**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | WC Docket No. 02-78          |
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| Petition of Mid-Rivers Telephone | ) |                              |
| Cooperative, Inc. for Order      | * |                              |
| Declaring it to be an Incumbent  | * |                              |
| Local Exchange Carrier in Terry, |   |                              |
| Montana Pursuant to Section      | * |                              |
| 251(h)(2)                        | * |                              |
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**NOTICE OF PROPOSED RULEMAKING**

**Adopted**: October 21, 2004 **Released**: November 15, 2004

By the Commission: Commissioners Copps and Adelstein issuing separate
statements; Commissioner Martin concurring and issuing a statement.

**Comment Date: 30 days after Federal Register publication of this
Notice**

**Comment Reply Date: 45 days after Federal Register publication of this
Notice**

# Introduction

1.  Mid-Rivers Telephone Cooperative, Inc. (Mid-Rivers), a competitive
    local exchange carrier (LEC) in the Terry, Montana exchange, filed a
    petition with the Commission requesting that it be classified as an
    incumbent LEC in that exchange pursuant to section 251(h)(2) of the
    Communications Act of 1934, as amended (the Act or Communications
    Act).[^1] Section 251(h)(2) allows the Commission to treat a
    competitive LEC as an incumbent LEC if the Commission determines "by
    rule" that the competitive LEC satisfies certain statutory
    criteria.[^2] Resolution of the Mid-Rivers' petition raises novel
    and difficult questions implicating several of the Commission's
    major policies including local competition, universal service, and
    access charges. We thus initiate this Notice of Proposed Rulemaking
    (Notice) and invite comment on how this section of the Act should be
    applied to this specific factual situation as well as to future
    petitions of this type.[^3] Despite the complicated legal and policy
    issues posed by this petition, we intend to complete this proceeding
    as expeditiously as possible.

# Background

## Relevant Statutory Provisions

2.  Section 251, added to the Communications Act by the 1996 Act, is a
    major element of Congress' plan to promote competition in the market
    for local exchange telephone service.[^4] To carry out this plan,
    Congress distinguished incumbent LECs from other LECs in section
    251(h). Section 251(h)(1) defines an incumbent LEC as a carrier
    that, on the date of enactment of the 1996 Act, provided local
    exchange service and was either a member of NECA,[^5] or became a
    successor or assign of a member of NECA.[^6] The Commission
    previously has described the problems associated with reading
    literally the "successor or assign" provision of section 251(h)(1)
    and opted to interpret the statute more holistically to conform with
    the traditional notion of "successor or assign."[^7] All other LECs
    are presumptively not incumbents, and therefore are competitors.[^8]

3.  A LEC may also be treated as an incumbent if the Commission
    determines "by rule" that it meets the requirements of section
    251(h)(2).[^9] This section of the Act sets forth a three-prong test
    for the Commission to use to determine whether treating the LEC as
    an incumbent is appropriate. The Commission may conclude, upon a
    clear and convincing showing, that a LEC should be treated as an
    incumbent if the LEC: (1) occupies a market position comparable to
    an incumbent; (2) has "substantially replaced" an incumbent LEC,
    and; (3) the reclassification serves the public interest,
    convenience, and necessity.[^10]

## Position of the Parties

4.  Qwest is the incumbent LEC in the Terry, Montana exchange.[^11]
    Mid-Rivers, an incumbent LEC in nearby exchanges, entered the Terry,
    Montana exchange as a competitive LEC in 1997 and quickly acquired a
    majority of the local subscribers.[^12] Mid-Rivers claims to serve
    approximately 93 percent of the access lines in the exchange.[^13]
    Mid-Rivers serves its customers in the Terry exchange primarily over
    its own facilities.[^14] Therefore, Mid-Rivers, through its
    petition, asserts that the Commission should classify it as an
    incumbent LEC in Terry because it meets the three-part statutory
    test set forth in section 251(h)(2) of the Act.[^15]

5.  Several parties commented on the Mid-Rivers Petition. The Montana
    Public Service Commission, the Rural Independent Competitive
    Alliance (RICA), the National Telecommunications Cooperative
    Association (NTCA), and John Starulakis, Inc. all expressed support
    for the Mid-Rivers Petition.[^16] However, Western Wireless filed
    comments in opposition to the Mid-Rivers Petition asserting that the
    petition fails to satisfy the public interest standard in section
    251(h)(2)(C) due primarily to the changes in universal service
    support availability that would result from a grant of the
    petition.[^17] Qwest filed a letter regarding the Mid-Rivers
    Petition that did not oppose the petition explicitly. Qwest did
    raise questions about how granting this petition could adversely
    affect universal service support and local competition policies and
    concerns about the proper application of section 251(h)(2).[^18]
    Thus, Qwest proposes that the Commission issue a Notice of Inquiry
    to address its concerns.[^19]

# Discussion

## Classifying Mid-Rivers as an Incumbent LEC

### Section 251(h)(2)(A)

6.  In order to treat Mid-Rivers as an incumbent LEC, the Commission
    must find that Mid-Rivers "occupies a position in the market for
    telephone exchange service within an area that is comparable to the
    position occupied by a carrier described in \[section
    251(h)(1)\]."[^20] In the *Guam Declaratory Ruling and NPRM*, the
    Commission stated that "incumbent LECs typically occupy a dominant
    position in the market for telephone exchange service in their
    respective operating areas, and possess economies of density,
    connectivity, and scale that make efficient competitive entry quite
    difficult, if not impossible, absent compliance with the obligations
    of section 251(c)."[^21]

7.  We seek comment on how to define the relevant "area" for the
    purposes of section 251(h)(2)(A). Can "area" be construed such that
    any part of a legacy incumbent LEC's service area in which the
    competitive LEC contends that it meets the above statutory criteria
    would qualify? Specifically, should "area" be construed to be as
    small as an exchange? Under this interpretation, for example, the
    Terry exchange would be the relevant "area" for purposes of
    analyzing the Mid-Rivers petition. Alternatively, should a
    competitive LEC be required to demonstrate that it meets the
    statutory criteria for all or a significant part of the legacy
    incumbent LEC\'s service area? Under this interpretation, the size
    of the legacy incumbent LEC's service area is a more decisive
    variable -- in this case Qwest operates as an incumbent LEC in
    disparate areas throughout the state of Montana and throughout 13
    other states. We further invite commenters to address the extent to
    which universal service concerns should inform our interpretation of
    the relevant "area." As discussed below, reclassification could
    result in newly-classified incumbent LECs being eligible for higher
    levels of universal service support than legacy incumbent LECs for
    serving the same area.[^22] Moreover, to the extent that the legacy
    incumbent LEC is reclassified as a competitive LEC and obtains
    competitive Eligible Telecommunications Carrier (ETC) status[^23]
    for that area, it would be eligible for the same per-line amount of
    high-cost universal service support that is available to the
    newly-classified incumbent LEC.[^24]

8.  Assuming that the Terry exchange is the relevant "area" for purposes
    of analyzing the Mid-Rivers petition, we tentatively conclude that
    Mid-Rivers "occupies a position in the market for telephone exchange
    service within an area that is comparable to the position occupied
    by \[an incumbent LEC\]."[^25] We reach this tentative conclusion
    based on Mid-Rivers' provision of facilities-based service to 93
    percent of the lines in the Terry exchange. We ask parties to
    comment on this tentative conclusion.

### Section 251(h)(2)(B)

9.  In order for the Commission to treat LECs such as Mid-Rivers as
    incumbents, section 251(h)(2)(B) requires a showing that "such
    carrier has substantially replaced an incumbent local exchange
    carrier described in \[section 251(h)(1)\]."[^26] In the *Guam
    Declaratory Ruling and NPRM*, the Commission concluded that this
    section is satisfied where the LEC at issue provides local exchange
    service "to all or virtually all" of the subscribers in a service
    area.[^27] Assuming that the Terry exchange is the relevant "area"
    for purposes of analyzing the Mid-Rivers petition, we tentatively
    conclude that Mid-Rivers has "substantially replaced" Qwest for
    purposes of satisfying section 251(h)(2)(B) because it serves 93
    percent of the subscribers in the Terry exchange. We seek comment on
    this tentative conclusion.

### Section 251(h)(2)(C)

10. We further seek comment on whether the requested classification
    change is "consistent with the public interest, convenience, and
    necessity."[^28] Congress has declared unequivocally that promoting
    competition in local exchange and exchange access markets serves the
    public interest.[^29] We invite comment as to whether the local
    competition provisions of the Act can be better served by
    classifying competitive carriers like Mid-Rivers as incumbent LECs
    in their exchanges.[^30] Congress has also encouraged the deployment
    of advanced telecommunications capability to all Americans.[^31] We
    believe there may be benefits both to consumers and potential
    competitors in the technical capabilities of Mid-Rivers' network,
    especially in comparison to the existing incumbent LEC. For example,
    Mid-Rivers claims that its network is superior to Qwest's facilities
    in the exchange and, apparently, is capable of carrying multiple
    advanced services.[^32] We seek comment on this. We also seek
    comment on the extent to which we should consider under the public
    interest standard broader market conditions. This would include
    comment regarding the regulatory treatment of other carriers, such
    as the legacy incumbent LEC which, in this instance, serves less
    than five percent of the market.[^33] Furthermore, we encourage the
    Montana Public Service Commission to provide any additional comment
    on whether it is appropriate to grant the petitions in light of any
    particular state considerations that may exist.[^34]

11. We invite comment on the significance of universal service concerns
    to the public interest analysis under section 251(h)(2)(C). If we
    were to grant Mid-Rivers' petition, we note that the amount of
    high-cost universal service support available to the area could well
    increase because it would then be served by a newly classified
    incumbent LEC that qualifies for support under a different set of
    high-cost support mechanisms than the legacy incumbent LEC.[^35]
    Therefore, classification may lead to fund increases by changing the
    amount of support available for service to particular areas. Unlike
    Qwest, for example, Mid-Rivers would be eligible for high-cost loop
    support, local switching support, and interstate common line support
    for serving the Terry exchange because of its comparatively small
    size.[^36] Many competitive carriers such as Mid-Rivers are rural
    telephone companies that expand their service into neighboring rural
    areas served by large incumbent LECs, and consumers in such areas
    may benefit significantly from such competition.[^37] At the same
    time, the Commission has recognized the vital importance of avoiding
    excessive growth in universal service fund size.[^38] For example,
    we note that, under the Commission's rules, if Mid-Rivers were to
    purchase or otherwise acquire the Terry exchange from Qwest,
    Mid-Rivers' universal service support for the exchange generally
    would be frozen at the level of support prior to the transfer.[^39]
    We seek comment on whether similar measures would be appropriate in
    the section 251(h)(2) context. We invite commenters to address these
    issues, and whether and how they should inform our analysis under
    section 251(h)(2)(C).[^40]

12. We also invite parties to comment on whether access charge
    considerations are relevant to the public interest analysis under
    section 251(h)(2)(C). Under the Commission's rules, competitive LECs
    may not tariff interstate access rates that are higher than the
    competing incumbent LEC rate,[^41] except that a rural competitive
    LEC that competes with a price cap LEC may charge rates contained in
    the NECA tariff.[^42] In some cases, a grant of incumbent LEC status
    under section 251(h) might result in increased access rates.[^43] We
    ask parties to comment on whether potential increases in access
    charges should be a factor that the Commission considers in its
    public interest analysis under section 251(h)(2).

## Subsequent Regulatory Treatment of Qwest

13. In its application, Mid-Rivers does not discuss the subsequent
    regulatory treatment of Qwest if the Commission grants its
    petition.[^44] The Commission has not previously been faced with the
    issue of reclassifying a legacy incumbent LEC, and section 251(h) is
    silent on this issue as well. Resolution of this issue raises a
    number of legal and policy concerns on which we seek comment. We
    seek comment on what regulatory treatment is appropriate for
    incumbent LECs which have been "substantially replaced" and which
    may no longer "occup\[y\] a position in the market" comparable to an
    incumbent LEC.[^45] If the Commission finds that a competitive LEC
    has satisfied the requirements of section 251(h)(2), must the
    Commission also find that the legacy incumbent LEC should no longer
    be subject to dominant carrier regulations? Can the Commission
    simply reclassify an incumbent LEC as a competitive LEC on the basis
    of applying the three-part test in section 251(h)(2)? Implicit in
    support for such a theory is a finding that when all three
    conditions of section 251(h)(2) are satisfied to classify a
    competitive LEC as an incumbent in that service area, the legacy
    incumbent LEC will not retain the market characteristics that define
    an incumbent LEC and that require special treatment. In this
    respect, the record indicates that Qwest serves fewer than five
    percent of the lines in this exchange.[^46] Thus, we seek comment on
    whether the logic implicit in the section 251(h)(2)(A) and (B) tests
    can be applied to reclassify automatically a legacy incumbent LEC as
    a competitive LEC.

14. Alternatively, we seek comment on whether there is any reason to
    permit more than one incumbent LEC in an exchange.[^47] We note that
    Qwest continues to fit the literal definition in section 251(h)(1)
    of an incumbent LEC in Terry regardless of any potential
    classification of Mid-Rivers as an incumbent LEC in that service
    area.[^48] We seek comment on what implications this has on our
    current interpretation of the Act. In particular, we seek comment on
    how such a situation would affect the Commission's rules regarding
    administration of universal service, as those rules are predicated
    on a single incumbent LEC per study area.[^49] For example, if two
    incumbent LECs were to be designated for a given area, which
    incumbent LEC's costs would serve as the basis of support in that
    area?[^50] Similarly, we seek comment on whether a legacy incumbent
    LEC in such an exchange should be considered a competitive LEC or an
    incumbent LEC for purposes of the Commission's access charge rules.

15. The Commission has authority to forbear from certain regulatory
    requirements that might apply to a legacy incumbent LEC. We note
    that section 10 of the Act establishes a rigorous standard for
    forbearance[^51] and prohibits the Commission from forbearing from
    the section 251(c) interconnection obligations of incumbent LECs
    until those requirements have been "fully implemented."[^52] We seek
    comment on whether section 10 forbearance is the required mechanism
    to address the status of a legacy incumbent LEC. We also seek
    comment on whether and how findings that a carrier "has
    substantially replaced" the legacy incumbent LEC and satisfies the
    other requirements to be an incumbent LEC under section 251(h)(2)
    are relevant to the various requirements under section 10 for
    forbearance from regulation of the legacy incumbent LEC.
    Furthermore, we seek comment on the potential impact that Commission
    forbearance under section 10 would have on any relevant state
    regulation of legacy incumbent LECs, such as carrier of last resort
    obligations.

## Other Considerations

16. The Commission has developed rules defining an incumbent LEC, but
    those rules do not explicitly provide for carriers that have been
    deemed to be incumbent LECs pursuant to section 251(h)(2) of the
    Act.[^53] Because this definition is crucial to the implementation
    of the Commission's local competition and other rules, we propose
    adding a category under the definition of incumbent LEC in the
    Commission's rules to account for any carriers that have been found
    by the Commission to be incumbent LECs pursuant to section 251(h)(2)
    of the Act.[^54] We seek comment on such a rule change.

17. We also seek comment on whether this petition depicts market
    situations that are representative of other local exchanges in which
    competitive LECs might choose to file petitions under section
    251(h)(2) and whether this petition signals a larger trend in local
    exchange markets.[^55] If so, we seek comment on what the underlying
    market and regulatory motivations driving such a trend are and how
    the Commission should address any such conditions.

18. We further seek comment on the process by which the Commission
    should address any future applications of this type. We seek comment
    on whether the Commission should craft generally applicable rules
    and standards to address the application of section 251(h)(2) rather
    than continuing to proceed on a case-specific basis. We also seek
    comment on how such generally applicable rules would operate.
    Additionally, we seek comment on whether future applications for
    reclassification under section 251(h)(2) can, as a legal matter, be
    decided by the Commission through adjudication rather than through
    the rulemaking process.[^56] Specifically, does section 251(h)(2)
    permit the Commission to adopt a set of rules, applicable on a
    case-by-case basis, that would allow the Commission to resolve
    petitions through an adjudication? To the extent there are a number
    of similarly situated carriers interested in filing applications of
    this kind, we seek comment on how the process for addressing these
    applications could be made more efficient. Finally, we seek comment
    on whether there are additional regulatory constraints, beyond those
    mentioned already, that might affect the process by which
    applications of this type are addressed.

# Procedural Matters

## Ex Parte Presentations

19. These matters shall be treated as a "permit-but-disclose" proceeding
    in accordance with the Commission's ex parte rules.[^57] Persons
    making oral ex parte presentations are reminded that memoranda
    summarizing the presentations must contain summaries of the
    substance of the presentations and not merely a listing of the
    subjects discussed. More than a one or two sentence description of
    the views and arguments presented in generally required.[^58] Other
    requirements pertaining to oral and written presentations are set
    forth in section 1.1206(b) of the Commission's rules.[^59]

## Comment Filing Procedures

20. 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 on
    Mid-Rivers' petition within 30 days after publication in the Federal
    Register and may file reply comments within 45 days after
    publication in the Federal Register. All filings shall refer to WC
    Docket No. 02-78. All filings must be addressed to the Commission's
    Secretary, Marlene H. Dortch, Office of the Secretary, Federal
    Communications Commission, 445 12^th^ Street, SW, Washington,
    DC 20554. One (1) courtesy copies must be delivered to Janice M.
    Myles at Federal Communications Commission, Wireline Competition
    Bureau, Competition Policy Division, 445 12^th^ Street, SW, Suite
    5-C140, Washington, DC 20554, or via e-mail, <janice.myles@fcc.gov>,
    and one (1) copy must be sent to Best Copy and Printing, Inc.,
    Portals II, 445 12th Street, SW, Room CY-B402, Washington, DC 20554,
    telephone 1-800-378-3160, or via e-mail
    [www.bcpiweb.com](http://WWW.BCPIWEB.COM/).

21. Comments may be filed using the Commission\'s Electronic Comment
    Filing System (ECFS) or by filing paper copies. See Electronic
    Filing of Documents in Rulemaking Proceedings, 63 Fed. Reg. 24121
    (1998). 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, U.S. 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.

22. 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
    appears in the caption of this proceeding, commenters must submit
    two additional copies for each additional docket or rulemaking
    number.

● Filings can be sent by hand or messenger delivery, by commercial
overnight courier, or by first-class or overnight U.S. Postal Service
mail (although we continue to experience delays in receiving U.S. Postal
Service mail). The Commission\'s contractor, Natek, Inc., will receive
hand-delivered or messenger-delivered paper filings for the
Commission\'s Secretary at 236 Massachusetts Avenue, N.E., Suite 110,
Washington, D.C. 20002. The filing hours at this location are 8:00 a.m.
to 7:00 p.m. All hand deliveries must be held together with rubber bands
or fasteners. Any envelopes must be disposed of before entering the
building.

● Commercial overnight mail (other than U.S. Postal Service Express Mail
and Priority Mail) must be sent to 9300 East Hampton Drive, Capitol
Heights, MD 20743.

● U.S. Postal Service first-class mail, Express Mail, and Priority Mail
should be addressed to 445 12th Street, SW, Washington, D.C. 20554.

23. Filings and comments are also available for public inspection and
    copying during regular business hours at the FCC Reference
    Information Center, Portals II, 445 12th Street, SW, Room CY-A257,
    Washington, DC, 20554. They may also be purchased from the
    Commission\'s duplicating contractor, Best Copy and Printing, Inc.,
    Portals II, 445 12th Street, SW, Room CY-B402, Washington, DC 20554,
    telephone 1-800-378-3160, or via e-mail
    [www.bcpiweb.com](http://WWW.BCPIWEB.COM/).

24. For further information regarding this proceeding, contact Ian
    Dillner, Competition Policy Division, Wireline Competition
    Bureau, (202) 418-1580, or via e-mail <Ian.Dillner@fcc.gov>.

25. In addition to filing comments with the Secretary, a copy of any
    Paperwork Reduction Act (PRA) comments on the information
    collection(s) contained herein should be submitted to Judith B.
    Herman, Federal Communications Commission, Room 1-C804, 445 12th
    Street, SW, Washington, DC 20554, or via the Internet to
    Judith-B.Herman@fcc.gov, and to Kristy L. LaLonde, OMB Desk Officer,
    Room 10234 NEOB, 725 17th Street, N.W., Washington, DC 20503 via the
    Internet to Kristy_L.\_LaLonde@omb.eop.gov or by fax to
    202-395-5167.

## Initial Regulatory Flexibility Analysis

26. As required by the Regulatory Flexibility Act of 1980, as amended
    (RFA),[^60] the Commission has prepared the present Initial
    Regulatory Flexibility Analysis (IRFA) of the possible significant
    economic impact on a substantial number of small entities by the
    policies and rules proposed in this Notice. 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 above in Section IV.B. The Commission will send a
    copy of the Notice, including this IRFA, to the Chief Counsel for
    Advocacy of the Small Business Administration.[^61] In addition, the
    Notice and IRFA (or summaries thereof) will be published in the
    Federal Register.[^62]

### Need for, and Objectives of, the Proposed Rules

27. The Commission initiates this rulemaking proceeding because the
    Mid-Rivers' petition raises novel and difficult questions
    implicating several of the Commission's major policies affecting
    LECs of all sizes, including local competition, universal service,
    and access charges.[^63] In this proceeding, we seek comment on
    whether Mid-Rivers satisfies the requirements of section 251(h)(2)
    to be classified as an incumbent LEC in Terry, Montana. To this end,
    the Commission makes tentative conclusions that Mid-Rivers satisfies
    the first two statutory prongs of section 251(h)(2). However, the
    Commission will weigh these tentative conclusions against the
    alternative possibility that Mid-Rivers does not satisfy the
    standards set forth in the Act.[^64] The Commission also plans to
    consider whether the petition satisfies the third prong of section
    251(h)(2) -- the public interest standard -- and will weigh the
    benefits of granting the application against other considerations,
    such as the impact on other major Commission policies.[^65]
    Furthermore, the Commission plans to review: (1) the subsequent
    regulatory treatment of Qwest, including whether two incumbent LECs
    can serve the same exchange, and whether the Commission is
    authorized to reclassify Qwest as a competitive LEC;[^66] (2)
    whether the Act permits expected future applications of this type to
    be decided by final order rather than by rulemaking;[^67] and (3)
    the appropriate regulatory requirements for classification changes
    such as these. Thus, we ask interested parties to address how the
    Commission can best balance its objective to advance local
    competition and other policy goals within the existing statutory and
    regulatory framework. The Commission also plans to consider the
    various alternative approaches, as described in the Notice of
    Proposed Rulemaking.

### Legal Basis

28. The legal basis for any action that may be taken pursuant to this
    Notice is contained in sections 4, 10, 201-202, 214, 303 and 403 of
    the Communications Act of 1934, as amended, 47 U.S.C. §§ 154, 160,
    201-204, 214, 303, and 403, section 706 of the Telecommunications
    Act of 1996, 47 U.S.C. § 157nt, and sections 1.1, 1.48, 1.411,
    1.412, 1.415, 1.419, and 1.1200-1.1216, of the Commission's rules,
    47 C.F.R. §§ 1.1, 1.48, 1.411, 1.412, 1.415, 1.419, and
    1.1200-1.1216.

### Description and Estimate of the Number of Small Entities To Which the Proposed Rules Would Apply

29. The RFA directs agencies to provide a description of, and, where
    feasible, an estimate of, the number of small entities that may be
    affected by the rules adopted herein.[^68] The RFA generally defines
    the term "small entity" as having the same meaning as the terms
    "small business," "small organization," and "small governmental
    jurisdiction."[^69] In addition, the term "small business" has the
    same meaning as the term "small business concern" under the Small
    Business Act.[^70] A "small business concern" is one which: (1) is
    independently owned and operated; (2) is not dominant in its field
    of operation; and (3) satisfies any additional criteria established
    by the Small Business Administration (SBA).[^71]

30. In this section, we further describe and estimate the number of
    small entity licensees and regulatees that may be affected by rules
    adopted in this Order. The most reliable source of information
    regarding the total numbers of certain common carrier and related
    providers nationwide, as well as the number of commercial wireless
    entities, appears to be the data that the Commission publishes in
    its *Trends in Telephone Service* report.[^72] The SBA has developed
    small business size standards for wireline and wireless small
    businesses within the three commercial census categories of Wired
    Telecommunications Carriers,[^73] Paging,[^74] and Cellular and
    Other Wireless Telecommunications.[^75] Under these categories, a
    business is small if it has 1,500 or fewer employees. Below, using
    the above size standards and others, we discuss the total estimated
    numbers of small businesses that might be affected by our actions.

31. We have included small incumbent local exchange carriers in this
    present RFA analysis. As noted above, a "small business" under the
    RFA is one that, *inter alia*, meets the pertinent small business
    size standard (*e.g.*, a telephone communications business having
    1,500 or fewer employees), and "is not dominant in its field of
    operation."[^76] The SBA's Office of Advocacy contends that, for RFA
    purposes, small incumbent local exchange carriers are not dominant
    in their field of operation because any such dominance is not
    "national" in scope.[^77] We have therefore included small incumbent
    local exchange carriers in this RFA analysis, although we emphasize
    that this RFA action has no effect on Commission analyses and
    determinations in other, non-RFA contexts.

32. *Wired Telecommunications Carriers*. The SBA has developed a small
    business size standard for Wired Telecommunications Carriers, which
    consists of all such companies having 1,500 or fewer employees.[^78]
    According to Census Bureau data for 1997, there were 2,225 firms in
    this category, total, that operated for the entire year.[^79] Of
    this total, 2,201 firms had employment of 999 or fewer employees,
    and an additional 24 firms had employment of 1,000 employees or
    more.[^80] Thus, under this size standard, the great majority of
    firms can be considered small.

33. *Incumbent Local Exchange Carriers (LECs).* Neither the Commission
    nor the SBA has developed a small business size standard
    specifically for incumbent local exchange services. The appropriate
    size standard under SBA rules is for the category Wired
    Telecommunications Carriers. Under that size standard, such a
    business is small if it has 1,500 or fewer employees.[^81] According
    to Commission data,[^82] 1,310 carriers have reported that they are
    engaged in the provision of incumbent local exchange services. Of
    these 1,310 carriers, an estimated 1,025 have 1,500 or fewer
    employees and 285 have more than 1,500 employees. Consequently, the
    Commission estimates that most providers of incumbent local exchange
    service are small businesses that may be affected by our proposed
    action.

34. *Competitive Local Exchange Carriers (CLECs), Competitive Access
    Providers (CAPs), "Shared-Tenant Service Providers," and "Other
    Local Service Providers."* Neither the Commission nor the SBA has
    developed a small business size standard specifically for these
    service providers. The appropriate size standard under SBA rules is
    for the category Wired Telecommunications Carriers. Under that size
    standard, such a business is small if it has 1,500 or fewer
    employees.[^83] According to Commission data,[^84] 563 carriers have
    reported that they are engaged in the provision of either
    competitive access provider services or competitive local exchange
    carrier services. Of these 563 carriers, an estimated 472 have 1,500
    or fewer employees and 91 have more than 1,500 employees. In
    addition, 14 carriers have reported that they are "Shared-Tenant
    Service Providers," and all 14 are estimated to have 1.500 or fewer
    employees. In addition, 37 carriers have reported that they are
    "Other Local Service Providers." Of the 37, an estimated 36 have
    1,500 or fewer employees and one has more than 1,500 employees.
    Consequently, the Commission estimates that most providers of
    competitive local exchange service, competitive access providers,
    "Shared-Tenant Service Providers," and "Other Local Service
    Providers" are small entities that may be affected by our proposed
    action.

35. *Interexchange Carriers (IXCs).* Neither the Commission nor the SBA
    has developed a small business size standard specifically for
    providers of interexchange services. The appropriate size standard
    under SBA rules is for the category Wired Telecommunications
    Carriers. Under that size standard, such a business is small if it
    has 1,500 or fewer employees.[^85] According to Commission
    data,[^86] 281 carriers have reported that they are engaged in the
    provision of interexchange service. Of these, an estimated 254 have
    1,500 or fewer employees and 27 have more than 1,500 employees.
    Consequently, the Commission estimates that the majority of IXCs are
    small entities that may be affected by our proposed action.

36. *Operator Service Providers (OSPs).* Neither the Commission nor the
    SBA has developed a small business size standard specifically for
    operator service providers. The appropriate size standard under SBA
    rules is for the category Wired Telecommunications Carriers. Under
    that size standard, such a business is small if it has 1,500 or
    fewer employees.[^87] According to Commission data,[^88] 23 carriers
    have reported that they are engaged in the provision of operator
    services. Of these, an estimated 22 have 1,500 or fewer employees
    and one has more than 1,500 employees. Consequently, the Commission
    estimates that the majority of OSPs are small entities that may be
    affected by our proposed action.*Prepaid Calling Card Providers.*
    The SBA has developed a size standard for a small business within
    the category of Telecommunications Resellers. Under that SBA size
    standard, such a business is small if it has 1,500 or fewer
    employees.[^89] According to Commission data, 32 companies reported
    that they were engaged in the provision of prepaid calling
    cards.[^90] Of these 32 companies, an estimated 31 have 1,500 or
    fewer employees and one has more than 1,500 employees.[^91]
    Consequently, the Commission estimates that the great majority of
    prepaid calling card providers are small entities that may be
    affected by the rules and policies adopted herein.

37. *Other Toll Carriers.* Neither the Commission nor the SBA has
    developed a size standard for small businesses specifically
    applicable to "Other Toll Carriers." This category includes toll
    carriers that do not fall within the categories of interexchange
    carriers, OSPs, prepaid calling card providers, satellite service
    carriers, or toll resellers. The closest applicable size standard
    under SBA rules is for Wired Telecommunications Carriers. Under that
    size standard, such a business is small if it has 1,500 or fewer
    employees.[^92] According to Commission's data, 65 companies
    reported that their primary telecommunications service activity was
    the provision of other toll services.[^93] Of these 65 companies, an
    estimated 62 have 1,500 or fewer employees and three have more than
    1,500 employees.[^94] Consequently, the Commission estimates that
    most "Other Toll Carriers" are small entities that may be affected
    by the rules and policies adopted herein.

38. *Wireless Service Providers.* The SBA has developed a small business
    size standard for wireless firms within the two broad economic
    census categories of "Paging"[^95] and "Cellular and Other Wireless
    Telecommunications." [^96] Under both SBA categories, a wireless
    business is small if it has 1,500 or fewer employees. For the census
    category of Paging, Census Bureau data for 1997 show that there were
    1,320 firms in this category, total, that operated for the entire
    year.[^97] Of this total, 1,303 firms had employment of 999 or fewer
    employees, and an additional 17 firms had employment of 1,000
    employees or more.[^98] Thus, under this category and associated
    small business size standard, the great majority of firms can be
    considered small. For the census category Cellular and Other
    Wireless Telecommunications, Census Bureau data for 1997 show that
    there were 977 firms in this category, total, that operated for the
    entire year.[^99] Of this total, 965 firms had employment of 999 or
    fewer employees, and an additional 12 firms had employment of 1,000
    employees or more.[^100] Thus, under this second category and size
    standard, the great majority of firms can, again, be considered
    small.*Broadband PCS.* The broadband PCS spectrum is divided into
    six frequency blocks designated A through F, and the Commission has
    held auctions for each block. The Commission defined "small entity"
    for Blocks C and F as an entity that has average gross revenues of
    \$40 million or less in the three previous calendar years.[^101] For
    Block F, an additional classification for "very small business" was
    added and is defined as an entity that, together with its
    affiliates, has average gross revenues of not more than \$15 million
    for the preceding three calendar years."[^102] These standards
    defining "small entity" in the context of broadband PCS auctions
    have been approved by the SBA.[^103] No small businesses, within the
    SBA-approved small business size standards bid successfully for
    licenses in Blocks A and B. There were 90 winning bidders that
    qualified as small entities in the Block C auctions. A total of 93
    small and very small business bidders won approximately 40 percent
    of the 1,479 licenses for Blocks D, E, and F.[^104] On March 23,
    1999, the Commission re-auctioned 347 C, D, E, and F Block licenses.
    There were 48 small business winning bidders. On January 26, 2001,
    the Commission completed the auction of 422 C and F Broadband PCS
    licenses in Auction No. 35. Of the 35 winning bidders in this
    auction, 29 qualified as "small" or "very small" businesses.
    Subsequent events, concerning Auction 305, including judicial and
    agency determinations, resulted in a total of 163 C and F Block
    licenses being available for grant. In addition, we note that, as a
    general matter, the number of winning bidders that qualify as small
    businesses at the close of an auction does not necessarily represent
    the number of small businesses currently in service. Also, the
    Commission does not generally track subsequent business size unless,
    in the context of assignments or transfers, unjust enrichment issues
    are implicated.

39. *Narrowband Personal Communications Services.* The Commission held
    an auction for Narrowband PCS licenses that commenced on July 25,
    1994, and closed on July 29, 1994. A second auction commenced on
    October 26, 1994 and closed on November 8, 1994. For purposes of the
    first two Narrowband PCS auctions, "small businesses" were entities
    with average gross revenues for the prior three calendar years of
    \$40 million or less.[^105] Through these auctions, the Commission
    awarded a total of 41 licenses, 11 of which were obtained by four
    small businesses.[^106] To ensure meaningful participation by small
    business entities in future auctions, the Commission adopted a
    two-tiered small business size standard in the *Narrowband PCS
    Second Report and Order*.[^107] 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.[^108] 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.[^109] The SBA has approved these small business size
    standards.[^110] A third auction commenced on October 3, 2001 and
    closed on October 16, 2001. Here, five bidders won 317 (Metropolitan
    Trading Areas and nationwide) licenses.[^111] Three of these claimed
    status as a small or very small entity and won 311 licenses.

40. *Specialized Mobile Radio*. The Commission awards "small entity"
    bidding credits in auctions for Specialized Mobile Radio (SMR)
    geographic area licenses in the 800 MHz and 900 MHz bands to firms
    that had revenues of no more than \$15 million in each of the three
    previous calendar years. [^112] The Commission awards "very small
    entity" bidding credits to firms that had revenues of no more than
    \$3 million in each of the three previous calendar years.[^113] The
    SBA has approved these small business size standards for the 900 MHz
    Service.[^114] The Commission has held auctions for geographic area
    licenses in the 800 MHz and 900 MHz bands. The 900 MHz SMR auction
    began on December 5, 1995, and closed on April 15, 1996. Sixty
    bidders claiming that they qualified as small businesses under the
    \$15 million size standard won 263 geographic area licenses in the
    900 MHz SMR band. The 800 MHz SMR auction for the upper 200 channels
    began on October 28, 1997, and was completed on December 8, 1997.
    Ten bidders claiming that they qualified as small businesses under
    the \$15 million size standard won 38 geographic area licenses for
    the upper 200 channels in the 800 MHz SMR band.[^115] A second
    auction for the 800 MHz band was held on January 10, 2002 and closed
    on January 17, 2002 and included 23 BEA licenses. One bidder
    claiming small business status won five licenses.[^116]

41. *39 GHz Service.* The Commission created a special small business
    size standard for 39 GHz licenses -- an entity that has average
    gross revenues of \$40 million or less in the three previous
    calendar years.[^117] An additional size standard for "very small
    business" is: an entity that, together with affiliates, has average
    gross revenues of not more than \$15 million for the preceding three
    calendar years.[^118] The SBA has approved these small business size
    standards.[^119] The auction of the 2,173 39 GHz licenses began on
    April 12, 2000 and closed on May 8, 2000. The 18 bidders who claimed
    small business status won 849 licenses. Consequently, the Commission
    estimates that 18 or fewer 39 GHz licensees are small entities that
    may be affected by the rules and polices proposed herein.

42. *Multipoint Distribution Service, Multichannel Multipoint
    Distribution Service, and Instructional Television Fixed Service.*
    Multichannel Multipoint Distribution Service (MMDS) systems, often
    referred to as "wireless cable," transmit video programming to
    subscribers using the microwave frequencies of the Multipoint
    Distribution Service (MDS) and Instructional Television Fixed
    Service (ITFS).[^120] In connection with the 1996 MDS auction, the
    Commission defined "small business" as an entity that, together with
    its affiliates, has average gross annual revenues that are not more
    than \$40 million for the preceding three calendar years.[^121] The
    SBA has approved of this standard.[^122] The MDS auction resulted in
    67 successful bidders obtaining licensing opportunities for 493
    Basic Trading Areas (BTAs).[^123] Of the 67 auction winners, 61
    claimed status as a small business. At this time, we estimate that
    of the 61 small business MDS auction winners, 48 remain small
    business licensees. In addition to the 48 small businesses that hold
    BTA authorizations, there are approximately 392 incumbent MDS
    licensees that have gross revenues that are not more than \$40
    million and are thus considered small entities.[^124]

43. In addition, the SBA has developed a small business size standard
    for Cable and Other Program Distribution,[^125] which includes all
    such companies generating \$12.5 million or less in annual
    receipts.[^126] According to Census Bureau data for 1997, there were
    a total of 1,311 firms in this category, total, that had operated
    for the entire year.[^127] Of this total, 1,180 firms had annual
    receipts of under \$10 million, and an additional 52 firms had
    receipts of \$10 million or more but less than \$25 million.[^128]
    Consequently, we estimate that the majority of providers in this
    service category are small businesses that may be affected by the
    proposed rules and policies.

44. Finally, while SBA approval for a Commission-defined small business
    size standard applicable to ITFS is pending, educational
    institutions are included in this analysis as small entities.[^129]
    There are currently 2,032 ITFS licensees, and all but 100 of these
    licenses are held by educational institutions. Thus, we tentatively
    conclude that at least 1,932 ITFS licensees are small businesses.

45. *Incumbent 24 GHz Licensees.* This analysis may affect incumbent
    licensees who were relocated to the 24 GHz band from the 18 GHz
    band, and applicants who wish to provide services in the 24 GHz
    band. The applicable SBA small business size standard is that of
    "Cellular and Other Wireless Telecommunications" companies. This
    category provides that such a company is small if it employs no more
    than 1,500 persons.[^130] According to Census Bureau data for 1997,
    there were 977 firms in this category, total, that operated for the
    entire year.[^131] Of this total, 965 firms had employment of 999 or
    fewer employees, and an additional 12 firms had employment of 1,000
    employees or more.[^132] Thus, under this size standard, the great
    majority of firms can be considered small. These broader census data
    notwithstanding, we believe that there are only two licensees in the
    24 GHz band that were relocated from the 18 GHz band, Teligent[^133]
    and TRW, Inc. It is our understanding that Teligent and its related
    companies have less than 1,500 employees, though this may change in
    the future. TRW is not a small entity. Thus, only one incumbent
    licensee in the 24 GHz band is a small business entity.

46. *Future 24 GHz Licensees.* With respect to new applicants in the
    24 GHz band, we have defined "small business" as an entity that,
    together with controlling interests and affiliates, has average
    annual gross revenues for the three preceding years not exceeding
    \$15 million.[^134] "Very small business" in the 24 GHz band is
    defined as an entity that, together with controlling interests and
    affiliates, has average gross revenues not exceeding \$3 million for
    the preceding three years.[^135] The SBA has approved these
    definitions.[^136] The Commission will not know how many licensees
    will be small or very small businesses until the auction, if
    required, is held.

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

47. The Commission in this Notice of Proposed Rulemaking makes tentative
    conclusions as to some, but not all of the necessary requirements of
    section 251(h)(2) for a competitive LEC, Mid-Rivers, to be declared
    an incumbent LEC. Should the Commission decide to find, after
    reviewing the record, that Mid-Rivers satisfies the requirements of
    section 251(h)(2) to be declared and incumbent LEC, and should the
    Commission make a finding as to the appropriate regulatory
    classification of the legacy incumbent LEC Qwest, the filing and
    compliance requirements of both Mid-Rivers and Qwest could
    potentially change. This is because incumbent LEC status often
    entails additional regulatory obligation and our decision on how to
    treat the legacy incumbent LEC could reduce Qwest's regulatory
    obligation. The Commission seeks comment in this Notice of Proposed
    Rulemaking regarding what, if any, broadly applicable rules would be
    necessary to properly implement this provision of the Act. Without
    more certainty about what rules, if any, the Commission will choose
    to adopt, we cannot accurately estimate the cost of compliance by
    small carriers. We therefore seek comment on the types of burdens
    carriers could face if the proposed recommendations are adopted.
    Entities, especially small businesses, are encouraged to quantify,
    if possible, the costs and benefits of potential reporting,
    recordkeeping, and other compliance requirements.

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

48. The RFA requires an agency to describe any significant, specifically
    small business, alternatives that it has considered in reaching its
    proposed approach, which may include the following four alternatives
    (among others): (1) the establishment of differing compliance or
    reporting requirements or timetables that take into account the
    resources available to small entities; (2) the clarification,
    consolidation, or simplification of compliance or reporting
    requirements under the rule for small entities; (3) the use of
    performance, rather than design, standards; and (4) an exemption
    from coverage of the rule, or any part thereof, for small
    entities.[^137]

49. While the Commission's primary concern is to implement the
    provisions of the Act, the Commission also plans to evaluate any
    adverse effect that its review of issues in this proceeding will
    have on small business entities. Our tentative conclusions that
    Mid-Rivers satisfies two of the three prongs of the statutory
    standard apply irrespective of the petitioner's size. However, some
    of the regulations and obligations that pertain to the incumbent LEC
    status that Mid-Rivers seeks are, by statute, limited in many
    circumstances because the Act exempts certain small incumbent local
    exchange telephone companies from the significant obligations of
    section 251(c).[^138] Thus, because Mid-Rivers qualifies for the
    exemption because of its small size, if our tentative conclusions
    are adopted as a part of an order granting the relief requested by
    Mid-Rivers, it is most likely that Mid-Rivers will not be subject to
    many of the costly regulations that generally pertain to incumbent
    LECs. Finally, we also consider procedural mechanisms that, if
    warranted, could potentially reduce the burdens on small entities
    that wish to seek similar treatment from the Commission.[^139] While
    it remains unclear what effect the alternative choices we face in
    this proceeding will have on small business entities, establishing
    this rulemaking will create a full record upon which we can more
    capably weigh these matters.

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

50. None.

## Paperwork Reduction Act

51. This Notice of Proposed Rulemaking does not contain proposed
    information collection(s) subject to the Paperwork Reduction Act of
    1995 (PRA), Public Law 104-13. In addition, therefore, it does not
    contain any new or modified "information collection burden for small
    business concerns with fewer than 25 employees," pursuant to the
    Small Business Paperwork Relief Act of 2002, Public Law 107-198,
    *see* 44 U.S.C. 3506(c)(4).

# Ordering CLAUSES

52. Accordingly, IT IS ORDERED that, pursuant to the authority contained
    in sections 2, 4(i)-4(j), 201, 251, and 303(r) of the Communications
    Act of 1934, as amended, 47 U.S.C. §§ 152, 154(i)-4(j), 201, 303(r),
    this Notice IS ADOPTED.

53. IT IS FURTHER ORDERED that the Commission's Consumer Information
    Bureau, Reference Information Center, SHALL SEND a copy of this
    Notice, including the Initial Regulatory Flexibility Analysis, to
    the Chief Counsel for Advocacy of the Small Business Administration.

    FEDERAL COMMUNICATIONS COMMISSION

    Marlene H. Dortch

    Secretary

**STATEMENT OF**

**COMMISSIONER MICHAEL J. COPPS**

Re: *Petition of Mid-Rivers Telephone Cooperative, Inc. for Order
Declaring it to be*

*an Incumbent Local Exchange Carrier in Terry, Montana Pursuant to*

*Section 251(h)(2)*, Notice of Proposed Rulemaking (WC Docket No. 02-78)

In the Telecommunications Act, Congress set out a path for designating a
new carrier as the incumbent local exchange carrier in a particular
market. Today's Notice of Proposed Rulemaking takes an appropriate step
down this road. It asks about standardizing the process for determining
when a carrier has "substantially replaced" an incumbent. It also poses
vital questions about the impact of reclassification on universal
service. I support this approach because Congress was clear in Section
251(h)(2) that any effort to reclassify carriers as incumbents must take
place "by rule\[.\]" But I also believe we have a special duty to
resolve this issue expeditiously. The petition that is at the heart of
this proceeding has been pending for more than two years. With time, the
issues it poses will only grow more prominent. Carriers like Mid-Rivers
that are providing service in a shifting marketplace deserve clarity
about their regulatory status. I look forward to working with my
colleagues to provide this certainty as soon as possible.

CONCURRING STATEMENT OF\
COMMISSIONER KEVIN J. MARTIN

*Re: Petition of Mid-Rivers Telephone Cooperative, Inc. for Order
Declaring it be an Incumbent Local Exchange Carrier in Terry, Montana
Pursuant to Section 251(h)(2); **WC Docket No. 02-78***

Today's decision initiates a Notice of Proposed Rulemaking that seeks
comment on how section 251(h)(2) of the Communications Act should be
applied to the request by Mid-Rivers Telephone Cooperative, Inc
("Mid-Rivers"), a competitive local exchange carrier in the Terry,
Montana exchange, to be classified as an incumbent local exchange
carrier ("ILEC") in that exchange.

Mid-Rivers filed its request in February 2002 and the Commission sought
comment on that request in April 2002.[^140] In its petition, Mid-Rivers
declared that it serves approximately 97% of the residential and
business access lines in the Terry exchange primarily over its own
facilities. Given its 97% share of the local exchange market in Terry,
Montana, Mid-Rivers asserts that it meets the requirements of the three
part statutory test to be classified as an ILEC. Mid-Rivers asserts that
its overwhelming market-share demonstrates that it: "...occupies a
position in the market for telephone exchange service that is comparable
to the position occupied by \[the ILEC\];"[^141] "has substantially
replaced the ILEC..."[^142]; and that the "...public interest,
convenience, and necessity..."[^143] is served by recognition of its *de
facto* status of serving virtually all the customers in the Terry
exchange over its modern network facilities. The Mid-Rivers' petition
was supported by the Montana Public Service Commission and the incumbent
LEC in Terry, Montana did not file in opposition.

While I agree that this petition\--which has been pending for nearly
three years\-- raises questions regarding some of the Commission's
fundamental policies, such as universal service and local competition, I
believe that the Commission could have moved forward to grant the
petition while simultaneously seeking further comment on these policy
issues.

Accordingly, I concur in the result of the Order.

**STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

*Re: Petition of Mid-Rivers Telephone Cooperative to be Declared an ILEC
Pursuant to Section 251(h)(2) of the Communications Act, WC Docket
02-78.*

I support today's decision to open a Notice of Proposed Rulemaking
seeking comment on the process for designating a competitive carrier as
an incumbent LEC when it has substantially replaced the existing
incumbent provider. Congress specifically provided for this circumstance
by adopting Section 251(h)(2) of the Act, which sets out a statutory
test for designation of a comparable carrier as an incumbent LEC. This
Notice asks important questions about the process for such designations
and about the implications for our universal service and local
competition rules. Designation as an incumbent may mean that additional
universal service support is available to rural carriers who expand into
the markets of their non-rural carrier neighbors, so the issues raised
in this proceeding are meaningful for the development of choice and high
quality services for those in Rural America. Timely resolution of this
proceeding, which has been pending for over two years, is essential
because we must ensure that our rules create incentives for carriers to
invest in the latest and most powerful technologies to serve Rural
America.

[^1]: Mid-Rivers serves approximately 11,000 access lines throughout a
    substantial portion of eastern Montana, generally between the
    Missouri and Yellowstone Rivers, and was formed in 1952 as a
    cooperative in order to bring telephone service to then unserved or
    poorly served rural areas. *See* Mid-Rivers Telephone Cooperative,
    Inc., *Petition for Order Declaring Mid-Rivers Telephone
    Cooperative, Inc. an Incumbent Local Exchange Carrier in Terry, MT*,
    WC Docket No. 02-78 at 1 (filed Feb. 5, 2002) (Mid-Rivers Petition).

[^2]: 47 U.S.C. § 251(h)(2).

[^3]: The only Commission precedent for the application of section
    251(h)(2) involved the Guam Telephone Authority (GTA), which
    satisfied all of the requirements of section 251(h)(1) except that
    it was not a member of the National Exchange Carrier Association
    (NECA). *See Guam Public Utilities Commission Petition for
    Declaratory Ruling Concerning Sections 3(37) and 251(h)(2) of the
    Communications Act*, Declaratory Ruling and Notice of Proposed
    Rulemaking, 12 FCC Rcd 6925 (1997) (*Guam Declaratory Ruling and
    NPRM*); *Treatment of the Guam Telephone Authority and Similarly
    Situated Carriers as Incumbent Local Exchange Carriers under Section
    251(h)(2) of the Communications Act*, Report and Order, 13 FCC Rcd
    13765, 13768-69, para. 6 (1998) (*Guam Report and Order*) (adopting
    in full the conclusions set forth in the *Guam Declaratory Ruling
    and NPRM*).

[^4]: *See* Implementation of the Local Competition Provisions in the
    Telecommunications Act of 1996, First Report and Order, CC Docket
    No. 96-98, 11 FCC Rcd 15499, 15506, para. 4 (1996) (*Local
    Competition First Report and Order*).

[^5]: NECA is an association, established by Commission rule, for all
    "telephone companies that participate in the distribution of Carrier
    Common Line revenue requirement, pay long term support to
    association Common Line tariff participants, or receive payments
    from the transitional support fund administered by the association."
    47 C.F.R. § 69.601(b). The association was established "in order to
    prepare and file access tariffs on behalf of all telephone companies
    that do not file separate tariffs or concur in a joint access tariff
    of another company for all access elements." 47 C.F.R. § 69.601(a).

[^6]: 47 U.S.C. § 251(h)(1). Incumbent LECs are subject not only to the
    requirements of sections 251(a) and (b), which are applicable to all
    LECs, but also are subject to the more detailed obligations in
    section 251(c). These obligations include the duties to: negotiate
    interconnection agreements in good faith; provide other carriers
    with unbundled access to its network elements; allow other carriers
    to resell its exchange service at wholesale rates; and provide
    physical collocation of other carriers' equipment. 47 U.S.C. §
    251(c).

[^7]: *Application of Ameritech Corp., Transferor, and SBC
    Communications Inc., Transferee, for Consent to Transfer Control of
    Corporations Holding Commission Licenses and Lines Pursuant to
    Sections 214 and 310(d) of the Communications Act and Parts 5, 22,
    24, 25, 63, 90, 95 and 101 of the Commission's Rules*, CC Docket No.
    98-141, Memorandum Opinion and Order, 14 FCC Rcd 14712, 14894-95,
    paras. 447-48 (1999) (declining to follow the literal approach set
    forth in MCI Telecommunications Corp. v. The Southern New England
    Telephone Co., 27 F.Supp.2d 326, 336-37 (D.Conn. 1998)), *rev\'d on
    other grounds*, Ass\'n of Communications Enterprises v. FCC, 235
    F.3d 662 (D.C. Cir. 2001).

[^8]: *See generally*, *Guam Declaratory Ruling and NPRM*, 12 FCC Rcd
    6925; *Guam Report and Order*, 13 FCC Rcd 13765 (determining by
    rulemaking the incumbent LEC status of GTA).

[^9]: 47 U.S.C. § 251(h)(2). *See also* section 51.223 of the
    Commission's rules, 47 C.F.R. § 51.223, which implements section
    251(h)(2).

[^10]: 47 U.S.C. § 251(h)(2). *See Local Competition First Report and
    Order*, 11 FCC Rcd 15499, 16110, para. 1248.

[^11]: Qwest is the incumbent LEC in Terry, Montana because its
    predecessor, U S WEST, was a member of NECA and was the exclusive
    local exchange carrier in Terry on the date of enactment of the 1996
    Act. *See* 47 U.S.C. § 251(h)(1). For purposes of clarity this
    *Notice*, we describe Qwest and similarly situated carriers as
    legacy incumbent LECs.

[^12]: Mid-Rivers Petition at 1-2. The Terry, Montana exchange includes
    customers located both within and outside of the town of Terry.

[^13]: Mid-Rivers Petition at 2; Mid-Rivers serves approximately 97
    percent of the 317 residential access lines and 97 percent of the
    118 business access lines in the town of Terry. *Id.*

[^14]: Mid-Rivers Petition at 2; *see* Letter from David Cosson, Counsel
    for Mid-Rivers, to Michael K. Powell, Chairman, FCC, WC Docket No.
    02-78 at 1 (filed Apr. 24, 2003) (Mid-Rivers Apr. 2003 *Ex Parte*
    Letter). Mid-Rivers asserts that it neither resells Qwest service
    nor utilizes unbundled network elements of Qwest for its customers
    within the town limits of Terry. *Id.* Mid-Rivers purchases some
    resold services from Qwest to serve customers outside of the town of
    Terry.

[^15]: Mid-Rivers Petition at 1.

[^16]: Letter from Gary Feland, Chairman, Montana Public Service
    Commission, to Marlene H. Dortch, Secretary, FCC, WC Docket No.
    02-78 (filed June 5, 2003) (June 5, 2003 Montana Commission *Ex
    Parte* Letter); RICA Comments; NTCA Comments; John Staurulakis, Inc.
    Comments.

[^17]: *See* Opposition of Western Wireless at 1-2. Western Wireless
    proposes several conditions that, if imposed, would ameliorate its
    concerns. *Id*. at 3 (suggesting that the Terry service area should
    be a separate study area for competitive ETC designation from
    Mid-Rivers' current study area; that Mid-Rivers should be required
    to provide section 251(c)(2) interconnection in the Terry exchange,
    despite the 251(f) rural exemption, and; that competitive ETC
    applications should be evaluated according to the standards
    applicable to an area served by a non-rural company).

[^18]: *See* Letter from Craig Brown, Senior Attorney, Qwest, to Marlene
    H. Dortch, Secretary, FCC, WC Docket No. 02-78 (filed June 28, 2002)
    (Qwest June 28, 2002 *Ex Parte* Letter).

[^19]: *Id*. at 1.

[^20]: 47 U.S.C. § 251(h)(2)(A). Mid-Rivers asserts that it satisfies
    this requirement. Mid-Rivers Petition at 3.

[^21]: *Guam Declaratory Ruling and NPRM*, 12 FCC Rcd at 6941, para. 26,
    citing *Local Competition First Report and Order*, 11 FCC Rcd at
    15505-12, paras. 1-20; *Guam Report and Order*, 13 FCC Rcd at
    13768-69, para. 6 (adopting in full the conclusions set forth in the
    *Guam Declaratory Ruling and NPRM*).

[^22]: *See infra*, para. 10.

[^23]: Section 254(e) of the Act provides that "only an eligible
    telecommunications carrier designated under section 214(e) shall be
    eligible to receive specific Federal universal service support." 47
    U.S.C. § 254(e); *see also* 47 U.S.C. § 214(e); 47 C.F.R. § 54.201.

[^24]: *See* 47 C.F.R. 54.307; *see infra* discussion at paras. 10-14.

[^25]: 47 U.S.C. § 251(h)(2)(A).

[^26]: 47 U.S.C. § 251(h)(2)(B). Mid-Rivers asserts that it satisfies
    this requirement. Mid-Rivers Petition at 3.

[^27]: *Guam Declaratory Ruling and NPRM,* 12 FCC Rcd at 6947, para. 38;
    *see Guam Report and Order*, 13 FCC Rcd at 13768-69, para. 6
    (adopting in full the conclusions set forth in the *Guam Declaratory
    Ruling and NPRM*).

[^28]: 47 U.S.C. § 251(h)(2)(C). Mid-Rivers asserts that it satisfies
    this requirement. Mid-Rivers Petition at 3.

[^29]: *See* 47 U.S.C. § 160(b).

[^30]: Like the GTA, Mid-Rivers qualifies as a rural telephone company
    and, therefore, is exempt from regulation under section 251(c) of
    the Act. *Guam Declaratory Ruling and NPRM,* 12 FCC Rcd at 6946-48,
    paras. 35, 40; *see Guam Report and Order*, 13 FCC Rcd at 13768-69,
    para. 6 (adopting in full the conclusions set forth in the *Guam
    Declaratory Ruling and NPRM*). The Commission reasoned in the *Guam*
    case that the public interest is served because the section 251(f)
    exception is not absolute in that it includes a procedure for
    terminating the exception. Therefore, a carrier declared to be an
    incumbent has the potential to be subject to the obligations of
    section 251(c) while a carrier not declared to be an incumbent will
    never be subject to such obligations. *Id. But see* Opposition of
    Western Wireless at 1-2 (raising concerns about the potential effect
    of reduced interconnection obligations); Qwest June 28, 2002 *Ex
    Parte* Letter at 2 (raising the issue of section 251(c)
    obligations).

[^31]: 47 U.S.C. § 157 nt.

[^32]: Mid-Rivers Petition at 3. Therefore, Mid-Rivers states that
    reclassifying Mid-Rivers as an incumbent LEC in the Terry exchange
    would serve the public interest by allowing competitors to
    interconnect to a more capable and advanced network, including the
    local loops, increasing the potential for competitive service
    offerings to consumers. *But see* Opposition of Western Wireless at
    2-3; Qwest June 28, 2002 *Ex Parte* Letter at 3. *See also* Petition
    of Qwest Corporation for Forbearance Pursuant to 47 U.S.C. § 160(c)
    in the Omaha Metropolitan Statistical Area, WC Docket No. 04-223
    (filed June 21, 2004).

[^33]: We discuss in detail the treatment of legacy incumbent LECs
    *infra* Part III.B.

[^34]: *See* June 5, 2003 Montana Commission *Ex Parte* Letter (briefly
    stating the state commission's support for the Mid-Rivers petition);
    *see also* *Local Competition First Report and Order*, 11 FCC Rcd at
    16110, para. 1248 (stating, "\[w\]e expect to give particular
    consideration to filings from state commissions"). We note that the
    Montana Public Service Commission has designated Mid-Rivers as an
    ETC in the Terry exchange. *Mid-Rivers Petition* at 2 & n.4.

[^35]: *See Federal-State Joint Board on Universal Service*, Order on
    Remand, Further Notice of Proposed Rulemaking, and Memorandum
    Opinion and Order, CC Docket No. 96-45, FCC 03-249 (rel. Oct. 27,
    2003) at para. 103 ("The amount of federal high-cost support
    available to an incumbent carrier differs according to the size,
    population density, and topography of the incumbent carrier's study
    area, whether the costs of service are allocated to the state or
    federal jurisdiction, and whether the incumbent carrier's interstate
    access service is subject to price cap or rate-of-return
    regulation.").

[^36]: *See supra* note 1; 47 C.F.R. sections 36.601, *et seq.*, 54.301,
    and 54.901. Moreover, because high-cost support generally is
    calculated based on costs averaged over an entire study area, a
    carrier serving a single, high-cost exchange will have higher costs
    than one serving multiple exchanges with varying costs.

[^37]: *See* Rural Independent Competitive Alliance Comments in CC
    Docket No. 96-45, FCC 03J-1 (May 5, 2003), at 1. The Rural
    Independent Competitive Alliance is a national association of
    approximately 80 competitive LECs operating in rural areas and
    affiliated with incumbent rural telephone companies. *Id.*

[^38]: *See, e.g., Federal-State Joint Board on Universal Service,
    Multi-Association Group (MAG) Plan for Regulation of Interstate
    Services of Non-Price Cap Incumbent Local Exchange Carriers and
    Interexchange Carriers*, Fourteenth Report and Order, Twenty-Second
    Order on Reconsideration, and Further Notice of Proposed Rulemaking
    in CC Docket No. 96-45, and Report and Order in CC Docket No.
    00-256, 16 FCC Rcd 11244, 11327, para. 211 (2001) (*Rural Task Force
    Order*).

[^39]: 47 C.F.R. § 54.305.

[^40]: *See, e.g.*, *supra* note Error: Reference source not found
    (describing proposals by Western Wireless).

[^41]: 47 C.F.R. § 61.26(b)(1).

[^42]: 47 C.F.R. § 61.26(e). A "rural CLEC" is defined as a competitive
    LEC "that does not serve (*i.e*., terminate traffic to or originate
    traffic from) any end users located within either: (i) Any
    incorporated place of 50,000 inhabitants or more . . . or (ii)
    \[a\]n urbanized area, as defined by the Census Bureau." 47 C.F.R. §
    61.26(a)(6).

[^43]: For example, if a carrier charges the CALLS rate when it is
    classified a competitive LEC (because it is competing with a price
    cap LEC in a non-rural area), but it would be subject to
    rate-of-return regulation if it were classified as an incumbent LEC,
    interexchange carriers will pay higher rates as a result of a
    decision to classify the carrier as an incumbent LEC. *See also*
    Opposition of Western Wireless at 2-3.

[^44]: Mid-Rivers, however, alludes to the possibility that Qwest might
    choose to leave the exchange if Mid-Rivers' petition is granted,
    stating that it "would not object to a Qwest relinquishment of ETC
    status in Terry pursuant to section 214(e)(4) and would consider
    purchase of Qwest's facilities in the Terry exchange." Mid-Rivers
    Petition at 3 n.8.

[^45]: We also seek comment on how to address any additional statutory
    obligations particular to a legacy incumbent LEC that is a Bell
    Operating Company (BOC) -- such as Qwest -- that has additional
    obligations under sections 271 and 272 of the Act.

[^46]: *See supra* note Error: Reference source not found.

[^47]: *See* Qwest June 28, 2002 *Ex Parte* Letter at 2 (questioning how
    the Commission would address this novel question).

[^48]: *Supra* paras. 3, 5 & n.14.

[^49]: Competitive ETCs normally receive the same per-line amount of
    high-cost universal service support that the incumbent LEC would
    receive for serving that customer, based on the incumbent LEC's
    costs. 47 C.F.R. § 54.307. We note that the Commission asked the
    Federal-State Joint Board on Universal Service (Joint Board) to
    reexamine certain of the Commission's rules relating to high-cost
    support, including the methodology for calculating support in areas
    served by multiple ETCs, and to provide recommendations as to
    whether these rules should be modified. *See* *Federal-State Joint
    Board on Universal Service*, CC Docket No. 96-45, Order, 17 FCC Rcd
    22642, para. 1 (2002). The Joint Board plans to address possible
    modifications to the basis of support for all ETCs as part of a
    comprehensive review of high-cost support mechanisms in the
    Rural/Non-Rural proceeding. *See* *Federal-State Joint Board on
    Universal Service*, CC Docket No. 96-45, Recommended Decision, FCC
    04J-1, para. 88 (rel. Feb. 27, 2004); *Rural Task Force Order*, 16
    FCC Rcd at 11310, para. 169; *Federal State Joint Board on Universal
    Service*, CC Docket No. 96-45, Notice of Proposed Rulemaking, 19 FCC
    Rcd 10800 (2004).

[^50]: *See*, *e.g*., Western Wireless Corp. Comments; Qwest June 28,
    2002 *Ex Parte* Letter. We also note that, if the petition is
    granted, affected carriers like Mid-Rivers and Qwest would need to
    amend their filing status with the Commission. *See Mid-Rivers
    Application* at 3, stating, "Upon grant of this petition, Mid-Rivers
    will promptly file a petition for waiver of the frozen study area
    rules and execute such other documents as are necessary to
    incorporate the Terry exchange into its ILEC study area and the NECA
    tariff."

[^51]: 47 U.S.C. § 160(a), (b).

[^52]: 47 U.S.C. § 160(d).

[^53]: 47 C.F.R. § 51.5 ("Incumbent Local Exchange Carrier," as defined
    in our local competition rules, describes incumbent LECs only by the
    criteria set forth in section 251(h)(1) of the Act).

[^54]: We propose adding the following clause to the Commission's
    definition of Incumbent Local Exchange Carrier in section 51.5 of
    the Commission's rules: ". . . (3) Is deemed by the Commission to be
    an incumbent local exchange carrier, pursuant to 47 U.S.C. §
    251(h)(2)."

[^55]: *See* Rural Independent Competitive Alliance Comments at 2
    (stating that "\[t\]he experience of Mid-Rivers in Terry, Montana,
    is consistent with the experience of other RICA members across rural
    America."). *See also* *supra* note Error: Reference source not
    found and accompanying text; Qwest June 28, 2002 *Ex Parte* Letter
    at 3-4.

[^56]: We note that the Act states, "\[t\]he Commission may, *by rule*,
    provide for the treatment of a local exchange carrier (or class or
    category thereof) as an incumbent local exchange carrier." 47 U.S.C.
    § 251(h)(2) (emphasis added). However, we also note that the
    Commission's rules provide that "\[a\] state commission, or any
    other interested party, may request that the Commission issue an
    *order* declaring that a particular LEC be treated as an incumbent
    LEC, or that a class or category of LECs be treated as incumbent
    LECs." 47 C.F.R. § 51.223(b) (emphasis added). The only Commission
    precedent under section 251(h)(2) was adopted by rulemaking. *Guam
    Declaratory Order and NPRM*, 12 FCC Rcd 6925.

[^57]: 47 C.F.R. §§ 1.1200-1.1216.

[^58]: *See* 47 C.F.R. § 1.1206(b)(2).

[^59]: 47 C.F.R. § 1.1206(b).

[^60]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601 *et. seq.*,
    has been amended by the Small Business Regulatory Enforcement
    Fairness Act of 1996 (SBREFA), Pub. L. No. 104-121, 110 Stat. 857
    (1996).

[^61]: *See* 5 U.S.C. § 603(a).

[^62]: *See id*.

[^63]: *See, e.g.*, *supra* para. 1.

[^64]: *See supra* paras. 6-9.

[^65]: *See supra* paras. 10-12.

[^66]: *See supra* paras. 13-15.

[^67]: *See supra* paras. 16-18.

[^68]: 5 U.S.C. § 604(a)(3).

[^69]: 5 U.S.C. § 601(6).

[^70]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small-business concern" in the Small Business Act, 15 U.S.C. §
    632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a
    small business applies "unless an agency, after consultation with
    the Office of Advocacy of the Small Business Administration and
    after opportunity for public comment, establishes one or more
    definitions of such term which are appropriate to the activities of
    the agency and publishes such definition(s) in the Federal
    Register."

[^71]: 15 U.S.C. § 632.

[^72]: FCC, Wireline Competition Bureau, Industry Analysis and
    Technology Division, *Trends in Telephone Service* at Table 5.3,
    Page 5-5 (May 2004) (*Trends in Telephone Service*). This source
    uses data that are current as of October 22, 2003.

[^73]: 13 C.F.R. § 121.201, North American Industry Classification
    System (NAICS) code 513310 (changed to 517110 in Oct. 2002).

[^74]: 13 C.F.R. § 121.201, NAICS code 517211.

[^75]: 13 C.F.R. § 121.201, NAICS code 517212.

[^76]: 15 U.S.C. § 632.

[^77]: Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, to
    William E. Kennard, Chairman, FCC (May 27, 1999). The Small Business
    Act contains a definition of "small-business concern," which the RFA
    incorporates into its own definition of "small business." See 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).

[^78]: 13 C.F.R. § 121.201, NAICS code 517110.

[^79]: 1997 Economic Census, Establishment and Firm Size, Table 5, NAICS
    code 513310 (issued Oct. 2000).

[^80]: Id. The census data do not provide a more precise estimate of the
    number of firms that have employment of 1,500 or fewer employees;
    the largest category provided is "Firms with 1,000 employees or
    more."

[^81]: 13 C.F.R. § 121.201, NAICS code 517110.

[^82]: *Trends in Telephone Service* at Table 5.3.

[^83]: 13 C.F.R. § 121.201, NAICS code 517110.

[^84]: *Trends in Telephone Service* at Table 5.3.

[^85]: 13 C.F.R. § 121.201, NAICS code 517110.

[^86]: *Trends in Telephone Service* at Table 5.3.

[^87]: 13 C.F.R. § 121.201, NAICS code 517110.

[^88]: *Trends in Telephone Service* at Table 5.3.

[^89]: 13 C.F.R. § 121.201, NAICS code 517310.

[^90]: *Trends in Telephone Service* at Table 5.3.

[^91]: *Id.*

[^92]: 13 C.F.R. § 121.201, NAICS code 517110.

[^93]: *Trends in Telephone Service* at Table 5.3.

[^94]: *Id.*

[^95]: 13 C.F.R. § 121.201, NAICS code 517211.

[^96]: 13 C.F.R. § 121.201, NAICS code 517212.

[^97]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    "Information," Table 5, Employment Size of Firms Subject to Federal
    Income Tax: 1997, NAICS code 513321 (issued October 2000).

[^98]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    "Information," Table 5, Employment Size of Firms Subject to Federal
    Income Tax: 1997, NAICS code 513321 (issued October 2000). The
    census data do not provide a more precise estimate of the number of
    firms that have employment of 1,500 or fewer employees; the largest
    category provided is "Firms with 1000 employees or more."

[^99]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    "Information," Table 5, Employment Size of Firms Subject to Federal
    Income Tax: 1997, NAICS code 513322 (issued October 2000).

[^100]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    "Information," Table 5, Employment Size of Firms Subject to Federal
    Income Tax: 1997, NAICS code 513322 (issued October 2000). The
    census data do not provide a more precise estimate of the number of
    firms that have employment of 1,500 or fewer employees; the largest
    category provided is "Firms with 1000 employees or more."

[^101]: *See Amendment of Parts 20 and 24 of the Commission's Rules --
    Broadband PCS Competitive Bidding and the Commercial Mobile Radio
    Service Spectrum Cap*, WT Docket No. 96-59, Report and Order, 11 FCC
    Rcd 7824 (1996); see also 47 C.F.R. § 24.720(b).

[^102]: *See Amendment of Parts 20 and 24 of the Commission's Rules --
    Broadband PCS Competitive Bidding and the Commercial Mobile Radio
    Service Spectrum Cap*, WT Docket No. 96-59, Report and Order, 11 FCC
    Rcd 7824 (1996).

[^103]: *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 5332 (1994).

[^104]: Broadband PCS, D, E and F Block Auction Closes, (rel. Jan. 14,
    1997); *see also Amendment of the Commission's Rules Regarding
    Installment Payment Financing for Personal Communications Services
    (PCS) Licenses*, WT Docket No. 97-82, Second Report and Order, 12
    FCC Rcd 16436 (1997).

[^105]: *Implementation of Section 309(j) of the Communications Act --
    Competitive Bidding Narrowband PCS*, Third Memorandum Opinion and
    Order and Further Notice of Proposed Rulemaking, 10 FCC Rcd 175,
    196, para. 46 (1994).

[^106]: *See* "Announcing the High Bidders in the Auction of ten
    Nationwide Narrowband PCS Licenses, Winning Bids Total
    \$617,006,674," Public Notice, PNWL 94-004 (released Aug. 2, 1994);
    "Announcing the High Bidders in the Auction of 30 Regional
    Narrowband PCS Licenses; Winning Bids Total \$490,901,787," Public
    Notice, PNWL 94-27 (released Nov. 9, 1994).

[^107]: *Amendment of the Commission's Rules to Establish New Personal
    Communications Services, Narrowband PCS*, Second Report and Order
    and Second Further Notice of Proposed Rule Making, 15 FCC Rcd 10456,
    10476, para. 40 (2000).

[^108]: *Amendment of the Commission's Rules to Establish New Personal
    Communications Services, Narrowband PCS*, Second Report and Order
    and Second Further Notice of Proposed Rule Making, 15 FCC Rcd 10456,
    10476, para. 40 (2000).

[^109]: *Amendment of the Commission's Rules to Establish New Personal
    Communications Services, Narrowband PCS*, Second Report and Order
    and Second Further Notice of Proposed Rule Making, 15 FCC Rcd 10456,
    10476, para. 40 (2000).

[^110]: *See* Letter to Amy Zoslov, Chief, Auctions and Industry
    Analysis Division, Wireless Telecommunications Bureau, Federal
    Communications Commission, from Aida Alvarez, Administrator, Small
    Business Administration, dated December 2, 1998.

[^111]: *See* "Narrowband PCS Auction Closes," Public Notice, 16 FCC Rcd
    18663 (WTB 2001).

[^112]: 47 C.F.R. § 90.814(b)(1).

[^113]: 47 C.F.R. § 90.814(b)(1).

[^114]: *See* Letter to Thomas Sugrue, Chief, Wireless
    Telecommunications Bureau, Federal Communications Commission, from
    Aida Alvarez, Administrator, Small Business Administration, dated
    August 10, 1999. We note that, although a request was also sent to
    the SBA requesting approval for the small business size standard for
    800 MHz, approval is still pending.

[^115]: *See* "Correction to Public Notice DA 96-586 'FCC Announces
    Winning Bidders in the Auction of 1020 Licenses to Provide 900 MHz
    SMR in Major Trading Areas,'" Public Notice, 18 FCC Rcd 18367 (WTB
    1996).

[^116]: *See* "Multi-Radio Service Auction Closes*," Public Notice*, 17
    FCC Rcd 1446 (WTB 2002).

[^117]: *See Amendment of the Commission's Rules Regarding the 37.0-38.6
    GHz and 38.6-40.0 GHz Bands*, ET Docket No. 95-183, Report and
    Order, 12 FCC Rcd 18600 (1997), 63 Fed.Reg. 6079 (Feb. 6, 1998).

[^118]: *Id.*

[^119]: *See* Letter to Kathleen O'Brien Ham, Chief, Auctions and
    Industry Analysis Division, Wireless Telecommunications Bureau, FCC,
    from Aida Alvarez, Administrator, SBA (Feb. 4, 1998) (VoIP); Letter
    to Margaret Wiener, Chief, Auctions and Industry Analysis Division,
    Wireless Telecommunications Bureau, Federal Communications
    Commission, from Hector Barreto, Administrator, Small Business
    Administration, dated January 18, 2002 (WTB).

[^120]: *Amendment of Parts 21 and 74 of the Commission's Rules with
    Regard to Filing Procedures in the Multipoint Distribution Service
    and in the Instructional Television Fixed Service and Implementation
    of Section 309(j) of the Communications Act -- Competitive Bidding*,
    Report and Order, 10 FCC Rcd 9589, 9593, para. 7 (1995) (*MDS
    Auction R&O*).

[^121]: 47 C.F.R. § 21.961(b)(1).

[^122]: *See* Letter to Margaret Wiener, Chief, Auctions and Industry
    Analysis Division, Wireless Telecommunications Bureau, Federal
    Communications Bureau, from Gary Jackson, Assistant Administrator
    for Size Standards, Small Business Administration, dated March 20,
    2003 (noting approval of \$40 million size standard for MDS
    auction).

[^123]: Basic Trading Areas (BTAs) were designed by Rand McNally and are
    the geographic areas by which MDS was auctioned and authorized. *See
    MDS Auction R&O*, 10 FCC Rcd at 9608, para. 34.

[^124]: 47 U.S.C. § 309(j). Hundreds of stations were licensed to
    incumbent MDS licensees prior to implementation of Section 309(j) of
    the Communications Act of 1934, 47 U.S.C. § 309(j). For these
    pre-auction licenses, the applicable standard is SBA's small
    business size standard for "other telecommunications" (annual
    receipts of \$12.5 million or less). *See* 13 C.F.R. § 121.201,
    NAICS code 517910.

[^125]: 13 C.F.R. § 121.201, NAICS code 517510.

[^126]: *Id.*

[^127]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    Information, "Establishment and Firm Size (Including Legal Form of
    Organization)," Table 4 (issued October 2000).

[^128]: *Id.*

[^129]: In addition, the term "small entity" under SBREFA applies to
    small organizations (nonprofits) and to small governmental
    jurisdictions (cities, counties, towns, townships, villages, school
    districts, and special districts with populations of less than
    50,000). 5 U.S.C. §§ 601(4)-(6). We do not collect annual revenue
    data on ITFS licensees.

[^130]: 13 C.F.R. § 121.201, NAICS code 513322 (changed to 517212 in
    October 2002).

[^131]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    Information, "Employment Size of Firms Subject to Federal Income
    Tax: 1997," Table 5, NAICS code 513322 (issued October 2000).

[^132]: *Id.* The census data do not provide a more precise estimate of
    the number of firms that have employment of 1,500 or fewer
    employees; the largest category provided is "Firms with 1,000
    employees or more."

[^133]: Teligent acquired the DEMS licenses of FirstMark, the only
    licensee other than TRW in the 24 GHz band whose license has been
    modified to require relocation to the 24 GHz band.

[^134]: *Amendments to Parts 1, 2, 87 and 101 of the Commission's Rules
    To License Fixed Services at 24 GHz*, Report and Order, 15 FCC Rcd
    16934, 16967, para. 77 (2000) (24 GHz Report and Order); see also 47
    C.F.R. § 101.538(a)(2).

[^135]: *24 GHz Report and Order*, 15 FCC Rcd at 16967, para. 77; *see
    also* 47 C.F.R. § 101.538(a)(1).

[^136]: *See* Letter to Margaret W. Wiener, Deputy Chief, Auctions and
    Industry Analysis Division, Wireless Telecommunications Bureau,
    Federal Communications Commission, from Gary M. Jackson, Assistant
    Administrator, Small Business Administration, dated July 28, 2000.

[^137]: 5 U.S.C. § 603(c)(1)-(c)(4).

[^138]: *See discussion supra* para. 10 n.Error: Reference source not
    found.

[^139]: *See supra* para. 18.

[^140]: *See* Mid-Rivers Telephone Cooperative, Inc*., Petition for
    Order Declaring Mid-Rivers Telephone Cooperative, Inc. an Incumbent
    Local Exchange Carrier in Terry, MT*, WC Docket 02-78 (filed Feb. 5,
    2002).

[^141]: *See* 47 USC 251(h)(2)(A)

[^142]: *See* 47 USC 251(h)(2)(B)

[^143]: *See* 47 USC 251(h)(2)(C)