 19 claimed small business status. In addition, there
are numerous incumbent site-by-site SMR licenses on the 800 and 900 MHz
band.
29. We do 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. We
assume, for purposes of this FRFA, that all of the remaining existing
extended implementation authorizations are held by small entities, as
that term is defined by the SBA.
30. For geographic area licenses in the 900 MHz SMR band, there are
60 who qualified as small entities. For the 800 MHz SMR's, 38 are small
or very small entities.
4. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements
31. Any decisions on rule changes adopted in this proceeding
potentially could modify the reporting and recordkeeping requirements
of telecommunications service providers regulated under the
Communications Act. As discussed previously, we potentially could
require telecommunications service providers to file additional and/or
different monthly or quarterly reports. In addition, we seek comment on
whether to modify or eliminate the interim safe harbor for wireless
telecommunications carriers. We also seek comment on whether to
eliminate the de minimis exemption from universal service contribution
requirements. Any such reporting requirements potentially could require
the use of professional skills, including legal and accounting
expertise. Without more data, we cannot accurately estimate the cost of
compliance with a carrier surcharge by small telecommunications service
providers. In this NPRM, we therefore seek comment on the frequency
with which carriers subject to a carrier surcharge should submit
reports to USAC, the types of burdens carriers will face in
periodically submitting reports to USAC, and whether the costs of such
reporting are outweighed by the potential benefits of a carrier
surcharge. Entities, especially small businesses, are encouraged to
quantify the costs and benefits of carrier surcharge reporting
requirement proposals.
5. Steps Taken to Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
32. The RFA requires an agency to describe any significant
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.
33. As discussed previously, this NPRM seeks comment on how to
streamline and reform both the manner in which the Commission assesses
carrier contributions to the universal service fund and the manner in
which carriers may recover those costs from their customers. We seek
comment on whether and how to revise the universal service contribution
methodology. We seek comment on specific proposals to require carriers
to contribute based on a percentage of collected revenues, or to
contribute on the basis of a flat-fee charge, such as a per-line
charge. Additionally, we seek comment on limiting the manner in which
carriers recover contribution costs from end users. If carriers choose
to recover universal service contributions from their end users through
line items, we propose to require carriers to do so through a uniform
universal service line item that corresponds to the contribution
assessment on the carrier. The NPRM also seeks comment on any other
mechanisms for the assessment and recovery of universal service
contributions.
34. Wherever possible, the NPRM proposes general rules, or
alternative rules to reduce the administrative burden and cost of
compliance for small telecommunications service providers. As
discussed, under the current universal service contribution rules
interstate telecommunications service providers whose annual universal
service contribution is expected to be less than $10,000 are not
required to contribute to the universal service mechanisms. In this
NPRM, we seek comment on the impact of the proposed contribution
assessment methodologies on the current de minimis exemption to the
universal service contribution requirement. We specifically seek
comment on whether to retain, modify, or eliminate the de minimis
exemption. We also more generally seek comment from small businesses on
the costs and benefits of reporting requirements associated with the
various proposed universal service assessment methodologies. Finally,
the NPRM seeks comment on measures to avoid significant economic impact
on small business entities, as defined by section 601(3) of the
Regulatory Flexibility Act.
6. Federal Rules that May Duplicate, Overlap, or Conflict with the
Proposed Rules
35. None.

D. Comment Filing Procedures

36. Pursuant to sections 1.415 and 1.419 of the Commission's rules,
47 CFR 1.415, 1.419, interested parties may file comments June 25,
2001, and reply comments July 9, 2001. Comments may be filed using the
Commission's Electronic Comment Filing System (ECFS) or by filing paper
copies.
37. Comments filed through the ECFS can be sent as an electronic
file via the Internet to http://www.fcc.gov/e-file/ecfs.html>.
Generally, only one copy of an electronic submission must be filed. If
multiple docket or rulemaking numbers appear in the caption of this
proceeding, however, commenters must transmit one electronic copy of
the comments to each docket or rulemaking number referenced in the
caption. In completing the transmittal screen, commenters should
include their full name, Postal Service mailing address, and the
applicable docket or rulemaking number. Parties may also submit an
electronic comment by Internet e-mail. To get filing instructions for
e-mail comments, commenters should send an e-mail to ecfs@fcc.gov, and
should include the following words in the body of the message, ``get
form your e-mail address>.'' A sample form and directions will be sent
in reply.
38. Parties who choose to file by paper must file an original and
four copies of each filing. If more than one docket or rulemaking
number appear in the caption of this proceeding, commenters must submit
two additional copies for each additional docket or rulemaking number.
All filings must be sent to the Commission's Secretary, Magalie Roman
Salas, Office of the Secretary, Federal Communications Commission, 445
12th Street, S.W., Washington, D.C. 20554.

[[Page 28725]]

39. Parties who choose to file by paper should also submit their
comments on diskette. These diskettes should be submitted to: Sheryl
Todd, Accounting Policy Division, 445 12th Street, S.W., Washington,
D.C. 20554. Such a submission should be on a 3.5-inch diskette
formatted in an IBM compatible format using Word or compatible
software. The diskette should be accompanied by a cover letter and
should be submitted in ``read only'' mode. The diskette should be
clearly labeled with the commenter's name, proceeding (including the
docket number, in this case CC Docket No. 96-45, type of pleading
(comment or reply comment), date of submission, and the name of the
electronic file on the diskette. The label should also include the
following phrase ``Disk Copy--Not an Original.'' Each diskette should
contain only one party's pleadings, preferably in a single electronic
file. In addition, commenters must send diskette copies to the
Commission's copy contractor, International Transcription Service,
Inc., 1231 20th Street, N.W., Washington, D.C. 20037.
40. Written comments by the public on the proposed and/or modified
information collections are due on or before June 25, 2001. Written
comments must be submitted by the Office of Management and Budget (OMB)
on the proposed and/or modified information collections on or before
July 23, 2001.

III. Ordering Clauses

41. Pursuant to the authority contained in sections 4(i), 4(j),
201-205, 254, and 403 of the Communications Act of 1934, as amended,
this Notice of Proposed Rulemaking is adopted.
42. The Commission's Consumer Information Bureau, Reference
Information Center, shall send a copy of this Notice of Proposed
Rulemaking, including the Initial Regulatory Flexibility Analysis, to
the Chief Counsel for Advocacy of the Small Business Administration.

List of Subjects 47 CFR Part 54

Reporting and recordkeeping requirements, Telecommunications,
Telephone.

Federal Communications Commission.
William F. Caton,
Deputy Secretary.
[FR Doc. 01-13114 Filed 5-23-01; 8:45 am]
BILLING CODE 6712-01-P