**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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**REPORT AND ORDER AND ORDER ON RECONSIDERATION**

**Adopted:** March 9, 2001 **Released:** March 14, 2001

By the Commission:

# introduction

1.  In this Order, we modify the existing methodology used to assess
    contributions that carriers make to the federal universal service
    support mechanisms. Specifically, we modify the existing
    contribution methodology to reduce the interval between the accrual
    of revenues and the assessment of universal service contributions
    based on those revenues. Currently, contributions to the federal
    universal service support mechanisms are based on carriers'
    interstate and international end-user telecommunications revenues
    from the prior year.[^1] With this modification, we shorten the
    interval between the accrual of revenues and assessment based on
    those revenues by six months.

2.  By reducing the interval between the accrual and assessment of
    revenues for contributions to the universal service fund, the
    revised methodology will improve upon the existing methodology by
    basing assessments on revenue data that are more reflective of
    current market conditions. As a result, the revised contribution
    methodology will prevent the possibility that certain carriers will
    be at a competitive disadvantage as market conditions change. By our
    action today, we ensure that the assessment of contributions to the
    federal universal service support mechanisms remains competitively
    neutral, and that the mechanisms continue to meet the statutory
    requirement of section 254(d) to be specific, predictable, and
    sufficient.[^2]

3.  Although the action we take today improves the operation of the
    current universal service assessment methodology, we believe that
    more fundamental modifications may be warranted to simplify the way
    in which carriers contribute to the universal service mechanisms.
    Accordingly, very shortly we intend to initiate a proceeding to seek
    comment on whether and how to modify our rules related to carriers'
    recovery of their universal service contribution obligations to
    simplify the process for carriers and consumers and ensure that the
    universal service fund remains sufficient and predictable.

# Background

## The Act

4.  In section 254 of the Communications Act of 1934, as amended by the
    Telecommunications Act of 1996 (the Act), Congress instructed the
    Commission and the states 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.[^3] Section 254(d) 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."[^4]

## The Current Methodology

5.  In the *Universal Service Order*, the Commission decided to assess
    contributions on carriers' end-user telecommunications revenues.[^5]
    The Commission did so after considering the Recommended Decision of
    the Federal-State Joint Board on Universal Service (Joint Board) and
    the record developed at that time.[^6] Specifically, the Commission
    concluded that assessment based on end-user telecommunications
    revenues is competitively neutral, easy to administer, and
    eliminates some economic distortions associated with an assessment
    based on gross telecommunications revenues.[^7]

6.  In the *Second Order on Reconsideration*, the Commission set forth
    the specific method of computation for universal service
    contributions.[^8] To collect information from contributors about
    their end-user telecommunications revenues, the Commission requires
    contributors to submit a Telecommunications Reporting Worksheet
    (Worksheet) semi-annually. The Worksheet explains that contributions
    are based on billed end-user telecommunications revenues from the
    prior year.[^9] Therefore, under the existing contribution
    methodology, the interval between the accrual of revenues by
    carriers and the assessment of universal service contributions based
    on those revenues is 12 months.[^10]

7.  On October 12, 2000, the Commission released a *Contribution Further
    Notice* seeking comment on proposals to modify the universal service
    contribution methodology.[^11] In light of significant recent
    developments in the interstate telecommunications marketplace, the
    Commission sought comment on whether to modify the existing
    contribution methodology.[^12] Specifically, the Commission noted
    that the existing contribution methodology may place new entrants
    into the long distance market, such as the Regional Bell Operating
    Companies (RBOCs) that have recently entered the interexchange
    services market under section 271 of the Act, at a competitive
    advantage as they gain entry into the long distance market.[^13]
    Similarly, the Commission noted that the existing contribution
    methodology may place carriers with decreasing interstate revenues
    at a competitive disadvantage as compared to carriers with stable or
    increasing interstate revenues.[^14]

8.  The Commission therefore sought comment on the following proposals
    to modify the existing contribution methodology to ensure that the
    contribution methodology remains specific, predictable, sufficient,
    and competitively neutral as markets develop: (1) a methodology for
    the assessment of universal service contributions based on current
    revenues;[^15] (2) a methodology that would reduce the current
    interval between the accrual of revenues and the collection of
    universal service contributions based on those revenues;[^16]
    and (3) other proposals for the assessment and collection of
    contributions, such as an end-user surcharge.[^17]

# Discussion

9.  As discussed in greater detail below, we modify the existing
    contribution methodology to significantly reduce the current
    interval between the accrual of revenues and the assessment of
    universal service contributions based on those revenues. Although we
    continue to believe that the current methodology is competitively
    neutral and satisfies the requirements of the Act, we conclude that
    reducing this interval will be superior to the current methodology
    by basing assessments on revenue data that are more reflective of
    current market conditions, without significantly increasing
    administrative costs for carriers and USAC.[^18] The shortened
    interval will allow contributions to better reflect market trends
    influencing carriers' revenues, such as the entry of new providers
    into the interstate marketplace. As a result, the revised
    methodology will further the Commission's goal of maintaining
    competitive neutrality.

## Modified Universal Service Contribution Methodology 

10. We adopt, with minor modifications, the contribution methodology
    proposal set forth in the *Contribution Further Notice* to reduce
    the interval between the accrual of revenues by carriers and
    assessment of universal service contributions based on those
    revenues.[^19] This revised methodology will reduce the interval
    from 12 months to an average interval of six months.

11. The revised contribution methodology will operate in a manner
    similar to the current methodology with only minor differences. The
    Commission will continue to set contribution factors on a quarterly
    basis using the same timeframes as under the current methodology.
    Carriers will continue to file Form 499-A in April to report their
    annual revenues from the prior year. Under the revised methodology
    we adopt today, carriers will also file on a quarterly basis the new
    Form 499-Q to report their revenues from the prior quarter.[^20] We
    direct USAC to provide revenue data to the Commission at least
    thirty days before the start of each quarter. The Commission and
    USAC will use the revenue information from a particular quarter to
    set the contribution factor for the second following quarter. For
    example, contributions in the third quarter will be assessed based
    on revenues accrued in the first quarter. Accordingly, the revised
    methodology reduces to six months the average interval between the
    accrual of revenues and the assessment of universal service
    contributions based on those revenues. The specific timelines for
    implementation and transition are detailed below in section
    III.B.[^21]

12. USAC will use the revenue data provided by carriers in the FCC Form
    499-A to perform annual true-ups to the quarterly revenue data
    submitted by carriers during the prior calendar year.[^22] As
    necessary, USAC will then refund or collect from carriers any
    over-payments or under-payments. If the combined quarterly revenues
    reported by a carrier are greater than those reported on its annual
    revenue report (Form 499-A), then a refund will be provided to the
    carrier based on an average of the two lowest contribution factors
    for the year. If the combined quarterly revenues reported by a
    carrier are less than those reported on its annual revenue report
    (Form 499-A), then USAC shall collect the difference from the
    carrier using an average of the two highest contribution factors
    from that year. We believe this will provide an incentive for
    carriers to accurately report their quarterly revenues.

13. By reducing the interval between the accrual and assessment of
    revenues for contribution to the universal service fund, the revised
    methodology improves upon the existing methodology by basing
    assessments on revenue data more reflective of current market
    conditions. As a result, the revised contribution methodology
    ensures that contributions to the universal service support
    mechanisms continue to operate in a competitively neutral manner.
    The shortened interval between accrual of revenues and assessment of
    contributions will allow the revised methodology to reflect more
    accurately trends in telecommunications conditions, such as new
    carriers entering the interexchange market,[^23] or declining
    revenue bases for carriers that are losing market share. We conclude
    that the shortened interval will constitute a significant
    enhancement to the current methodology. Because it is similar to the
    existing contribution methodology, however, the methodology that we
    adopt herein will also be relatively easy to administer and
    implement.[^24] Similarly, we conclude that USAC will be able to
    continue to monitor carrier submissions to ensure that such
    submissions are accurate and timely without substantial changes in
    its auditing authority or the adoption of additional enforcement
    rules.

14. We decline to adopt at this time the proposal to base contributions
    on current revenues as set forth in the *Contribution Further
    Notice* and AT&T's petition for reconsideration.[^25] Under this
    proposal, the contribution factor is set using prior-year revenues,
    but carriers contribute based on application of this contribution
    factor to their current revenues. This proposal would increase
    reporting burdens on carriers by requiring carriers to file revenue
    information 13 times per year within very short timeframes. We agree
    with the majority of commenters that this proposal would be unduly
    burdensome on carriers, particularly smaller carriers.[^26] We also
    have concerns that the adoption of this proposal might affect the
    sufficiency of the universal service fund and require the collection
    of a reserve fund to protect against a fund shortfall.[^27] For
    these reasons, we decline to adopt this proposal at this time and
    deny AT&T's petition.

15. We also decline to adopt at this time the alternative contribution
    methodologies suggested by some commenters in this proceeding, such
    as having carriers base contributions on projected revenues, or
    permitting carriers to have the option of using more than one
    contribution methodology.[^28] We decline to adopt these proposals
    at this time because we conclude that the costs they impose would
    outweigh any potential benefits. We have concerns that these
    proposals would create incentives for carriers to under-report
    revenues or otherwise encourage carrier gaming of the contribution
    system. We also conclude that some of these proposals would unduly
    increase the costs of administering the universal service
    mechanisms.[^29] Accordingly, we decline to adopt these proposals at
    this time. Moreover, we do not preclude the possibility of adopting
    at some later date a surcharge methodology to recover contributions
    to the universal service mechanisms. Such a methodology may satisfy
    the goals of section 254(d) to be specific, predictable, and
    sufficient, while protecting consumers from excessive or confusing
    universal service charges on their telephone bills. We do not,
    however, have an adequate record at this time to adopt such a
    proposal. Therefore, we intend to seek further comment on this issue
    in the very near future.

## Transition to the Revised Contribution Methodology

16. We direct USAC to begin implementation of the revised contribution
    methodology effective for the second quarter of 2001 (*i.e.*, April
    through June of 2001). To ensure a smooth transition for second
    quarter 2001, during the month of April 2001, certain aspects of the
    existing contribution methodology will remain unchanged. As
    currently required under the existing methodology, on April 2, 2001,
    carriers will file the Form 499-A, reporting revenues billed from
    January through December 2000.[^30] Also as required under the
    existing methodology, carriers' April 2001 contributions will be
    calculated based on their reported revenues from January through
    June 2000 (*i.e.*, revenues reported on the 2000 Form 499-S).[^31]

17. Beginning in May 2001, for the entire second quarter 2001, USAC
    shall calculate carriers' contributions based on revenues that
    approximate the revenues earned in fourth quarter 2000.
    Specifically, we direct USAC to derive the fourth quarter 2000
    revenue by subtracting the revenues reported by carriers in the Form
    499-S (January through June 2000) from the revenues reported in the
    April 2001 Form 499-A (January through December 2000). USAC must
    then divide this revenue amount by two, to approximate carrier
    revenues for the fourth quarter of 2000. We direct USAC to include
    this revenue information in its quarterly filing due on May 2, 2001.
    Based on this fourth quarter 2000 revenue information, the
    Commission will determine whether to modify the contribution factor
    accordingly.

18. We direct USAC to calculate carriers' contributions for the second
    quarter 2001 using the fourth quarter 2000 revenue information, as
    discussed above. For each carrier, USAC shall compare this amount
    with the amount the carrier would have paid under the existing
    methodology. USAC shall then make appropriate adjustments to
    individual carriers' bills in May and June 2001 to: (1) reflect the
    revised contribution amounts for second quarter, and (2) true-up any
    amounts that a carrier may have over- or underpaid in the April 2001
    bill. For example, if during the second quarter of 2001 Carrier A
    would have paid \$12,000 using the existing methodology, but would
    only have paid \$9,000 using the revised methodology, Carrier A
    would be billed for the second quarter of 2001 in the following
    manner. For April, Carrier A would pay \$4,000 (*i.e.*, one-third of
    \$12,000). For May and June, however, Carrier A would pay \$2,500
    each month. Under the revised methodology, Carrier A owes \$3,000
    per month. But because Carrier A overpaid \$1,000 in April, this
    amount shall be refunded in equal amounts to Carrier A during May
    and June (in the form of \$500 credit each month).

19. After this initial transition period, the contribution methodology
    will operate as follows. Carriers will file Form 499-Q on May 11,
    2001,[^32] reporting revenue data from the first quarter of 2001. On
    June 1, 2001, USAC shall file revenue data from the first
    quarter 2001. Using this revenue data and the projected program
    demand data supplied by USAC in its quarterly filing in May, the
    Commission will calculate a new contribution factor for the third
    quarter of 2001.[^33] Carriers will be billed in accordance with the
    new contribution factor for the third quarter. Thereafter, carriers
    will file Form 499-Q, reporting their revenues for the prior
    quarter, by the beginning of the second month in each quarter
    (*i.e.*, February 1, May 1, August 1, and November 1). Carriers will
    continue to receive annual true-ups when they file their Forms 499-A
    in April of each year. USAC will file projected program demand data
    at least 60 days prior to the start of a quarter and total
    contribution base revenue data at least 30 days prior to the start
    of a quarter.[^34] The Commission delegates authority under section
    54.711(c) to the Common Carrier Bureau to take whatever additional
    steps are necessary to implement the contribution methodology
    adopted herein.[^35]

20. In addition, the Commission directs USAC and the other fund
    administrators[^36] to devise an appropriate cost allocation plan
    for the additional costs for collecting, validating, and
    distributing the contributor data provided in the Form 499-Q.

# procedural matters

## Paperwork Reduction Act

21. The action contained herein has been analyzed with respect to the
    Paperwork Reduction Act of 1995 (PRA) and found to impose new or
    modified reporting and/or recordkeeping requirements or burdens on
    the public. Implementation of these new or modified reporting and/or
    recordkeeping requirements will be subject to approval by the Office
    of Management and Budget (OMB) as prescribed by the PRA, and will go
    into effect upon announcement in the Federal Register of OMB
    approval.

## Final Regulatory Flexibility Analysis

22. As required by the Regulatory Flexibility Act (RFA),[^37] an Initial
    Regulatory Flexibility Analysis (IRFA) was incorporated into the
    *Contribution Further Notice*.[^38] The Commission sought written
    public comment on the proposals in the *Contribution Further
    Notice*, including comment on the IRFA. This present Final
    Regulatory Flexibility Analysis (FRFA) conforms to the RFA.[^39]

### Need for and Objectives of this Report and Order and the Rules Adopted Herein

23. The Commission issues this Report and Order (Order) 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."[^40] In light of significant recent
    developments in the interstate telecommunications marketplace, such
    as the entry of Regional Bell Operating Companies (RBOCs) into the
    interexchange services market under section 271, the Commission
    sought comment on whether the existing contribution methodology
    provides or will provide a competitive disadvantage to certain
    carriers in the marketplace.[^41] This Order modifies the existing
    assessment methodology to determine carriers' contributions to the
    federal universal service support mechanisms. Currently,
    contributions to the federal universal service mechanisms are based
    on carriers\' interstate and international end-user
    telecommunications revenues from the prior year. In this Order, we
    shorten the interval between accrual of revenues and assessment
    based on those revenues by six months. In so doing, we ensure that
    assessment of contributions to the federal universal service support
    mechanisms remains competitively neutral, and that the mechanisms
    continue to meet the statutory requirement of section 254(d) to be
    specific, predictable, and sufficient.[^42]

### Summary of Significant Issues Raised by Public Comments in Response to the IRFA

24. We received no comments directly in response to the IRFA in this
    proceeding. Some comments generally addressed the potential
    administrative burdens of the various proposals set forth in the
    *Contribution Further Notice* to modify the universal service
    contribution methodology.[^43] These commenters express concern that
    the administrative costs associated with increasing the number of
    revenue filings may outweigh the benefits associated with reducing
    the contribution interval between the accrual of revenues by
    carriers and the assessment of contributions to the universal
    service support mechanisms.

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

25. 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 proposed rules.[^44] The RFA generally defines the
    term "small entity" as having the same meaning as the terms "small
    business," "small organization," and "small governmental
    jurisdiction."[^45] In addition, the term "small business" has the
    same meaning as the term "small business concern" under the Small
    Business Act.[^46] 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).[^47] A small
    organization is generally "any not-for-profit enterprise which is
    independently owned and operated and is not dominant in its
    field."[^48] Nationwide, as of 1992, there were approximately
    275,801 small organizations.[^49] "Small governmental
    jurisdiction"[^50] generally means "governments of cities, counties,
    towns, townships, villages, school districts, or special districts,
    with a population of less than 50,000."[^51] As of 1992, there were
    approximately 85,006 such jurisdictions in the United States.[^52]
    This number includes 38,978 counties, cities, and towns; of these,
    37,566, or 96 percent, have populations of fewer than 50,000.[^53]
    The Census Bureau estimates that this ratio is approximately
    accurate for all governmental entities. Thus, of the 85,006
    governmental entities, we estimate that 81,600 (91 percent) are
    small entities. In this Order, we stated that the modifications
    adopted will affect all providers of interstate telecommunications
    and interstate telecommunications services. Below, we further
    describe and estimate the number of small business concerns that may
    be affected by the modifications to the universal service
    contribution methodology adopted in this Order.

26. 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.[^54] 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.

27. 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.[^55] According to data in the most recent report, there are
    4,144 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.

28. We have included small incumbent LECs in this present RFA analysis.
    As noted above, a "small business" under the RFA is one that, *inter
    alia*, meets the pertinent small business size standard (*e.g.*, a
    telephone communications business having 1,500 or fewer employees),
    and "is not dominant in its field of operation."[^56] 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.[^57] 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.

29. *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.[^58] 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."[^59] 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.

30. *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.[^60] According to SBA\'s definition, a
    small business telephone company other than a radiotelephone company
    is one employing no more than 1,500 persons.[^61] 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.

31. *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.[^62] 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
    in connection with the Telecommunications Relay Service (TRS).[^63]
    According to our most recent data, there are 1,395 incumbent LECs,
    349 CAPs, 204 IXCs, 21 OSPs, 758 payphone providers and 541
    resellers.[^64] 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 1,395 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.

32. *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.[^65]
    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.[^66] 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
    *Telecommunications Industry Revenue* data, 808 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.[^67] 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 808 small
    cellular service carriers that may be affected by the decisions and
    rules adopted in this Order.

33. *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.[^68] 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.[^69] 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.

34. *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.[^70] 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.[^71] The SBA has approved
    these definitions.[^72] An auction of Phase II licenses commenced on
    September 15, 1998, and closed on October 22, 1998.[^73] 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.[^74]

35. *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.[^75] 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.[^76] The SBA has approved these
    definitions.[^77] An auction of Metropolitan Economic Area (MEA)
    licenses commenced on February 24, 2000, and closed on March 2,
    2000.[^78] 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
    *Telecommunications Industry Revenue* data, 172 carriers reported
    that they were engaged in the provision of either paging or "other
    mobile" services, which are placed together in the data.[^79] 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 172 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.

36. *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.[^80] 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.[^81] These regulations defining "small entity" in
    the context of broadband PCS auctions have been approved by the
    SBA.[^82] 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.[^83] 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.

37. *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*.[^84] 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.

38. *Rural Radiotelephone Service.* The Commission has not adopted a
    definition of small entity specific to the Rural Radiotelephone
    Service.[^85] A significant subset of the Rural Radiotelephone
    Service is the Basic Exchange Telephone Radio Systems (BETRS).[^86]
    We will use the SBA\'s definition applicable to radiotelephone
    companies, *i.e*[.]{.underline}, an entity employing no more than
    1,500 persons.[^87] 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.

39. *Air-Ground Radiotelephone Service.* The Commission has not adopted
    a definition of small entity specific to the Air-Ground
    Radiotelephone Service.[^88] We will use the SBA\'s definition
    applicable to radiotelephone companies, *i.e.*, an entity employing
    no more than 1,500 persons.[^89] 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.

40. *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.[^90] 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.

41. 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.

42. 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

43. In this Order, we adopt modifications to the federal universal
    service contribution methodology that will require carriers to
    report their interstate end-user telecommunications revenues on a
    quarterly basis.[^91] In addition, carriers will continue to file
    annually FCC Form 499-A reporting total interstate end-user
    telecommunications revenues from the prior calendar year, as they
    are currently required to do. Carriers will, however, no longer be
    required to file FCC Form 499-S. In order to comply with the
    quarterly filing requirements, it may be necessary for some carriers
    to adopt additional or accelerated recordkeeping procedures to
    report their quarterly revenues in a timely and accurate manner.

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

44. The Commission has considered a number of proposals, both in the
    *Contribution Further Notice*, and in response to commenter
    suggestions for revising the existing universal service contribution
    methodology. In an effort to minimize the economic impact on all
    carriers, particularly small carriers, that are required to
    contribute to the universal service mechanisms, the Commission has
    taken into consideration the benefits of reducing the contribution
    interval against any corresponding increase in administrative
    burdens on carriers.[^92] For example, we rejected an alternative
    proposal that would have increased the number of filings that
    carriers are required to file annually to as many as 13 per year. We
    have concluded that the administrative cost of compliance on
    carriers, particularly smaller carriers, would outweigh the
    corresponding benefit of reducing the contribution interval under
    this proposal.[^93] We have also taken into consideration
    alternative proposals that would not have increased the existing
    reporting requirements. As discussed above, these alternative
    proposals were rejected because they failed to significantly reduce
    the contribution interval or impose significant alterations to the
    existing contribution methodology that would create substantial
    uncertainty in ensuring the continued predictability and sufficiency
    of the universal service fund.[^94] Although the revised
    contribution methodology adopted herein will increase carrier
    filings from two to five filings per year, the Commission has taken
    into consideration the corresponding benefit of substantially
    reducing the contribution interval. As discussed above, we believe
    that carriers will benefit from a specific, predictable, and
    sufficient contribution methodology that ensures that all carriers,
    including small carriers, continue to be assessed contributions in a
    competitively neutral manner.[^95]

### Report to Congress.

45. The Commission will send a copy of this Order, including this FRFA,
    in a report to be sent to Congress pursuant to the Small Business
    Regulatory Enforcement Fairness Act of 1996, *see* 5 U.S.C. §
    801(a)(1)(A). In addition, the Commission will send a copy of the
    Order, including FRFA, to the Chief Counsel for Advocacy of the
    Small Business Administration. A copy of the Order and FRFA (or
    summaries thereof) will also be published in the Federal Register.
    *See* 5 U.S.C. § 604(b).

## Effective Date of Final Rules

46. Pursuant to 5 U.S.C. § 553(d),[^96] the rule changes adopted herein
    shall take effect thirty (30) days after publication in the Federal
    Register.

# ordering clauses

47. Accordingly, IT IS ORDERED that, pursuant to the authority contained
    in sections 4(i), 4(j), 254, and 303(r) of the Communications Act of
    1934, as amended, 47 U.S.C. §§ 154(i), 154(j), 254, and 303(r) this
    REPORT AND ORDER AND ORDER ON RECONSIDERATION IS ADOPTED. The
    collections of information contained within this Order are
    contingent upon approval by the Office of Management and Budget. The
    Commission will publish a notice announcing the effective date of
    the collections of information.

48. IT IS FURTHER ORDERED that Part 54 of the Commission's rules, 47
    C.F.R. Part 54, IS AMENDED as set forth in Appendix A attached
    hereto, effective thirty (30) days after the publication of this
    REPORT AND ORDER AND ORDER ON RECONSIDERATION in the Federal
    Register.

49. IT IS FURTHER ORDERED that the Petition for Reconsideration filed on
    March 1, 2000 by AT&T IS DENIED.

50. IT IS FURTHER ORDERED that the Commission's Consumer Information
    Bureau, Reference Information Center SHALL SEND a copy of this
    Report and Order and Order on Reconsideration to the Chief Counsel
    for Advocacy of the Small Business Administration.

    FEDERAL COMMUNICATIONS COMMISSION

    Magalie Roman Salas Secretary

**APPENDIX A --FINAL RULES**

Part 54 of Title 47 of the Code of Federal Regulations is amended as
follows:

**PART 54 -- UNIVERSAL SERVICE**

**Subpart H -- Administration**

1.  Section 54.709 is amended by revising the fourth sentence of
    paragraph (a)(3) to read as follows:

**§ 54.709 Computations of required contributions to universal service
support mechanisms.**

\(a\) \* \* \*

\(3\) \* \* \* Based on data submitted to the Administrator on the
Telecommunications Reporting Worksheets, the Administrator must submit
the total contribution base to the Common Carrier Bureau at least thirty
(30) days before the start of each quarter. \* \* \*

\* \* \* \* \*

51. Section 54.711 is amended by revising the second sentence of
    paragraph (a) to read as follows:

    **§ 54.711 Contributor reporting requirements.**

    \(a\) **\* \* \*** The Telecommunications Reporting Worksheet sets
    forth information that the contributor must submit to the
    Administrator on a quarterly and annual basis. **\* \* \***

    **\* \* \* \* \***

    APPENDIX B -- Form 499Q

[^1]: *See* 47 C.F.R. §§ 54.709, 54.711.

[^2]: 47 U.S.C. § 254(d).

[^3]: 47 U.S.C. § 254.

[^4]: 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).

[^5]: *Federal-State Joint Board on Universal Service*, Report and
    Order, CC Docket No. 96-45, 12 FCC Rcd 8776, 9206 at para. 844
    (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*). Currently, contributions to the
    federal universal service support mechanisms are based on carriers'
    interstate and international end-user telecommunications revenues
    from the prior year.

[^6]: *Federal-State Joint Board on Universal Service*, Recommended
    Decision, CC Docket No. 96-45, 12 FCC Rcd 87 (1996).

[^7]: *Universal Service Order*, 12 FCC Rcd at 9206-09, paras. 844-50.

[^8]: *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' 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.

[^9]: *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*, Report and Order, CC Docket 98-171, 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*, Public Notice, CC Docket No. 98-171, DA 99-1520 (rel.
    July 30, 1999), *see Common Carrier Bureau Announces Release of
    Telecommunications Reporting Worksheet (FCC Form 499-A) for April 1,
    2000 Filing by All Telecommunications Carriers*, Public Notice, CC
    Docket No. 98-171, DA 00-471 (rel. Mar. 1, 2000).

[^10]: Contributions based on carriers' revenues accrued in January
    through June of one year are assessed on carriers in January through
    June of the next year.

[^11]: *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.,* Further Notice of Proposed Rulemaking and
    Order, CC Docket No. 96-45, FCC 00-359 (rel. Oct. 12, 2000)
    (*Contribution Further Notice*). Although we denied Oncor's petition
    for forbearance, we indicated that the Commission would review, on
    an industry-wide basis, changes to the universal service
    contribution methodology in this rulemaking proceeding. *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.*, Memorandum Opinion and Order, CC Docket No.
    96-45, FCC 01-51 (rel. Feb. 13, 2001).

[^12]: *Contribution Further Notice* at para. 1.

[^13]: *Contribution Further Notice* at para. 9 (citing Letter of Joel
    Lubin, AT&T, to Magalie Roman Salas, FCC, dated January 14, 2000).

[^14]: *Contribution Further Notice* at para. 10.

[^15]: *Contribution Further Notice* at paras. 14-20.

[^16]: *Contribution Further Notice* at paras. 21-28.

[^17]: *Contribution Further Notice* at paras. 29-30.

[^18]: Although some commenters express concern regarding the potential
    administrative burdens, the majority agree that a reduction in the
    contribution interval between accrual of revenues and their
    assessment would be a valuable enhancement to the existing
    methodology. *See, e.g.*, AT&T Comments at 2; Sprint Comments at 2;
    WorldCom Comments at 2-3.

[^19]: *Contribution Further Notice* at paras. 21-28.

[^20]: *See* Appendix B. The Form 499-Q will include a box for each of
    the quarterly filing submissions. Carriers will check the
    appropriate box to indicate the quarter for which revenue
    information is being reported. Carriers will no longer file the Form
    499-S, which carriers filed in September of each year as the second
    of the two semi-annual Worksheet filings.

[^21]: *See infra* section III.B.

[^22]: In addition, carriers will be allowed an opportunity to file a
    revised Form 499-Q prior to the filing date of the next Form 499.

[^23]: For example, some RBOCs have recently entered the interexchange
    services market after receiving approval under section 271 of the
    Act.

[^24]: USAC Comments at 21.

[^25]: *Contribution Further Notice* at paras. 14-20. *See also* AT&T
    Petition for Reconsideration of Federal-State Joint Board on
    Universal Service, filed March 1, 2000 (AT&T Petition).

[^26]: *See, e.g.*, Qwest Comments at 5; USTA Comments at 3; USAC
    Comments at 9; WorldCom Comments at 2.

[^27]: *See, e.g.*, Qwest Comments at 7; USAC Comments at 8; Verizon
    Comments at 5.

[^28]: *See, e.g.*, Oncor Comments at 6; Network Service Operator
    Comments at 6.

[^29]: USAC Comments at 25-26.

[^30]: We note that Form 499-A would normally be filed on April 1, but
    because April 1, 2001 is a Sunday, carriers will file on April 2,
    2001.

[^31]: As discussed further below, individual carrier contributions for
    April 2001, as determined under the current methodology, will then
    be trued-up in May and June to reflect the contribution that the
    carrier would have paid under the revised contribution methodology.

[^32]: During the initial transition period in second quarter of 2001,
    carriers will file FCC Form 499-Q on May 11, 2001. Thereafter,
    carriers will report first quarter revenues on Form 499-Q on May 1
    of each year.

[^33]: 47 C.F.R. § 54.709(a).

[^34]: *See* 47 C.F.R. § 54.709.

[^35]: 47 C.F.R. § 54.711(c).

[^36]: These include the administrators of the Telecommunications Relay
    Service Fund, North American Numbering Plan, and long-term number
    portability.

[^37]: *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).

[^38]: *See* *Contribution Further Notice* at paras. 36-64.

[^39]: *See* 5 U.S.C. § 604.

[^40]: 47 U.S.C. § 254(d). *See also* 47 U.S.C.§(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).

[^41]: *Contribution Further Notice* at para. 1.

[^42]: 47 U.S.C. § 254(d).

[^43]: *See, e.g.*, CTIA Comments at 2-3; Qwest Comments at 5-7; USTA
    Comments at 3.

[^44]: 5 U.S.C. § 603(b)(3).

[^45]: 5 U.S.C. § 601(6).

[^46]: 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).

[^47]: Small Business Act, 15 U.S.C. § 632.

[^48]: 5 U.S.C. § 601(4).

[^49]: 1992 Economic Census, U.S. Bureau of the Census, Table 6 (special
    tabulation of data under contract to Office of Advocacy of the U.S.
    Small Business Administration).

[^50]: 47 C.F.R. § 1.1162.

[^51]: 5 U.S.C. § 601(5).

[^52]: U.S. Dept. of Commerce, Bureau of the Census, "1992 Census of
    Governments."

[^53]: *Id*.

[^54]: 13 C.F.R. § 121.201. Categories 4812 and 4813 have recently been
    reclassified as NAICS codes 513321, 513322, 51331, and 51334.

[^55]: FCC, Common Carrier Bureau, Industry Analysis Division, *Trends
    in Telephone Service*, Table 19.3 (March 2000) (*Trends Report*).

[^56]: 5 U.S.C. § 601(3).

[^57]: 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).

[^58]: 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").

[^59]: 15 U.S.C. § 632(a)(1).

[^60]: 1992 Census, *supra*, at Firm Size 1‑123.

[^61]: 13 C.F.R. § 121.201, SIC Code 4813.

[^62]: 13 C.F.R. § 121.210, SIC Code 4813.

[^63]: *See* 47 C.F.R. § 64.601 *et seq.*; *Trends Report* at Table
    19.3.

[^64]: *Id.* The total for resellers includes both toll resellers and
    local resellers. The TRS category for CAPs also includes competitive
    local exchange carriers (CLECs) (total of 129 for both).

[^65]: 13 CFR 121.201, SIC code 4812.

[^66]: 1992 Census, Series UC92-S-1, at Table 5, SIC code 4812.

[^67]: *Trends in Telephone Service*, Table 19.3 (March 2000).

[^68]: 13 CFR 121.201, Standard Industrial Classification (SIC) code
    4812.

[^69]: 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).

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

[^71]: 220 MHz Third Report and Order, 12 FCC Rcd at 11068‑69, para.
    291.

[^72]: *See* Letter from A. Alvarez, Administrator, SBA, to D. Phythyon,
    Chief, Wireless Telecommunications Bureau, FCC (Jan. 6, 1998).

[^73]: *See generally* Public Notice, \"220 MHz Service Auction
    Closes,\" Report No. WT 98‑36 (Wireless Telecommunications Bureau,
    October 23, 1998).

[^74]: 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).

[^75]: *220 MHz Third Report and Order*, 12 FCC Rcd 10943, 11068-70, at
    paragraph 291-295 (1997).

[^76]: *220 MHz Third Report and Order*, 12 FCC Rcd 11068-69, at
    paragraph 291 (1997).

[^77]: *See* Letter from A. Alvarez, Administrator, SBA, to D. Phythyon,
    Chief, Wireless Telecommunications Bureau, FCC (January 6, 1998).

[^78]: *See generally* Public Notice, "220 MHz Service Auction Closes,"
    Report No. WT 98-36 (Wireless Telecommunications Bureau (October 23,
    1998).

[^79]: *Trends in Telephone Service*, Table 19.3 (February 19, 1999).

[^80]: *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 Section 24.720(b).

[^81]: *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)

[^82]: *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).

[^83]: FCC News, *Broadband PCS, D, E and F Block Auction Closes,* No.
    71744 (released January 14, 1997).

[^84]: 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).

[^85]: The service is defined in § 22.99 of the Commission\'s Rules, 47
    CFR 22.99.

[^86]: BETRS is defined in §§ 22.757 and 22.759 of the Commission\'s
    Rules, 47 CFR 22.757 and 22.759.

[^87]: 13 CFR 121.201, SIC code 4812.

[^88]: The service is defined in § 22.99 of the Commission\'s Rules, 47
    CFR 22.99.

[^89]: 13 CFR 121.201, SIC code 4812.

[^90]: 47 CFR Section 90.814(b)(1).

[^91]: *See supra* section III.A.

[^92]: *See supra* para. 15.

[^93]: *See supra* para. 14.

[^94]: *See supra* paras. 14-15.

[^95]: *See supra* para. 13.

[^96]: *See* 5 U.S.C. § 553(d).