Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | CC Docket No. 96-45          |
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| Federal-State Joint Board on     | ) | CC Docket No. 98-171         |
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| Universal Service                | * | CC Docket No. 90-571         |
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| 1998 Biennial Regulatory Review  | * | CC Docket No. 92-237         |
| -- Streamlined Contributor       | * |                              |
| Reporting Requirements           | ) | NSD File No. L-00-72         |
| Associated with Administration   | * |                              |
| of Telecommunications Relay      | * | CC Docket No. 99-200         |
| Service, North American          |   |                              |
| Numbering Plan, Local Number     | * | CC Docket No. 95-116         |
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**NOTICE OF PROPOSED RULEMAKING**

**Adopted:** April 26, 2001 **Released:** May 8, 2001

**Comment Date: 30 days from publication in the Federal Register**

**Reply Comment Date: 45 days from publication in the Federal Register**

By the Commission: Commissioner Ness issuing a statement.

**TABLE OF CONTENTS**

Paragraph

I. Introduction 1

II\. Background 7

A. The Act 7

B. The Current Methodology 8

C. Market Conditions 12

III\. Issues for Comment 16

A. Assessment of Universal Service Contributions 17

1\. Assessment on a Revenue Basis 18

2\. Assessment on a Flat-Fee Basis 25

3\. *De Minimis* Carriers 31

4\. Limited International Revenues Exception 32

5\. Fund Sufficiency 33

6\. Carrier Reporting 37

7\. Enforcement & Auditing 39

8\. Administrative Burdens on USAC 40

9\. Transition 41

B. Recovery of Universal Service Contributions 42

1\. Lifeline Exception 45

2\. Recovery Limitations for Incumbent Local Exchange Carriers 46

3\. Legal Authority 47

IV\. Procedural Issues 50

A. Ex Parte 50

B. Initial Paperwork Reduction Act of 1995 Analysis 51

C. Initial Regulatory Flexibility Act Analysis 52

D. Comment Filing Procedures 79

V. Ordering Clauses 84

# Introduction

1.  In this Notice of Proposed Rulemaking (Notice), 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.[^1] Section 254 of the Communications Act of 1934, as
    amended by the Telecommunications Act of 1996 (the Act),[^2]
    requires carriers providing interstate telecommunications services
    to contribute to universal service.[^3] Under the current universal
    service rules, carriers' contributions are assessed as a percentage
    of their interstate and international end-user telecommunications
    revenues.[^4] 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.[^5]

2.  In this Notice, 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.[^6]
    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."[^7] 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.[^8] We also are seeing certain
    wireline interexchange carriers suffer declining revenues in light
    of growing competition.[^9] 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.[^10] 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.[^11] 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.[^12]
    The major interexchange carriers, however, imposed line-item fees on
    residential and business customers ranging from approximately 5.9
    percent to 8.6 percent.[^13] For the second quarter of 2001, after
    the Commission established a contribution factor of 6.8823%,[^14]
    one interexchange carrier raised its residential line item to
    12%.[^15] 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.[^16]

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 Notice,
    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).

# Background

## The Act

7.  The assessment and recovery of universal service contributions are
    governed by a statutory framework established by Congress in the
    Act.[^17] In section 254 of the Act, Congress instructed the
    Commission to establish support mechanisms with the goal of ensuring
    the delivery of affordable telecommunications service to all
    Americans, including consumers in high-cost areas, low-income
    consumers, eligible schools and libraries, and rural health care
    providers.[^18] Section 254(d) of the Act requires 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."[^19] In addition to the specific
    universal service provisions of section 254, sections 201(b) and
    202(a) of the Act also govern carrier services and charges.[^20]
    Section 201(b) requires that all carrier charges, practices,
    classifications, and regulations "for and in connection with"
    interstate communications service be just and reasonable, and gives
    the Commission jurisdiction to enact rules to implement that
    requirement.[^21] Section 202(a) of the Act prohibits "unjust or
    unreasonable discrimination" in connection with the provision of
    communications services. Section 202(a) also prohibits carriers from
    making or giving "any undue or unreasonable preference or advantage
    to any particular person, class of persons, or locality, or to
    subject any particular person, class of persons, or locality to any
    undue or unreasonable prejudice or disadvantage."[^22] Thus, our
    overarching goal in this Notice is to explore ways to reform and
    streamline the universal service contribution methodology so that it
    remains consistent with the objectives of section 254, while
    ensuring that carrier conduct regarding universal service stays
    within the bounds of reasonableness that Congress established in
    sections 201 and 202.

## The Current Methodology

8.  In the *Universal Service Order*, the Commission decided to assess
    contributions on carriers' end-user telecommunications
    revenues.[^23] The Commission did so after considering the
    Recommended Decision of the Joint Board and the record developed at
    that time.[^24] Specifically, the Commission concluded that
    assessment based on end-user telecommunications revenues would be
    competitively neutral, easy to administer, and would eliminate some
    economic distortions associated with an assessment based on gross
    telecommunications revenues.[^25] At that time, the Commission
    declined to adopt a mandatory end-user surcharge to collect
    contributions, agreeing with the state members of the Joint Board
    that a mandatory end-user surcharge "would dictate how carriers
    recover their contribution obligations and would violate Congress's
    mandate."[^26] The Commission expressed concern that mandating
    recovery through an end-user surcharge might affect carriers'
    flexibility to offer, for example, bundled services or new pricing
    options, possibly resulting in fewer options for consumers.[^27]
    Instead, the Commission allowed carriers to decide for themselves
    whether, how, and how much to recover from their customers.[^28] The
    Commission required only that carriers 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.[^29]

9.  In the *Second Order on Reconsideration*, the Commission set forth
    the specific method of computation for universal service
    contributions.[^30] The Commission also designated the Universal
    Service Administrative Company (USAC) as the entity responsible for
    administering the universal service support mechanisms, including
    billing contributors, collecting contributions to the universal
    service support mechanisms, and disbursing universal service support
    funds.[^31] To collect information from contributors about their
    end-user telecommunications revenues, the Commission required
    contributors to submit to USAC a Telecommunications Reporting
    Worksheet (Worksheet) semi-annually. Contributions were based on
    billed end-user telecommunications revenues from the prior
    year.[^32] Therefore, the interval between the accrual of revenues
    by carriers and the assessment of universal service contributions
    based on those revenues was 12 months.[^33]

10. In order to ensure that universal service contributions are assessed
    on revenue data that is more reflective of current market
    conditions, we recently reduced the interval between the accrual of
    revenues by carriers and assessment of universal service
    contributions based on those revenues from 12 months to an average
    interval of six months.[^34] We concluded that the shortened
    interval allows contributions to better reflect market trends
    influencing carrier revenues, such as the entry of new providers
    into the interstate marketplace.[^35]

11. The Commission also has implemented rules and guidelines meant to
    reduce administrative burdens for certain categories of carriers.
    For example, the Commission established an interim safe harbor for
    calculating the percentage of interstate revenues of wireless
    telecommunication providers for universal service contribution
    purposes. Instead of reporting their actual interstate and
    international end-user telecommunications revenues, wireless
    carriers may simply report a fixed percentage of revenues, which
    ranges from one to 15 percent.[^36] In addition, our rules provide
    that 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.[^37] Our rules also provide a limited exception to
    universal service contribution requirements for carriers with
    interstate end-user telecommunications revenues that constitute less
    than eight percent of their combined interstate and international
    end-user telecommunications revenues.[^38]

## Market Conditions

12. As discussed above, the telecommunications marketplace has undergone
    dramatic changes that may necessitate a reexamination of the way in
    which we recover universal service contributions. For example, we
    have seen considerable growth in the wireless telecommunications
    sector. Because of growth in the offering of bundled local and long
    distance wireless services, many consumers have increased their use
    of wireless long-distance service.[^39] The number of wireless
    telephony subscribers rose from 55 million in 1997 to 86 million in
    1999.[^40] Total interstate and international revenues for the
    wireless telecommunications industry rose from approximately \$2.3
    billion in 1997 to over \$5.3 billion in 1999.[^41] In light of the
    increase in the use of wireless services and bundled local and long
    distance wireless offerings, it is possible that the actual
    percentage of interstate wireless telecommunications revenues may
    now significantly exceed the Commission's interim safe harbor
    percentages.[^42]

13. Other trends in the telecommunications marketplace also may have
    implications for the existing contribution methodology. Carriers
    increasingly are bundling interstate and intrastate services, as
    well as telecommunications and non-telecommunications services.
    Bundling services in this way may affect carriers' ability to
    allocate interstate telecommunications services properly for
    contribution purposes.[^43] In addition, the development of "voice
    over Internet" technology may have effects on the amount of total
    revenues reported under the current system.[^44] Finally, there may
    be additional legal, technological and market developments that
    could significantly impact the manner in which universal service
    contributions should be made, many of which we cannot even foresee
    today.[^45]

14. We also recently have seen several significant developments in the
    interstate telecommunications marketplace that may impact the
    effectiveness of the existing contribution methodology, which is
    based on historical end-user telecommunications revenues. For
    example, certain carriers have argued that a contribution
    methodology based on historical revenues may give a competitive
    advantage to new entrants to the long distance marketplace,
    particularly the RBOCs. These new entrants are not required to
    contribute to universal service for six months because they have no
    historical revenues upon which to base contributions. Accordingly,
    these new entrants may be able to undercut the prices offered by
    established providers who are contributing to universal service. In
    subsequent years, to the extent that new entrants increase their
    long distance market share and recover contributions against current
    end-user revenues, the revenue base against which they recover
    contributions would remain greater than the revenue base against
    which their contributions are assessed, creating a potential for a
    continuing competitive advantage.[^46]

15. An assessment mechanism based on historical revenues also may create
    a competitive disadvantage for carriers with decreasing interstate
    revenues. Recently, we have seen a decline in wireline revenue for
    certain interexchange carriers.[^47] To the extent that
    interexchange carriers continue to lose market share, they may have
    to recover from a declining current revenue base their universal
    service contributions assessed against a larger revenue base from a
    prior period.[^48]

# Issues for Comment

16. We seek comment on how to streamline and reform both the manner in
    which the Commission assesses carrier contributions to the universal
    service mechanisms and the manner in which carriers may recover
    those costs from their customers. Specifically, we seek comment on
    whether and how to modify the current universal service contribution
    methodology. We also seek comment on whether to develop a new
    methodology for assessing and recovering universal service
    contributions. Proposed methodologies should be adaptable to changes
    in the marketplace, competitively neutral, and relatively simple to
    administer. Although we have specific proposals for the assessment
    and recovery of universal service contributions, as detailed
    below,[^49] we seek comment on a broad range of ideas about
    universal service contributions in general.

## Assessment of Universal Service Contributions

17. As described above, section 254 of the Act requires providers of
    "interstate telecommunications services" to contribute to universal
    service on an equitable and nondiscriminatory basis.[^50] Thus, in
    establishing a universal service contribution methodology, the
    Commission must choose a way to measure the amount of interstate
    telecommunications services provided by each carrier, so that the
    Commission can equitably and nondiscriminatorily assess
    contributions. As previously mentioned, the Commission has chosen
    revenues to gauge the amount of interstate telecommunications
    service provided. Below, we seek comment on whether to continue
    using revenues as a measure of interstate telecommunications service
    and, if so, how to ensure that a revenues-based methodology remains
    consistent with the Act over time. We also seek comment on
    alternative ways to measure the amount of interstate
    telecommunications service provided, such as a flat "per-unit"
    assessment (e.g., a fixed monetary assessment per-line, per-account,
    etc.).[^51] In commenting on the proposals outlined below, we ask
    parties to consider the universal service principles of the Act, as
    well as the burdens on contributors, consumers, the Commission, and
    USAC.

### Assessment on a Revenue Basis

18. Under the current universal service rules, the interval between the
    reporting of gross-billed end-user revenues and the assessment of
    carrier contributions based on those revenues is approximately six
    months.[^52] Although the Commission previously concluded that
    assessment based on gross-billed end-user telecommunications
    revenues is competitively neutral, easy to administer, and
    eliminates some economic distortions associated with an assessment
    methodology based on gross telecommunications revenues,[^53]
    additional modifications to the current assessment methodology may
    be warranted in light of rapid changes in the telecommunications
    marketplace. We therefore seek comment on whether modifications
    should be made to the manner in which the Commission assesses
    universal service contributions.

19. We ask commenters to take a fresh look at how the universal service
    contribution system should operate, especially in light of changing
    market conditions. We seek comment on ways to simplify for carriers
    the assessment and recovery of universal service contributions.
    Commenters should put forth proposals that would satisfy the Act's
    mandate of equitable and nondiscriminatory contributions, but also
    would perhaps decrease or streamline reporting requirements, or
    enable carriers to simplify the manner in which they calculate
    line-item fees. In order to relieve contributors from having to
    recover additional amounts over their assessed contributions in
    order to cover, for example, costs associated with uncollectibles
    and credits, we seek comment on whether universal service
    contributions should be based on revenues other than gross-billed
    end-user telecommunications revenues.

20. Some carriers have argued that the existing mechanism, which is
    based on historical revenues, may give competitive advantages to
    certain new entrants, while disadvantaging carriers with declining
    revenues.[^54] In order to further reduce the interval between the
    reporting of revenues and the assessment of contributions, we seek
    comment on whether to assess universal service contributions based
    on current or projected revenues. As discussed above, the interval
    between the reporting of revenues and the assessment of carrier
    contributions based on those revenues is approximately six months.

21. We also seek comment on measures that should be taken to ensure that
    the current contribution methodology better reflects changing market
    conditions. We seek comment, for example, on whether to consider
    modifying the interim safe harbor for the reporting of interstate
    and international end-user revenues by wireless telecommunications
    providers. We also seek comment on whether to modify or eliminate
    the so-called *de minimis* exception, which exempts interstate
    telecommunications service providers whose annual universal service
    contribution is expected to be less than \$10,000 from contributing
    to the universal service mechanisms.[^55] We seek comment on how to
    allocate revenues for bundled interstate and intrastate
    telecommunications and non-telecommunications services.[^56] Parties
    also are encouraged to propose other modifications to the assessment
    of universal service contributions.

22. We specifically seek comment on a proposal to require carriers to
    contribute to the universal service mechanisms based on a percentage
    of their collected, instead of gross-billed, interstate and
    international end-user telecommunications revenues.[^57] Each
    quarter, the Commission would calculate a percentage contribution
    factor, based either on projected or historical carrier end-user
    revenues reported to USAC either on a quarterly or annual
    basis.[^58] Carriers then would be required to contribute, on a
    monthly basis, an amount equal to the percentage contribution factor
    multiplied by collected interstate and international end-user
    telecommunications revenue.[^59] To enable the Commission to monitor
    compliance with the contribution rules and to enable carriers to
    'true-up' contribution amounts, carriers might be required to report
    their collected revenues on a regular basis.

23. We seek comment on the relative advantages of this proposal over the
    current system for assessing contributions. We specifically seek
    comment on whether such a proposal would simplify the assessment and
    recovery of universal service contributions for carriers and
    consumers. Under the proposed mechanism, for example, carriers no
    longer would need to engage in complex calculations to account for
    such variables as uncollected revenues, credits, and the need to
    recover universal service contributions from a declining revenue
    base. Because the proposed methodology would be based on collected,
    as opposed to gross-billed revenues, it should eliminate a carrier's
    need to recover from customers amounts in addition to the assessed
    contribution percentage. We seek comment on whether the assessment
    of contributions based on a percentage of collected revenues would
    relieve carriers of the need to recover such additional amounts.
    Furthermore, because a carrier's assessment amount would be
    dependent on current collected revenues, rather than historical
    gross-billed revenues, the proposal would eliminate concerns about
    the interval between the reporting of revenues and the assessment of
    universal service contributions. The proposed mechanism therefore
    would not place carriers with declining interstate end-user
    telecommunications revenues at a competitive disadvantage to
    carriers with increasing revenues. We seek comment on this aspect of
    the proposal. We also ask commenters to generally address the issue
    of whether this proposal would satisfy the Act's requirement that
    mechanisms be sufficient and predictable.[^60] We also seek comment
    on whether this proposal is competitively neutral.

24. If an assessment methodology based on a percentage of collected
    revenues is adopted, we seek comment on whether to continue using
    the Commission's interim safe harbor for calculating the percentage
    of interstate revenues for wireless telecommunications providers. As
    discussed above, the rules provide a safe harbor for wireless
    telecommunications providers when calculating the percentage of
    interstate revenues for universal service contribution
    purposes.[^61] The Commission currently does not seek supporting
    data from cellular, broadband personal communications service (PCS),
    and certain types of Specialized Mobile Radio (SMR) providers[^62]
    regarding their reported percentage of interstate telecommunications
    if they report at least 15 percent of their cellular, broadband PCS,
    and SMR telecommunications revenues as interstate.[^63] The interim
    safe harbor percentages for paging providers and SMR providers that
    do not primarily provide wireless telephony are 12 percent and one
    percent, respectively.[^64] Because wireless telecommunications
    providers increasingly are offering bundled local and long distance
    wireless services in a one-rate package, many consumers may be
    shifting their long distance calling from traditional wireline
    service to wireless service.[^65] It is possible therefore that the
    actual percentage of interstate telecommunications may now
    significantly exceed the safe harbor percentages. We seek comment on
    whether to increase the safe harbor percentages and alternative
    methods for allocating interstate and intrastate revenues for
    wireless telecommunications providers. We also seek comment on
    whether all SMR providers should be subject to the same safe harbor
    percentage as cellular and broadband PCS providers. If an increase
    in the interim safe harbor percentage is proposed, we seek comment
    on what the new percentage should be.

### Assessment on a Flat-Fee Basis

25. We also seek comment on a proposal to assess universal service
    contributions on a flat-fee basis, such as a per-line or per-account
    charge.[^66] The Commission would calculate a flat per-line or
    per-account assessment on a quarterly basis using projected or
    historical line-counts or numbers of accounts reported to USAC
    either on a quarterly or annual basis.[^67] Each month, carriers
    would be required to contribute on a flat-fee basis, based on the
    carriers' current line counts or number of accounts. The amount of
    the per-line or per-account charge would be the same regardless of
    the level of interstate revenue or traffic associated with a given
    line or account. We therefore seek comment on whether levels of
    interstate revenues are relevant in a flat-fee environment. To
    enable the Commission to monitor compliance with the contribution
    rules and to enable carriers to 'true-up' contribution amounts,
    carriers might be required to periodically report their line counts
    or number of accounts.

26. We seek comment on the relative advantages of assessing
    contributions on a flat-fee basis. We specifically seek comment on
    whether the assessment and recovery of contributions on a flat-fee
    basis would be simpler for carriers. Similar to the assessment of
    contributions based on a percentage of collected revenues,
    assessment on a flat-fee basis may eliminate the need for complex
    calculations to determine whether to recover amounts in addition to
    contribution assessments. If we adopted a methodology that required
    carriers to contribute based on their current line counts or number
    of accounts, the assessment of contributions on a flat-fee basis
    also may eliminate concerns associated with the existing mechanism's
    interval between the reporting of revenues and the assessment of
    universal service contributions. We expect that the proposed
    mechanism therefore would not place competitors with declining
    interstate end-user telecommunications revenues at a competitive
    disadvantage compared to competitors with increasing revenues. We
    seek comment on this proposal.

27. We seek comment on the extent to which a flat "per-unit" assessment
    would reduce the administrative burden for carriers by requiring
    them only to file line-counts or number of accounts by service and
    customer category and by relieving them of their obligation to
    periodically report their revenues. We seek comment on how
    frequently carriers should report their line or account information.
    We also seek comment on the administrative impact of a flat-fee
    assessment methodology on USAC as the administrator of the universal
    service fund.

28. We also seek comment on the resulting consumer benefits of a flat
    "per-unit" assessment. As discussed below, to the extent that we
    adopt carrier recovery limitations, carriers choosing to recover
    through line items on bills would have identical flat-fee line items
    on their bills.[^68] We seek comment on whether a flat-fee
    assessment would result in more equitable recovery of universal
    service contributions because all carriers would have the same
    line-item amount across the board. To the extent that the flat-fee
    assessment is reflected as a line item on customer bills, we also
    seek comment on whether this methodology would make it easier for
    consumers to compare carrier rates.

29. We additionally seek comment on whether there are any disadvantages
    to this proposal. We note, for example, that unlike a revenues-based
    assessment methodology, a flat per-line or per-account assessment
    methodology would not be usage based. Customers would be charged the
    same amount regardless of the overall size of their bill. We seek
    comment on whether this proposal might shift a disproportionate
    share of the carrier's universal service contributions to certain
    customers or classes of customers, such as low-volume users.[^69]
    Furthermore, the Commission previously decided not to adopt
    proposals to calculate universal service contributions entirely on
    non-revenues-based measures, such as on a flat-fee basis.[^70] The
    Commission expressed concern that a non-revenues-based approach may
    not be competitively neutral because it may inadvertently favor
    certain services or providers over others.[^71] We therefore seek
    comment on whether such a proposed methodology would be
    competitively neutral in today's marketplace.

30. In order to address some of these competitive concerns, we also seek
    comment on how a flat "per-unit" assessment should be calculated and
    whether such assessment should vary for different types of lines and
    different types of users.[^72] In particular, we seek comment on
    whether there should be different flat-fee assessments for
    residential subscribers (primary and secondary lines), single-line
    businesses, and multi-line businesses. We seek comment on how flat
    fees should be assessed when there is more than one provider
    associated with a particular line, such as a local service provider
    and a presubscribed interexchange carrier. We also seek comment on
    whether there should be different assessments for different types of
    service offerings, and how those categories should be defined.
    Finally, we seek comment on whether there should be different
    assessments for different types of service providers, such as
    wireline and wireless telecommunications providers, or subcategories
    of providers such as paging providers. Commenters should address
    whether treating different categories of customers differently will
    perpetuate or exacerbate any problems that may have arisen under the
    traditional approach of pricing local services differently based on
    the category of customer. In particular, we seek comment on whether
    treating different customers differently would be consistent with
    the Commission's universal service, access, and other
    pro-competitive reforms.

### *De Minimis* Carriers 

31. We seek comment on the impact of these proposals on the current *de
    minimis* exemption to the universal service contribution
    requirement. Under section 54.708 of the Commission's 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.[^73] In support of the *de minimis* exemption, the
    Commission concluded that compliance costs associated with
    contributing to the universal service mechanisms should not exceed
    contribution amounts.[^74] To the extent that the administrative
    costs of contributing to the universal service mechanisms have
    declined over time, we seek comment on whether the *de minimis*
    exemption should be modified or eliminated. In particular, we seek
    comment from *de minimis* carriers on the administrative burdens
    associated with requiring them to contribute to the universal
    service mechanisms. We request comment from USAC on the
    administrative burdens associated with processing additional filings
    from *de minimis* carriers. We also seek comment on whether and how
    carriers should true-up contribution amounts to reflect changes in
    their *de minimis* status during the relevant reporting period.

### Limited International Revenues Exception

32. We also seek comment on whether to modify the limited exception to
    our contribution requirements for carriers with a low percentage of
    interstate end-user telecommunications revenues. Under section
    54.706(c) of our rules, a provider of interstate and international
    telecommunications is not required to contribute based on its
    international telecommunications end-user revenues if its interstate
    end-user telecommunications revenues constitute less than eight
    percent of its combined interstate and international end-user
    telecommunications revenues.[^75] The rule is intended to exclude
    from the contribution base the international end-user
    telecommunications revenues of any telecommunications provider whose
    annual contribution, based on the provider's interstate and
    international end-user telecommunications revenues, would exceed the
    amount of the provider's interstate end-user telecommunications
    revenues.[^76] When the rule was implemented in November 1999, the
    universal service contribution factor was 5.8995 percent,[^77] and
    the Commission anticipated that the universal service contribution
    factor would not exceed eight percent in the near future.[^78] As
    discussed previously, the Commission recently established a
    universal service contribution factor of 6.8823 percent.[^79] We
    therefore seek comment on whether to increase the percentage
    threshold for carriers to qualify for the limited international
    revenue exception to our universal service contribution
    requirements. We also seek comment on whether and how to modify the
    limited international revenue exception if we adopt a proposal to
    assess contributions on a flat-fee basis. We specifically seek
    comment from carriers with a low percentage of interstate end-user
    telecommunications revenues.

### Fund Sufficiency

33. We seek comment on ways to ensure fund sufficiency under the
    proposed assessment methodologies. The current assessment
    methodology, which uses historical revenue data from a prior
    quarter, does not raise significant fund sufficiency issues because
    the Commission knows the exact amount of the revenue base when it
    calculates carrier contribution assessments.[^80] The streamlined
    assessment proposals would require the Commission to calculate the
    quarterly contribution factor based on an estimate of universal
    service funding requirements (as it does now) and an estimate of
    collected revenues, line counts, or accounts in the next quarter.
    Because the Commission cannot predict with complete accuracy the
    collected revenues, line counts, or accounts in each quarter, the
    proposals create the possibility, however remote, of an occasional
    shortfall in the universal service fund. We seek comment on which of
    these approaches, a revenues-based proposal or a flat-fee proposal,
    is more likely to result in a shortfall in the fund, and on the
    likely magnitude of a shortfall. We emphasize that commenters should
    address the issue of whether these proposals would satisfy the Act's
    requirement that universal service mechanisms be sufficient and
    predictable.[^81]

34. We ask commenters to address whether a reserve should be established
    to guard against an unexpected shortfall in the fund that may result
    if Commission estimates are not correct. To the extent that a
    reserve fund is appropriate, we seek detailed comment on the
    appropriate size of such a reserve, factors impacting its size, and
    how a reserve fund should be collected and maintained.

35. We also seek comment on an alternative method to ensure fund
    sufficiency that would not require the creation of a reserve fund.
    Currently, USAC allocates collected contributions into separate
    accounts for the different universal service mechanisms (i.e.,
    High-Cost, Low-Income, Schools and Libraries, and Rural Health
    Care). In the event of a shortfall in a particular account, we seek
    comment on a proposal to cover the shortfall using available funds
    from a different mechanism's account. We ask for comment on whether
    this alternative would be appropriate or useful and whether a
    reserve fund might still be necessary.

36. We also seek comment on the methodology the Commission should use,
    for purposes of establishing a quarterly contribution factor, to
    estimate collected revenues, line counts, or accounts. For example,
    we seek comment whether estimates of collected revenues, line
    counts, or accounts should be based on historical data or trends
    from prior periods or on future projections. As an alternative to
    the Commission estimating carrier revenues, line counts, or
    accounts, we seek comment on whether to require carriers to submit
    annual and/or quarterly estimates of their collected interstate and
    international end-user revenues, line counts, or accounts, which
    would serve as the basis for quarterly assessments. We seek comment
    on the advantages and/or disadvantages of basing quarterly
    assessments on the carriers' own estimates as opposed to the
    Commission's estimates.

### Carrier Reporting

37. We seek comment on whether and how these proposals would reduce
    existing carrier reporting requirements. Under the revised
    methodology we recently adopted, carriers will report their
    gross-billed end-user telecommunications revenues on a quarterly
    basis in FCC Form 499-Q, and on an annual basis in FCC Form
    499-A.[^82] We seek comment on whether carrier reporting
    requirements should be modified consistent with these proposals, and
    on the administrative burdens such changes would impose on carriers.
    In particular, we seek comment on whether carriers should report
    their collected revenues, line counts, or number of accounts on a
    quarterly and/or annual basis. We additionally seek comment on the
    administrative burdens associated with requiring carriers to submit
    quarterly and/or annual reports of their projected or historical
    collected revenues, line counts, or number of accounts. Where
    possible, commenters, especially small businesses, should quantify
    the costs and benefits of various approaches. We also seek comment
    on whether USAC should use the data submitted by carriers on a
    quarterly and/or annual basis to perform true-ups on contributions.

38. We further note that the revenue information currently reported in
    FCC Form 499-A also is used for the Telecommunications Relay
    Service, North American Numbering Plan, Local Number Portability,
    and regulatory fees administration programs.[^83] Any changes to the
    information submitted in FCC Form 499-A could impact these other
    programs. We seek comment on such impact, as well as proposals to
    minimize this impact. Commenters should address whether changes in
    information submitted would be inconsistent with any statutory or
    other requirements for these non-universal service programs.

### Enforcement & Auditing 

39. Commenters are invited to address whether we should require
    additional steps to ensure that, under the measures proposed herein,
    carriers accurately report the relevant information and contribute
    in a timely manner. For example, we seek comment on whether USAC
    should have additional oversight responsibilities to monitor carrier
    compliance with reporting and contribution requirements. In
    addition, we seek comment on proposals that would minimize the
    potential for carrier gaming and on the extent to which fund
    sufficiency could be affected by a carrier's ability to underreport
    in the early months of a reporting period in order to reduce current
    contribution obligations.[^84]

### Administrative Burdens on USAC

40. We additionally seek comment on the administrative burdens
    associated with modifying the current mechanism for assessing
    universal service contributions. In particular, we ask USAC to
    quantify the administrative burdens associated with the
    above-described proposals. For example, we seek comment from USAC on
    the administrative costs associated with carrier reporting
    obligations under the proposed assessment methodologies. We also ask
    USAC to comment on the costs associated with ensuring that carriers
    accurately report revenues, lines, or accounts and contribute in a
    timely manner.

### Transition

41. We also seek comment on how to transition from the existing
    contribution assessment methodology to the proposed regimes. In
    particular, we ask commenters to address the timing of such
    transitions, including when carriers should be required to begin
    contributing to the universal service mechanisms under the new
    regime, and how to "close-out" the assessment of contributions under
    the existing methodology.

## Recovery of Universal Service Contributions

42. To ensure that carrier recovery of universal service contributions
    remains within the bounds of reasonableness as prescribed by
    sections 201 and 202 of the Act,[^85] we also propose to limit the
    flexibility previously afforded carriers in the recovery of
    universal service obligations. Under our proposal, carriers would
    still have flexibility to recover their universal service
    contributions from end users, should they choose to do so, either
    through rates or through a line-item or "surcharge" on end user
    bills. If a carrier chooses to recover its contributions through a
    line-item charge on customer bills, however, we propose to require
    carriers to do so through a uniform line-item that corresponds to
    the prescribed percentage, per-line, or per-account assessment
    established by the Commission on a quarterly basis. To the extent
    that the line item appears on customer bills, carriers would be
    required to impose the line item on a uniform basis. We further
    propose to require carriers to describe the line item on customers'
    bills as the "Federal Universal Service Charge."[^86] Carriers would
    not be permitted to represent any other line item on end-user
    customer bills as a federal universal service charge.

43. We seek comment on the relative advantages of this proposal over our
    current rules regarding the recovery of universal service
    contributions. In particular, we invite commenters to address
    whether the uniform line-item would benefit consumers by requiring
    carriers that choose to pass the costs of their contributions on to
    customers as a line-item to do so in a uniform manner. We also
    invite commenters to address whether this recovery approach will
    prevent carriers from recovering through the line item more than the
    carriers' universal service contribution obligations deriving from
    that customer. We additionally ask commenters to address whether the
    proposal will result in bills that are simpler and easier to
    understand. We particularly seek comment from consumer groups on the
    benefits of this proposal.

44. We also seek comment on whether there are any disadvantages to
    requiring carriers that recover universal service contributions
    through a line-item on customer bills to do so through a uniform
    line-item that corresponds to the prescribed assessment amount. We
    particularly seek comment from carriers on whether this proposal
    imposes any costs and whether these costs outweigh the benefits. We
    also seek comment on whether our proposed recovery limitation would
    unnecessarily reduce carriers' pricing flexibility, resulting in
    fewer options for consumers.[^87]

### Lifeline Exception

45. We also seek comment on whether all carriers should be prohibited
    from recovering universal service contributions from Lifeline
    customers.[^88] The Commission's Lifeline support program is
    designed to increase subscribership by reducing qualifying
    low-income consumers' monthly basic local service charges.[^89]
    Under current rules, price cap LECs may not recover universal
    service contributions from Lifeline customers.[^90] Under this
    proposal, however, all carriers would be prohibited from recovering
    universal service contributions from low-income consumers receiving
    Lifeline discounts, but would continue to be permitted to recover
    contributions from other low-income and/or low-volume consumers. We
    seek comment on whether this proposal would address concerns that a
    flat-fee assessment methodology might shift a disproportionate share
    of carriers' universal service contributions to low-volume users,
    who may also be low-income customers, or whether additional action
    is needed. We seek comment on whether prohibiting recovery of
    universal service contributions from Lifeline customers is
    consistent with statutes and regulations governing the assessment
    and recovery of universal service contributions. In particular, we
    invite comment on whether this proposal will promote equitable and
    nondiscriminatory universal service contributions.[^91] We also seek
    comment on whether this proposal would increase the likelihood of a
    shortfall in the fund, and, if so, how to minimize the likelihood of
    such a fund shortfall. For example, we seek comment on whether to
    exclude Lifeline customer revenues, lines, or accounts from the
    contribution base. We seek comment on whether to require carriers to
    separately report their Lifeline customer revenues, lines, or
    accounts in their reports to USAC, and on any administrative burdens
    that such a requirement would impose on carriers and USAC.[^92] We
    also invite comment on whether non-LECs would be able identify
    Lifeline customer revenues, lines, or accounts. To the extent that
    non-LECs may be unable to identify Lifeline customer revenues,
    lines, or accounts, we seek comment on whether to only extend this
    requirement to non-price cap LEC providers of services to Lifeline
    customers.[^93] We additionally ask commenters to describe how
    carriers that recover universal service contributions from end-users
    through their rates would exclude such contributions from Lifeline
    customer rates. We ask commenters to address any other
    administrative burdens associated with this proposal. Finally, we
    seek comment on other proposals that would ensure that low-income
    customers would not be unfairly burdened under our contribution and
    recovery proposals.

### Recovery Limitations for Incumbent Local Exchange Carriers

46. We also seek comment on the impact of our proposed recovery
    limitation on existing guidelines governing incumbent LEC recovery
    of universal service contributions.[^94] Rate-of-return incumbent
    LECs are permitted to recover universal service contributions
    through access charges or through end-user charges.[^95] The
    Commission recently adopted separate rules governing price cap LEC
    recovery of universal service contributions.[^96] If a price cap LEC
    recovers some or all of its universal service contributions, the
    price cap LEC shall recover those contributions through a charge to
    end users other than Lifeline users.[^97] Price cap LECs may recover
    this rate element on a per-line basis or as a percentage of
    interstate end-user revenues, and, at the option of the carrier, it
    may be combined for billing purposes with other end-user rate
    elements.[^98] We recently sought comment on whether to impose
    similar requirements on rate-of-return LECs.[^99] We therefore seek
    comment on whether any new recovery limitation should apply to
    incumbent LECs.

### Legal Authority

47. We seek comment on our authority to impose these constraints on
    carriers' recovery of universal service contributions from their
    customers. We seek comment on whether sections 4(i), 201, 202, and
    254 of the Act provide sufficient authority to adopt these
    proposals.[^100] We also ask commenters to address whether these
    proposals raise First Amendment or other constitutional concerns,
    and, if so, how we should address those concerns? Would these
    proposals be consistent with the Commission's other policies and
    regulations, including the Commission's goals of promoting
    competition, deregulation, innovation, and universal service?

48. We specifically invite commenters to address whether the recovery
    limitation proposal described above is consistent with the
    requirements of section 254(d) of the Act, including the requirement
    that "\[e\]very telecommunications carrier" contribute to the
    federal universal service mechanisms.[^101] We believe that the
    modifications to the recovery of universal service contributions
    that we propose today are consistent with section 254(d) of the Act.
    Under the proposal, the obligation to contribute to universal
    service would remain with providers of interstate telecommunications
    services, as the statute envisions. The requirement that carriers
    impose a uniform prescribed line-item on customer phone bills would
    only be triggered if the carrier chose to pass its contribution
    costs through to its customers as a line item.

49. We believe that our proposal to limit recovery is distinguishable
    from the mandatory end-user surcharge that was rejected by the
    Commission in the *Universal Service Order*. In the 1997 *Universal
    Service Order*, the Commission declined to adopt a mandatory
    end-user surcharge to collect contributions to the universal service
    support mechanisms.[^102] The Commission agreed with the state
    members of the Joint Board that a mandatory end-user surcharge
    "would dictate how carriers recover their contribution obligations
    and would violate Congress's mandate."[^103] At that time, the
    Commission was concerned that mandating recovery through an end-user
    surcharge might affect carriers' pricing flexibility, resulting in
    fewer options for consumers.[^104] The Commission also stated that
    "an end-user surcharge is not necessary to ensure that contributions
    be explicit."[^105] As explained above, we are not proposing to
    mandate that carriers recover their universal service contributions
    through an end-user surcharge. Rather, should a carrier elect to
    recover its contributions directly from its customers in the form of
    a line item on the bill, we would merely limit the amount, and the
    labeling, of the line item.[^106] Carriers would retain the
    flexibility to recover their universal service contributions through
    their rate structure.[^107]

# Procedural Issues

## Ex Parte

50. This is a non-restricted notice and comment rulemaking proceeding.
    *Ex parte* presentations are permitted, except during the Sunshine
    Agenda period, provided they are disclosed as provided in the
    Commission's rules.[^108]

## Initial Paperwork Reduction Act of 1995 Analysis

51. This Notice 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 Notice, 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
    Notice; OMB comments are due 60 days from the date of publication of
    this Notice in the Federal Register. 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.

## Initial Regulatory Flexibility Act Analysis

52. As required by the Regulatory Flexibility Act (RFA),[^109] 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 Notice provided below in
    section IV.D. The Commission will send a copy of the Notice,
    including this IRFA, to the Chief Counsel for Advocacy of the Small
    Business Administration.[^110] In addition, the Notice and IRFA (or
    summaries thereof) will be published in the Federal Register.[^111]

### Need for and Objectives of the Proposed Rules

53. The Commission seeks comment in this Notice 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."[^112] 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.[^113] 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.

### Legal Basis

54. The legal basis as proposed for this Notice 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.

### Description and Estimate of the Number of Small Entities to Which Rules Will Apply

55. 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.[^114] 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 below a detailed estimate of the number of small
    entities within each of several major carrier‑type categories.

56. 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."[^115] In addition, the term "small business" has the
    same meaning as the term "small business concern" under the Small
    Business Act.[^116] 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).[^117] A small
    organization is generally "any not-for-profit enterprise which is
    independently owned and operated and is not dominant in its
    field."[^118]

57. 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.[^119] 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.

58. 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."[^120] 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.[^121] 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.

59. 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.[^122] 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.

60. *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 providing telephone
    services, as defined therein, for at least one year.[^123] 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."[^124] 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.

61. *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.[^125] According to SBA\'s definition, a
    small business telephone company other than a radiotelephone company
    is one employing no more than 1,500 persons.[^126] 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.

62. *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.[^127] 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.[^128] 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.

63. *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.[^129]
    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.[^130] 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.[^131]
    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.

64. *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.[^132] 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.[^133] 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.

65. *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*, 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.[^134] 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.[^135] The SBA has approved
    these definitions.[^136] An auction of Phase II licenses commenced
    on September 15, 1998, and closed on October 22, 1998.[^137] 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 licenses.
    Fourteen companies claiming small business status won 158
    licenses.[^138]

66. *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.[^139] 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.[^140] The SBA has approved these
    definitions.[^141] An auction of Metropolitan Economic Area (MEA)
    licenses commenced on February 24, 2000, and closed on March 2,
    2000.[^142] 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.[^143] 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.

67. *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.[^144] 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.[^145] These regulations defining "small entity" in
    the context of broadband PCS auctions have been approved by the
    SBA.[^146] 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.[^147] 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.

68. *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*.[^148] 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.

69. *Rural Radiotelephone Service.* The Commission has not adopted a
    definition of small entity specific to the Rural Radiotelephone
    Service.[^149] A significant subset of the Rural Radiotelephone
    Service is the Basic Exchange Telephone Radio Systems (BETRS).[^150]
    We will use the SBA\'s definition applicable to radiotelephone
    companies, *i.e*., an entity employing no more than 1,500
    persons.[^151] 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.

70. *Air-Ground Radiotelephone Service.* The Commission has not adopted
    a definition of small entity specific to the Air-Ground
    Radiotelephone Service.[^152] We will use the SBA\'s definition
    applicable to radiotelephone companies, *i.e.*, an entity employing
    no more than 1,500 persons.[^153] 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.

71. *Specialized Mobile Radio (SMR).* Pursuant to 47 CFR Section
    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.[^154] 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 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.

72. 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.

73. 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.

### Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements

74. 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.[^155] In addition, we
    seek comment on whether to modify or eliminate the interim safe
    harbor for wireless telecommunications carriers.[^156] We also seek
    comment on whether to eliminate the *de minimis* exemption from
    universal service contribution requirements.[^157] 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 Notice, 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
    quantify the costs and benefits of carrier surcharge reporting
    requirement proposals.

### Steps Taken to Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered

75. 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.[^158]

76. As discussed previously, this Notice 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.[^159] 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 Notice also seeks comment on any
    other mechanisms for the assessment and recovery of universal
    service contributions.

77. Wherever possible, the Notice proposes general rules, or alternative
    rules to reduce the administrative burden and cost of compliance for
    small telecommunications service providers. As discussed above,
    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.[^160] In this
    Notice, 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.[^161] Finally, the Notice seeks comment on measures
    to avoid significant economic impact on small business entities, as
    defined by section 601(3) of the Regulatory Flexibility Act.

### Federal Rules that May Duplicate, Overlap, or Conflict with the Proposed Rules.

78. None.

## Comment Filing Procedures

79. Pursuant to sections 1.415 and 1.419 of the Commission\'s rules, 47
    C.F.R. §§ 1.415, 1.419, interested parties may file comments 30 days
    or fewer from publication in the Federal Register, and reply
    comments 45 days or fewer from publication in the Federal Register.
    Comments may be filed using the Commission\'s Electronic Comment
    Filing System (ECFS) or by filing paper copies.[^162]

80. 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.

81. 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.

82. 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.

83. Written comments by the public on the proposed and/or modified
    information collections are due on or before thirty days after the
    date of publication in the Federal Register. Written comments must
    be submitted by the Office of Management and Budget (OMB) on the
    proposed and/or modified information collections on or before 60
    days after date of publication in the Federal Register. In addition
    to filing comments with the Secretary, a copy of any comments on the
    information collections contained herein should be submitted to Judy
    Boley, Federal Communications Commission, Room 1-C804, 445 12th
    Street, S.W., Washington, DC 20554, or via the Internet to
    jboley@fcc.gov and to Edward Springer, OMB Desk Officer, 10236 NEOB,
    725 - 17th Street, N.W., Washington, D.C. 20503.

# Ordering Clauses

84. Accordingly, IT IS ORDERED that, pursuant to the authority contained
    in sections 4(i), 4(j), 201-205, 254, and 403 of the Communications
    Act of 1934, as amended, 47 U.S.C. §§ 154(i), 154(j), 201-205, 254,
    and 403, this Notice of Proposed Rulemaking IS ADOPTED.

85. IT IS FURTHER ORDERED that 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.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

> Secretary

# Separate Statement of {#separate-statement-of .unnumbered}

# Commissioner Susan Ness {#commissioner-susan-ness .unnumbered}

Re: Federal-State Joint Board on Universal Service (CC Docket No. 96-45)

I support initiating this proceeding to revisit the manner in which
carriers contribute to the universal service mechanisms. Periodic
reviews can ensure not only that the universal service programs are
meeting their critical objectives, but also that we fund the mechanisms
in a manner that is fair and understandable for consumers, as well as
simple for carriers to implement.

I write separately to urge the Commission to incorporate the input of
the Joint Board into the decision-making process as we move forward with
this and other universal service proceedings. A continuing dialogue with
our state colleagues is vital as the Commission works through issues
affecting universal service.

[^1]: For purposes of this Notice, the term \"carrier\" is synonymous
    with all filers of universal service contribution worksheets.

[^2]: Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56
    (1996) (the Act). The 1996 Act amended the Communications Act of
    1934. 47 U.S.C. §§ 151, et seq.

[^3]: 47 U.S.C. § 254.

[^4]: *See* 47 C.F.R. §§ 54.706, 54.709, 54.711. For purposes of this
    Order and unless otherwise stated, the term "end-user revenues"
    shall refer to a contributor's interstate and international end-user
    telecommunications revenues.

[^5]: *See* *Federal-State Joint Board on Universal Service*, CC Docket
    No. 96-45, Report and Order, 12 FCC Rcd 8776, 9199, para. 829, 9211,
    para. 855 (1997), as corrected by *Federal-State Joint Board on
    Universal Service*, Erratum, CC Docket No. 96-45, FCC 97-157 (rel.
    June 4, 1997) *aff'd in part*, *rev'd in part*, *remanded in part
    sub nom. Texas Office of Public Utility Counsel v. FCC*, 183 F.3d
    393 (5^th^ Cir. 1999) *cert. denied* 2000 WL 684656 (U.S. Sup. Ct.
    May 30, 2000) (*Universal Service Order*). We note that the
    Commission has developed guidelines for incumbent local exchange
    carrier (LEC) recovery of universal service contributions. *See* 47
    C.F.R. § 69.158 (limiting recovery of universal service
    contributions by price cap incumbent LECs); *Federal-State Joint
    Board on Universal Service*, *Access Charge Reform*, CC Docket No.
    96-45, Sixteenth Order on Reconsideration in CC Docket No. 96-45,
    Eighth Report and Order in CC Docket No. 96-45, Sixth Report and
    Order in CC Docket No. 96-262, 15 FCC Rcd 1679, 1693, para. 33
    (1999) (*Universal Service Remand Order*) (detailing universal
    service contribution recovery options for incumbent local exchange
    carriers).

[^6]: *See infra* paragraph 29 for a discussion of the potential impact
    of assessing contributions on a flat-fee basis on low-volume
    customers.

[^7]: 47 U.S.C. § 254(d).

[^8]: 47 U.S.C. § 271.

[^9]: For example, in its most recent annual filing with the Securities
    and Exchange Commission, AT&T reported that its consumer services
    revenue declined 13.2%, or \$2.9 billion, in 2000. *See* AT&T Corp.,
    S.E.C. Form 10-K405, filed April 2, 2001, at 99.

[^10]: *See Implementation of Section 6002(b) of the Omnibus Budget
    Reconciliation Act of 1993, Annual Report and Analysis of
    Competitive Market Conditions With Respect to Commercial Mobile
    Services*, Fifth Report, 15 FCC Rcd 17660, 17663-66, 17673-74 (2000)
    (discussing growth of wireless telecommunications sector and
    increased competition between wireless and wireline
    telecommunications service providers) (*Fifth CMRS Competition
    Report*).

[^11]: We note that the recovery of universal service contributions
    through line items on customer bills is consistent with competitive
    markets, in which suppliers generally pass such costs on to their
    customers.

[^12]: *See Proposed Fourth Quarter 2000 Universal Service Contribution
    Factor*, CC Docket No. 96-45, Public Notice, DA 00-2065 (rel. Sep.
    8, 2000).

[^13]: The residential fee in the fourth quarter 2000 for Verizon was
    5.6688 percent and for AT&T and Sprint was 8.6 percent. *See*
    Verizon Select Services, Inc., Tariff F.C.C. No. 1, Section 2.13,
    issued September 29, 2000; AT&T Tariff F.C.C. No. 27, Sections
    3.5.12.B and 24.1.18.B, issued February 18, 2000; Sprint Tariff
    F.C.C. No. 1, Section 3.11.8, issued October 31, 2000. The business
    fee in the fourth quarter 2000 for Verizon was 5.6688 percent and
    for AT&T and Sprint was 6.6 percent. *See* Verizon Select Services,
    Inc., Tariff F.C.C. Nos. 2 and 3, Sections 2.12 and 2.17,
    respectively, issued September 29, 2000; AT&T Tariff F.C.C. No. 1,
    Section 2.5.9.C1, issued October 19, 1999, and January 10, 2001;
    Sprint Tariff F.C.C. No. 1, Section 3.11.8, issued October 31, 2000.

[^14]: *See Proposed Second Quarter 2001 Universal Service Contribution
    Factor*, CC Docket No. 96-45, Public Notice, DA 01-614 (rel. Mar. 9,
    2001).

[^15]: MCI Worldcom Tariff F.C.C. No. 1, Section C 1.061212, issued
    March 22, 2001.

[^16]: *See* *Universal Service Order*, 12 FCC Rcd at 9199, para. 829.

[^17]: *See* 47 U.S.C. §§ 201, 202, 254.

[^18]: 47 U.S.C. § 254.

[^19]: 47 U.S.C. § 254(d). *See also* 47 U.S.C.§ 254(b)(4), (5)
    (Commission policy on universal service shall be based, in part, on
    the principles that contributions should be equitable and
    nondiscriminatory, and support mechanisms should be specific,
    predictable, and sufficient). The Commission adopted the additional
    principle that federal support mechanisms should be competitively
    neutral, neither unfairly advantaging nor disadvantaging particular
    service providers or technologies. *Universal Service Order*, 12 FCC
    Rcd at 8801-03, paras. 46-51.

[^20]: *See* 47 C.F.R. §§ 201(b), 202(a).

[^21]: 47 C.F.R. § 201(b).

[^22]: 47 C.F.R. § 202(a).

[^23]: *See Universal Service Order*, 12 FCC Rcd at 9206, para. 844.

[^24]: *Federal-State Joint Board on Universal Service*, Recommended
    Decision, CC Docket No. 96-45, 12 FCC Rcd 87 (1996).

[^25]: *Universal Service Order*, 12 FCC Rcd at 9206-09, paras. 844-50.

[^26]: *See id.* at 9210-11, para. 853.

[^27]: *See id*.

[^28]: *Id.*

[^29]: *Id*. at 9199, para. 829, 9211, para. 855.

[^30]: *Changes to the Board of Directors of the National Exchange
    Carrier Association, Inc*, CC Docket No. 97-21, *Federal-State Joint
    Board on Universal Service*, CC Docket No. 96-45, Report and Order
    and Second Order on Reconsideration, 12 FCC Rcd 18400 (1997)
    (*Second Order on Reconsideration*). *See also* 47 C.F.R. § 54.709.
    Section 54.709(a) provides, in relevant part, that contributions to
    the universal service support mechanisms shall be based on
    contributors' interstate and international end-user
    telecommunications revenues and a contribution factor determined
    quarterly based on information submitted by the Administrator of the
    fund, the Universal Service Administrative Company (USAC). The
    quarterly contribution factor is based on the ratio of total
    projected quarterly expenses of the universal service support
    mechanisms to total end-user telecommunications revenues. Thus,
    contributions are the product of a contributor's end-user
    telecommunications revenues multiplied by a quarterly contribution
    factor that is equal to the ratio of total projected quarterly
    expenses of the universal service support mechanisms to total
    end-user telecommunications revenues.

[^31]: *See Second Order on Reconsideration*, 12 FCC Rcd at 18423-24,
    para. 41; *see also* 47 C.F.R. § 54.701.

[^32]: *Second Order on Reconsideration*, 12 FCC Rcd 18400, Appendix B;
    *see also* 47 C.F.R. 54.711(a). ("Contributions shall be calculated
    and filed in accordance with the Telecommunications Reporting
    Worksheet. The Telecommunications Reporting Worksheet sets forth
    information that the contributor must submit to the Administrator
    \[USAC\] on a semi-annual basis. . . ."). *See Second Order on
    Reconsideration*, 12 FCC Rcd at 18424, para. 43, 18442, para. 80,
    18501-02, Appendix C. The Commission adopted the Worksheet and
    attached it as Appendix C to the *Second Reconsideration Order*.
    Subsequent to its issuance of the *Second Order on Reconsideration*,
    in an effort to reduce administrative burdens on contributors, the
    Commission consolidated the reporting requirements for the universal
    service mechanisms, the Telecommunications Relay Service Fund, the
    cost recovery mechanism for administration of the North American
    Numbering Plan, and the cost recovery mechanism for administration
    of long-term number portability into the FCC Form 499
    Telecommunications Reporting Worksheet. *1998 Biennial Regulatory
    Review -- Streamlined Contributor Reporting Requirements Associated
    with Administration of Telecommunications Relay Service, North
    American Numbering Plan, Local Number Portability, and Universal
    Service Support Mechanisms*, CC Docket 98-171, Report and Order, FCC
    99-175 (1999); *see also Common Carrier Bureau Announces Release of
    September Version of Telecommunications Reporting Worksheet (FCC
    Form 499-S) for Contributions to the Universal Service Support
    Mechanisms*, CC Docket No. 98-171, Public Notice, DA 99-1520 (rel.
    July 30, 1999); *see also Common Carrier Bureau Announces Release of
    Telecommunications Reporting Worksheet (FCC Form 499-A) for April 1,
    2000 Filing by All Telecommunications Carriers*, CC Docket No.
    98-171, Public Notice, DA 00-471 (rel. Mar. 1, 2000).

[^33]: For example, contributions based on carriers' revenues accrued in
    January through June of one year were assessed on carriers in
    January through June of the next year.

[^34]: *See Federal-State Joint Board on Universal Service, Petition for
    Reconsideration filed by AT&T*, CC Docket No. 96-45, Report and
    Order and Order on Reconsideration, FCC 01-85, at para. 2 (rel. Mar.
    14, 2001) (*Quarterly Reporting Order*).

[^35]: *See id.* at para. 9.

[^36]: *See Federal-State Joint Board on Universal Service*, CC Docket
    No. 96-45, Memorandum Opinion and Order and Further Notice of
    Proposed Rulemaking, 13 FCC Rcd 21252, 21258-59, paras. 13-15 (1998)
    (*Wireless Safe Harbor Order*).

[^37]: *See* 47 C.F.R. § 54.708. Section 254(d) of the Act states that
    the Commission may exempt a carrier or class of carriers from
    contributing to the universal service mechanisms "if the carrier's
    contribution to the preservation and advancement of universal
    service would be *de minimis*."

[^38]: *See* 47 C.F.R. § 54.706(c).

[^39]: *See, e.g., Fifth CMRS Competition Report*, 15 FCC Rcd at
    17675-76 (discussing growth of national wireless calling plans, such
    as AT&T's Digital-One-Rate plan, Sprint's Free & Clear plan and
    Verizon Wireless's SingleRate plan).

[^40]: *See id.* at 17746*.*

[^41]: *See Telecommunications Industry Revenues: 1999*, available at
    [[http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/lec.html]{.underline}](http://www.fcc.gov/ccb/stats),
    at Table 6 (Ind. Anal. Div. rel. Sept. 25, 2000);
    *Telecommunications Industry Revenue: 1997*, available at
    [[http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/lec.html]{.underline}](http://www.fcc.gov/ccb/stats),
    at Table 6 (Ind. Anal. Div. rel. Oct. 8, 1998).

[^42]: *See supra* discussion at para. 11.

[^43]: *See, e.g., Policy and Rules Concerning Interstate, Interexchange
    Marketplace, Implementation of Section 254(g) of the Communications
    Act of 1934, as amended, 1998 Biennial Regulatory Review -- Review
    of Customer Premises Equipment And Enhanced Services Unbundling
    Rules In the Interexchange, Exchange Access And Local Exchange
    Markets*, CC Docket Nos. 96-61, 98-183, Report and Order, FCC 01-98,
    at paras. 47-54 (rel. Mar. 30, 2001) (*Bundling Order*).

[^44]: The Commission previously has observed that, to the extent that
    certain Internet-based services, such as Internet Protocol (IP)
    telephony, could be characterized as "telecommunications services,"
    those services would fall within the Act's mandatory requirement
    that providers of interstate telecommunications service contribute
    to universal service mechanisms. *See Federal-State Joint Board on
    Universal Service*, CC Docket No. 96-45, Report to Congress, 13 FCC
    Rcd 11501, 11508, para. 14 (1998). The Commission determined that
    certain forms of "phone-to-phone" IP telephony services lacked the
    characteristics that would render them "information services" within
    the meaning of the statute, and instead bear the characteristics of
    "telecommunications services." The Commission, however, did not find
    it appropriate to make any definitive pronouncements in the absence
    of a more complete record focused on individual service offerings.
    *See id.* at 11541, para. 83.

[^45]: For example, the Commission has not yet addressed the issue of
    whether cable operators that provide broadband transmission service
    over cable systems are providing "telecommunications service" and,
    thus, absent forebearance, should be subject to universal service
    obligations. *See, e.g.,* *Inquiry Concerning High-Speed Access to
    the Internet Over Cable and Other Facilities*, GN Docket No. 00-185,
    Notice of Inquiry, 15 FCC Rcd 19287, 19295-96, para. 20 (2000).

[^46]: *See Federal-State Joint Board on Universal Service; Petition for
    Forbearance from Enforcement of Sections 54.709 and 54.711 of the
    Commission's Rules by Operator Communications, Inc. d/b/a Oncor
    Communications, Inc.,* CC Docket No. 96-45, Further Notice of
    Proposed Rulemaking and Order, FCC 00-359, para. 9 (rel. Oct. 12,
    2000) (*Contribution Further Notice*).

[^47]: *See, e.g.,* AT&T Corp., S.E.C. Form 10-K405, filed April 2,
    2001, at 99 (consumer services revenue declined 13.2%, or \$2.9
    billion, in 2000). AT&T, for example, reports that recent reductions
    in consumer services revenues primarily are "due to a decline in
    traditional voice services, such as Domestic Dial 1, reflecting the
    ongoing competitive nature of the consumer long distance industry,
    which has resulted in pricing pressures and a loss of market share.
    Also negatively impacting revenue was product substitution and
    market migration away from direct-dial wireline and higher-priced
    calling-card services to rapidly growing wireless services and
    lower-priced prepaid-card services.\" AT&T predicts that competition
    and product substitution will continue to negatively impact its
    consumer services revenue. *Id.*

[^48]: *Contribution Further Notice* at para. 10.

[^49]: *See infra* discussion at paras. 18-30.

[^50]: *See* 47 U.S.C. § 254(e).

[^51]: We note that the Consumer Energy Council of America recently
    issued a report that addresses alternative methods for assessing
    universal service contributions. *See* The Consumer Energy Council
    of America*, Universal Service: Policy Issues for the 21^st^
    Century*, March 2001, at 23-27 (*CECA Report*).

[^52]: *See supra* discussion at para. 10.

[^53]: *Universal Service Order*, 12 FCC Rcd at 9206-09, paras. 844-50.

[^54]: *See supra* discussion at para. 14.

[^55]: *See infra* discussion at para. 31.

[^56]: *See also Bundling Order* at paras. 47-54 (providing options for
    allocating universal service reporting revenues for bundled
    telecommunications services and Customer Premises Equipment
    (CPE)/enhanced services).

[^57]: By "collected end-user" revenues we mean end-user revenues
    excluding uncollectibles and credits, but including revenues from
    the recovery of universal service contributions through the
    line-item. Carriers would continue to include pass-through charges,
    if any, as part of their reporting of collected end-user revenues.
    The carrier's contribution base revenue, however, would equal
    collected end-user revenue divided by one plus the contribution
    rate. This, in effect, would impute pass-through charges for all
    carriers and would remove the imputed amounts from the carrier's
    contributions base.

[^58]: *See infra* discussion of reporting requirements at paras. 37-38.

[^59]: Carriers might have the option of contributing based on actual
    collections or billed revenues less estimates of uncollectibles.

[^60]: *See* 47 U.S.C. § 254(b)(5).

[^61]: *See Wireless Safe Harbor Order*, 13 FCC Rcd at 21257-60, paras.
    10-15. The interim safe harbor for the reporting of revenues by
    wireless telecommunications providers was adopted in response to
    concerns raised by certain wireless telecommunications providers
    regarding difficulties associated with distinguishing between their
    interstate and intrastate revenues. *Id.* at 21254-58, paras. 5-12.
    The Commission concluded, at that time, that the interim safe harbor
    percentages reasonably approximated the percentage of interstate
    wireless telecommunications revenues generated by each category of
    wireless telecommunications provider. *Id.* at 21257, para. 11. The
    safe harbor for cellular, broadband personal communications service
    (PCS), and certain types of Specialized Mobile Radio (SMR)
    providers, for example, approximated the nationwide average
    percentage of interstate wireline traffic. *Id.* at 21259, para. 13.
    The Commission emphasized that the safe harbor guidelines were
    adopted on an interim basis and sought comment on any needed changes
    to the safe harbor provisions. *Id.* at 21258, para. 12.

[^62]: The Commission currently does not seek supporting data from SMR
    providers that primarily provide wireless telephony rather than
    dispatch or other mobile services.

[^63]: *Id.* at 21258-59, para. 13.

[^64]: *Id.* at 21259-60, paras. 14-15.

[^65]: *See supra* discussion at para. 12.

[^66]: *See, e.g., CECA Report* at 26.

[^67]: *See infra* discussion of reporting requirements at paras. 37-38.

[^68]: *See infra* discussion at para. 42.

[^69]: *See infra* proposal to prohibit the recovery of universal
    service contributions from Lifeline customers at para. 45.

[^70]: *See Universal Service Order*, 12 FCC Rcd at 9210, para. 852.

[^71]: *See id.*

[^72]: *See CECA Report* at 26.

[^73]: *See* 47 C.F.R. § 54.708. Section 254(d) of the Act states that
    the Commission may exempt a carrier or class of carriers from
    contributing to the universal service mechanisms "if the carrier's
    contribution to the preservation and advancement of universal
    service would be *de minimis*." *See* 47 U.S.C. § 254(d).

[^74]: *See Federal-State Joint Board on Universal Service*, Fourth
    Order on Reconsideration in CC Docket No. 96-45, Report and Order in
    CC Docket Nos. 96-45, 96-262, 94-1, 91-213, 95-72, 13 FCC Rcd 5318,
    5465, para. 295 (1997).

[^75]: *See* 47 C.F.R. § 54.706(c); *see also* *Federal-State Joint
    Board on Universal Service, Access Charge Reform*, Sixteenth Order
    on Reconsideration in CC Docket No. 96-45, Eighth Report and Order
    in CC Docket No. 94-45, Sixth Report and Order in CC Docket No.
    96-262, 15 FCC Rcd 1679-80, 1687, para. 19 (1999). The Commission
    concluded that the rule is consistent with the determination of the
    United States Court of Appeals for the Fifth Circuit that requiring
    a carrier to pay more universal service contributions than it
    derives from interstate revenues violates the requirement in section
    254(d) of the Act that universal service contributions be equitable
    and nondiscriminatory. *See id.* (citing *Texas Office of Public
    Utility Counsel v. FCC*, 183 F.3d at 434-35).

[^76]: *Id.*

[^77]: *See Proposed Fourth Quarter 1999 Universal Service Contribution
    Factor for November and December 1999*, CC Docket No. 96-45, Public
    Notice, DA 99-2109 (rel. Oct. 8, 1999).

[^78]: *Id.*

[^79]: *See Proposed Second Quarter 2001 Universal Service Contribution
    Factor*, CC Docket No. 96-45, Public Notice, DA 01-614 (rel. Mar. 9,
    2001).

[^80]: We note that there still are fund sufficiency issues under the
    current assessment methodology when, for example, carriers are
    delinquent on their debts to USAC.

[^81]: *See* 47 U.S.C. § 254(b)(5).

[^82]: *See* *supra* para. 10; *see also Quarterly Reporting Order* at
    paras. 10-15.

[^83]: Carriers currently report this information on the FCC Form 499-A.

[^84]: Because the assessment of universal service contributions
    currently is based on gross-billed revenues reported on a quarterly
    basis and because the contribution factor changes from quarter to
    quarter, carriers may have an incentive under our current
    contribution methodology to underreport revenues in one quarter and
    overreport revenues in another quarter in order to minimize
    contribution obligations. We note, however, that such underreporting
    does not result in a fund shortfall because the same revenue base is
    used to calculate the contribution factor and assess contributions.

[^85]: *See supra* discussion at para. 7.

[^86]: In the truth-in-billing proceeding, the Commission adopted a
    guideline requiring carriers to use clear, standardized labels on
    telephone bills to refer to line-item charges associated with
    federal regulatory action. *Truth-in-Billing and Billing Format,
    First Report and Order and Further Notice of Proposed Rulemaking*,
    CC Docket No. 98-170, 14 FCC Rcd 7492, 7522-33, paras. 49-64 (1999)
    (*TIB Order and FNPRM*), *reconsideration granted in part*, Order on
    Reconsideration, 15 FCC Rcd 6023 (2000), Errata, 15 FCC Rcd 16544
    (Com. Car. Bur. 2000). The Commission adopted truth-in-billing
    principles and guidelines to improve consumers' understanding of
    their telephone bills. We note that, in the *TIB Order and FNPRM*,
    the Commission sought comment on specific standard labels to be used
    on bills when referring to various line-item charges relating to
    federal regulatory action, including local number portability and
    subscriber line charges, in addition to charges attributed to the
    universal service fund. *TIB Order and FNPRM*, 14 FCC Rcd at 7537,
    para. 71.

[^87]: As discussed in paragraph 49 *infra*, the Commission has
    previously expressed concern about limiting carriers' pricing
    flexibility.

[^88]: *See* 47 C.F.R. §§ 54.401, 54.403 (describing Lifeline program).

[^89]: *See Universal Service Order*, 12 FCC Rcd at 8952-53, para. 329.
    Lifeline customer eligibility criteria are outlined in section
    54.409 of our rules. *See* 47 C.F.R. § 54.409.

[^90]: *See* 47 C.F.R. § 69.158; *see also* *Access Charge Reform*,
    Sixth Report and Order in CC Docket No. 96-262 and 94-1, Report and
    Order in CC Docket No. 99-249, Eleventh Report and Order in CC
    Docket No. 96-45, FCC 00-193, at paras. 218-220 (rel. May 31, 2000)
    (*Interstate Access Universal Service Order*).

[^91]: *See* 47 C.F.R. § 254(d).

[^92]: *See supra* discussion of carrier reporting requirements at
    paras. 37-38.

[^93]: *See* 47 C.F.R. § 54.405 (obligating eligible telecommunications
    carrier to offer Lifeline services). As discussed above, price cap
    LECs already are prohibited from recovering universal service
    contributions from Lifeline customers.

[^94]: *See supra* discussion at n. 5.

[^95]: *See Universal Service Remand Order*, 15 FCC Rcd at 1693, para.
    33.

[^96]: S*ee Access Charge Reform*, Sixth Report and Order in CC Docket
    No. 96-262 and 94-1, Report and Order in CC Docket No. 99-249,
    Eleventh Report and Order in CC Docket No. 96-45, FCC 00-193, at
    para. 218-220 (rel. May 31, 2000) (*Interstate Access Universal
    Service Order*).

[^97]: *See* 47 C.F.R. § 69.158.

[^98]: *Id.*

[^99]: *See Multi-Association Group (MAG) Plan for Regulation of
    Interstate Services of Non-Price Cap Incumbent Local Exchange
    Carriers and Interexchange Carriers, CC Docket No. 00-256, Federal
    State Joint Board on Universal Service*, CC Docket No. 96-45,
    *Access Charge Reform for Incumbent Local Exchange Carriers Subject
    to Rate-of-Return Regulation*, CC Docket No. 98-77, *Prescribing the
    Authorized Rate of Return for Interstate Services of Local Exchange
    Carriers*, CC Docket No. 98-166, Notice of Proposed Rulemaking, FCC
    00-448, at para. 18 (rel. Jan. 5, 2001) ("Should we adopt a
    provision similar to that included in the *CALLS Order* for recovery
    of universal service contributions through a separate rate element
    or line item?"). We additionally note that the United States Court
    of Appeals for the Fifth Circuit recently held that, under section
    254(e) of the Act, the Commission may not permit incumbent LECs to
    recover implicit universal service subsidies through interstate
    access charges. *See Comsat Corp., et al. v. FCC*, No. 00-60044, at
    22 (5^th^ Cir. May 3, 2001).

[^100]: *See* 47 U.S.C. §§ 154(i), 201, 202, 254.

[^101]: 47 U.S.C. § 254(d).

[^102]: *See Universal Service Order*, 12 FCC Rcd at 9210, para. 853
    ("we agree with the Joint Board and reject commenters' suggestions
    that the Commission mandate that carrier recover contributions
    through an end-user surcharge").

[^103]: *See id*.

[^104]: *See id*.

[^105]: *See id.* at 9211, para. 854.

[^106]: In the truth-in-billing proceeding, the Commission adopted
    guidelines requiring carriers to provide full and non-misleading
    descriptions of line-item charges on telephone bills. *See TIB Order
    and FNPRM*, 14 FCC Rcd at 7522-7533, paras. 49-64. The Commission
    focused primarily on three types of line-item charges that result
    from federal regulatory action: (1) universal service-related fees;
    (2) subscriber line charges; and (3) local number portability
    charges. *See id.* at 7523-25, paras. 51-52.

[^107]: *See supra*, para. 40. *See also Federal-State Joint Board on
    Universal Service*, CC Docket No. 96-45, Second Recommended
    Decision, 13 FCC Rcd 24744, 24771-72, paras. 69-70 (Jt. Bd. 1998).

[^108]: *See generally* 47 C.F.R. §§ 1.1202, 1.1203, 1.1206(a).

[^109]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601 *et. seq.*,
    has been amended by the Contract with America Advancement Act of
    1996, Pub. L. No. 104-121, 110 Stat. 847 (1996) (CWAAA). Title II of
    the CWAAA is the Small Business Regulatory Enforcement Fairness Act
    of 1996 (SBREFA).

[^110]: *See* 5 U.S.C. § 603(a).

[^111]: *See id.*

[^112]: 47 U.S.C. § 254(d). *See also* 47 U.S.C. § 254(b)(4),(5)
    (Commission policy on universal service shall be based, in part, on
    the principles that contributions should be equitable and
    nondiscriminatory, and support mechanisms should be specific,
    predictable, and sufficient).

[^113]: *See supra* discussion at paras. 2-3.

[^114]: 47 C.F.R. §§ 52.17 (applying to all telecommunications
    carriers), 54.703 (applying to every telecommunications carrier that
    provides interstate telecommunications services, every provider of
    interstate telecommunications that offers telecommunications for a
    fee on a non-common carrier basis, and certain payphone providers),
    *and* 64.604(c)(4)(iii)(A) (applying to every carrier providing
    interstate telecommunications services). We note that the
    Commission's rules for universal service exempt certain small
    contributors, i.e., contributors that have revenue below a stated
    threshold. 47 C.F.R. § 54.705.

[^115]: 5 U.S.C. § 601(6).

[^116]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in 15 U.S.C. § 632). Pursuant to the RFA,
    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(s) in the Federal Register." 5 U.S.C. § 601(3).

[^117]: Small Business Act, 15 U.S.C. § 632.

[^118]: 5 U.S.C. § 601(4).

[^119]: 13 C.F.R. § 121.201. Categories 4812 and 4813 have recently been
    reclassified as NAICS codes 513321, 513322, 51331, and 51334.

[^120]: 5 U.S.C. § 601(3).

[^121]: Letter from Jere W. Glover, SBA, to Chmn. William E. Kennard,
    FCC, dated 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* 15 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 C.F.R. § 121.102(b).
    Since 1996, out of an abundance of caution, the Commission has
    included small incumbent LECs in its regulatory flexibility
    analyses. *See, e.g.*, *Implementation of the Local Competition
    Provisions of the Telecommunications Act of 1996*, CC Docket No.
    96-98, First Report and Order, 11 FCC Rcd 15499, 16144-45 (1996).

[^122]: FCC, Common Carrier Bureau, Industry Analysis Division, *Trends
    in Telephone Service*, Table 16.3 (December 2000) (*Trends Report*).

[^123]: United States Department of Commerce, Bureau of the Census, 1992
    Census of Transportation, Communications, and Utilities:
    Establishment and Firm Size, at Firm Size 1‑123 (1995) ("1992
    Census").

[^124]: 15 U.S.C. § 632(a)(1).

[^125]: 1992 Census, *supra*, at Firm Size 1‑123.

[^126]: 13 C.F.R. § 121.201, SIC Code 4813.

[^127]: 13 C.F.R. § 121.210, SIC Code 4813.

[^128]: *See Trends Report* at Table 16.3. The total for resellers
    includes both toll resellers and local resellers. The category for
    CAPs also includes competitive local exchange carriers (CLECs)
    (total of 129 for both).

[^129]: 13 CFR 121.201, SIC code 4812.

[^130]: 1992 Census, Series UC92-S-1, at Table 5, SIC code 4812.

[^131]: *Trends Report*, Table 16.3.

[^132]: 13 CFR 121.201, Standard Industrial Classification (SIC) code
    4812.

[^133]: U.S. Bureau of the Census, U.S. Department of Commerce, 1992
    Census of Transportation, Communications, and Utilities, UC92‑S‑1,
    Subject Series, Establishment and Firm Size, Table 5, Employment
    Size of Firms; 1992, SIC code 4812 (issued May 1995).

[^134]: 220 MHz Third Report and Order, 12 FCC Rcd 10943, 11068‑70, at
    paras. 291‑ 295 (1997).

[^135]: 220 MHz Third Report and Order, 12 FCC Rcd at 11068‑69, para.
    291.

[^136]: *See* Letter from A. Alvarez, Administrator, SBA, to D.
    Phythyon, Chief, Wireless Telecommunications Bureau, FCC (Jan. 6,
    1998).

[^137]: *See generally* Public Notice, \"220 MHz Service Auction
    Closes,\" Report No. WT 98‑36 (Wireless Telecommunications Bureau,
    October 23, 1998).

[^138]: Public Notice, \"FCC Announces It is Prepared to Grant 654 Phase
    II 220 MHz Licenses After Final Payment is Made,\" Report No.
    AUC-18-H, DA No. 99-229 (Wireless Telecom. Bur. Jan. 22, 1999).

[^139]: *220 MHz Third Report and Order*, 12 FCC Rcd 10943, 11068-70, at
    paragraph 291-295 (1997).

[^140]: *220 MHz Third Report and Order*, 12 FCC Rcd 11068-69, at
    paragraph 291 (1997).

[^141]: *See* Letter from A. Alvarez, Administrator, SBA, to D.
    Phythyon, Chief, Wireless Telecommunications Bureau, FCC (January 6,
    1998).

[^142]: *See generally* Public Notice, "220 MHz Service Auction Closes,"
    Report No. WT 98-36 (Wireless Telecommunications Bureau (October 23,
    1998).

[^143]: *Trends Report*, Table 16.3.

[^144]: *See* Amendment of Parts 20 and 24 of the Commission's Rules --
    Broadband PCS Competitive Bidding and the Commercial Mobile Radio
    Service Spectrum Cap, *Report and Order*, FCC 96-278, WT Docket No.
    96-59 Sections 57-60 (released June 24, 1996), 61 FR 33859 (July 1,
    1996); *see also* 47 CFR § 24.720(b).

[^145]: *See* Amendment of Parts 20 and 24 of the Commission's Rules --
    Broadband PCS Competitive Bidding and the Commercial Mobile Radio
    Service Spectrum Cap, *Report and Order*, FCC 96-278, WT Docket No.
    96-59 Sections 60 (released June 24, 1996), 61 FR 33859 (July 1,
    1996)

[^146]: *See, e.g.,* Implementation of Section 309(j) of the
    Communications Act -- Competitive Bidding, PP Docket No. 93-253,
    *Fifth Report and Order*, 9 FCC Rcd 5532, 5581-84 (1994).

[^147]: FCC News, *Broadband PCS, D, E and F Block Auction Closes,* No.
    71744 (released January 14, 1997).

[^148]: In the Matter of Amendment of the Commission's Rules to
    Establish New Personal Communications Services, Narrowband PCS,
    Docket No. ET 92-100, Docket No. PP 93-253, *Second Report and Order
    and Second Further Notice of Proposed Rulemaking*, 15 FCC Rcd 10456
    (2000).

[^149]: The service is defined in section 22.99 of the Commission\'s
    Rules, 47 CFR § 22.99.

[^150]: BETRS is defined in sections 22.757 and 22.759 of the
    Commission\'s Rules, 47 CFR §§ 22.757, 22.759.

[^151]: 13 CFR 121.201, SIC code 4812.

[^152]: The service is defined in section 22.99 of the Commission\'s
    Rules, 47 CFR § 22.99.

[^153]: 13 CFR 121.201, SIC code 4812.

[^154]: 47 CFR § 90.814(b)(1).

[^155]: *See supra* discussion at paras. 37-38.

[^156]: *See supra* discussion at paras. 24.

[^157]: *See supra* discussion at para. 31.

[^158]: 5 U.S.C. § 603(c).

[^159]: *See supra* discussion at paras. 2-3.

[^160]: *See supra* discussion at para. 31; *see also* 47 C.F.R. §
    54.708.

[^161]: *See supra* discussion at para. 37.

[^162]: ^?^ *See* Electronic Filing of Documents in Rulemaking
    Proceedings, 63 Fed. Reg. 24,121 (1998).