**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of )

Implementation of the )

Pay Telephone Reclassification and ) CC Docket No. 96-128

Compensation Provisions of the )

Telecommunications Act of 1996 )

**FOURTH ORDER ON RECONSIDERATION AND ORDER ON REMAND**

**Adopted:** January 28, 2002 **Released:** January 31, 2002

**By the Commission:**

**I. Introduction**

1\. In this order, the Commission revisits the issue of pay telephone
compensation pursuant to the remand in the *Illinois* decision.[^1]
Below, we redetermine aspects of the compensation to be paid to payphone
service providers (PSPs) by interexchange carriers (IXCs) and local
exchange carriers (LECs) during the period from November 7, 1996 to
October 6, 1997, which is commonly referred to as the \"interim
period.\" Among other things, we address in this order a new estimate of
completed access charge and subscriber 800 calls per payphone per month,
[^2] an adjusted default compensation amount per call, the issue of
compensation for 0+ and inmate calls, interest payments, and a number of
other matters. We do not resolve several pending issues at this time. In
particular, we do not resolve the allocation among the IXCs and LECs of
the per payphone/per month payment due to the PSPs because we find that
the record contains insufficient data to allow us to make that
determination. We have asked each of the Regional Bell Operating
Companies (RBOCs) to provide us with additional data, and we will issue
a further order upon receipt and analysis of that data.

**II. Background**

2\.

In a series of orders starting in 1996,[^3] the Commission promulgated
pay telephone service regulations to implement section 276 of the
Communications Act of 1934, as amended.[^4] This implementation includes
a system of per-call compensation to ensure, as required by Section 276,
that every PSP receives fair compensation for each and every completed
interstate and intrastate payphone call. However, the per-call
compensation plan did not take effect immediately due to the fact that
per-call tracking capabilities were not installed at the time the
Commission first implemented Section 276.[^5] Accordingly, instead of a
per-call compensation plan, the Commission instituted a compensation
plan to cover the interim period (November 7, 1996 through October 6,
1997), and under this plan, IXCs and LECs collectively were required to
pay \$45.85 per payphone per month, which was the product of our
estimate of the average number of compensable access code and subscriber
800 calls originated monthly from a payphone multiplied by a rate per
call of \$0.35.

3\. On appeal, the court held *inter alia* that the \$0.35 default rate
was arbitrary, that our method of allocating the charge among the
various IXCs was arbitrary, and that we had improperly failed to provide
compensation for 0+ and inmate calls.[^6] With regard to the
Commission\'s justification for using a \$0.35 surrogate rate because
the costs of coin calls, subscriber 800 calls, and access code calls
allegedly are similar, the court found that the \"problem with the
FCC\'s decision is that the record in this case is replete with evidence
that the costs of local coin calls versus 800 and access code calls are
*not* similar,\" and the Commission \"failed to respond to any of the
data showing that the costs of different types of payphone calls are not
similar.\"[^7] The court also found the Commission\'s failure to provide
interim compensation for 0+ calls and inmate calls to be inconsistent
with the language of Section 276 that fair compensation be provided for
\"each and every completed . . . call.\"[^8] In addition, the court
found that the Commission acted arbitrarily and capriciously in
requiring interim compensation only from carriers with annual toll
revenue over \$100 million.[^9] Moreover, the court rejected the
Commission\'s use of annual toll revenue as an allocator between
carriers of the compensation obligation, instead of each carrier\'s
share of payphone-originated calls. The court upheld the Commission\'s
use of net book cost for payphone asset valuation, pursuant to the
Commission\'s affiliate transaction rules,[^10] for LECs that maintain
payphone assets on the LEC\'s books of account.[^11] The court, however,
disallowed the Commission\'s use of fair market value for payphone
assets transferred by LECs to a separate affiliate or operating division
as \"plainly inappropriate under *Democratic Central*.\"[^12]

4\. After the *Illinois* remand, the Commission set the default rate for
per-call compensation in the *Second Report and Order* at \$0.284 for
the intermediate period of October 7, 1997 through April 20, 1999. This
compensation rate of \$0.284 was reversed and remanded to the Commission
by the United States Court of Appeals for the District of Columbia
Circuit (the court).[^13] According to the court, the Commission\'s
explanation of its derivation of the \$0.284 rate was plainly inadequate
due to the Commission\'s failure to explain why a rate for coinless
calls could be derived by subtracting costs from the \$0.35 price
charged for coin calls.[^14] \"Some articulation of this crucial
assumption was required . . . .\"[^15] After this remand, the Commission
set a default compensation rate of \$0.24 per call, for the period
beginning April 21, 1999 in the *Third Report and Order*.[^16] On June
16, 2000, the court affirmed the default rate of \$0.24, concluding that
the Commission\'s bottom-up calculation of the default payphone
compensation rate was a reasonable exercise of its jurisdiction.[^17]

**III. Discussion**

5\. **Interim Period**. The per-payphone compensation plan adopted
herein replaces several aspects of the per-payphone compensation plan
for the interim period that was vacated by the court in the *Illinois*
decision.[^18] The Commission will start its consideration of the issues
remanded in the *Illinois* decision with a determination of the default
compensation amount for the interim period.[^19]

6\. In the *Illinois* decision, the court ruled that the Commission\'s
calculation of interim compensation at \$45.85 per payphone per month
was defective because the calculation was based on a surrogate rate of
\$0.35, representing local coin call costs. In particular, the court
held that the Commission did not justify its conclusion that the costs
of coin calls are similar to the costs of subscriber 800 calls and
access code calls.[^20] In *American*, however, the court affirmed the
Commission\'s calculation of \$0.24 per call for default payphone
compensation for the period beginning April 21, 1999.[^21]

7\. In the *Third Report and Order*, the Commission tentatively
concluded that the cost-based \$0.24 default compensation rate would
also serve as an appropriate base for determining per payphone/per month
compensation. No party has questioned that determination, and there is
no reason to believe that the cost components on which we relied to
derive the \$0.24 rate are no longer accurate.[^22] We will therefore
employ the default rate as the starting point for interim period
compensation. Nevertheless, we recognized in the *Third Report and
Order* that certain adjustments would need to be made to the cost
factors that make up the \$0.24 rate, so the ultimate rate would be
slightly different. We now make two adjustments, by removing the FlexANI
cost component, as has been urged by a number of parties,[^23] and by
removing the payment delay component, to derive a per-call rate for the
interim period of \$0.229.

8\. **FlexANI Cost Component Adjustment**. Our first adjustment is to
remove the cost of installing flexible automatic number identification
(FlexANI). [^24] When it calculated the \$0.24 default rate, the
Commission included, *inter alia*, a component of \$0.002 to provide a
mechanism for carriers to recover the cost of installing FlexANI.
However, these FlexANI costs are not properly included in an interim
compensation amount because FlexANI costs were not recoverable at that
time.[^25] As the Commission explained in the *Third Report and Order*,
LECs had not tariffed the cost recovery of FlexANI until after the end
of the interim period, and thus, had not passed on the recovery of
FlexANI costs to PSPs during the interim period. Accordingly, the
Commission specified in the *Third Report and Order* that, in
calculating interim compensation, the \$0.002 for FlexANI would be
deducted from the \$0.24 default rate.[^26] Most comments filed after
the release of the *Third Report and Order* argued that this adjustment
of \$0.002 should be made by the Commission to prevent overcompensation
for this FlexANI component.[^27]

9\. **Delay Cost Component Adjustment**. Our second adjustment is to
remove the cost component that was included to reflect the time value of
money during the typical four-month delay in payment to PSPs. When it
calculated the \$0.24 default rate, the Commission also included a cost
component of \$0.009 for a four-month payment delay.[^28] The specified
\$0.009 for this cost component is not applicable for interim
compensation because it was calculated specifically for the four-month
delay in payment for the per-call period. In the *Third Report and
Order*, the Commission stipulated that this \$0.009 would be removed
from the compensation rate for the interim period.[^29] After the
release of the *Third Report and Order*, no comments were received that
opposed this adjustment for interim compensation.

10\. **Interim Rate**. After \$0.002 for FlexANI and \$0.009 for the
delay cost component are deducted from \$0.24, \$0.229 remains as the
rate the Commission will use in calculating per-payphone compensation
for the interim period. As noted below, however, interest shall be
recoverable on unpaid compensation owed for the interim period.

11\. **Call Estimate.** In the *First Report and Order*, we estimated,
based on the data then available, that an average of 131 access code and
subscriber 800 calls originated from each

payphone each month. [^30] That figure was multiplied by the
compensation rate to yield the total per

payphone/per month compensation amount. We now have new data that have
been submitted by the parties. According to the American Public
Communications Council (APCC), the \"type of data relied upon by the
Commission \-- actual call records from payphones \-- remains the most
reliable available data for purposes of determining call volumes at
independent PSPs payphones during the Interim Period.\"[^31] We
accordingly take this opportunity to adjust the average call figure to
148 access code and subscriber 800 calls per payphone per month.

12\. Because of the nine-month deadline imposed in the
Telecommunications Act of 1996, the 131 figure established in the *First
Report and Order* was based on estimated call volume data that was
limited because it was collected over a very short period of time,
ranging from one to three months,[^32] prior to the beginning of the
interim period on November 7, 1996.[^33] We now have before us data
gathered over a much longer observation period, and collected during
periods of time that overlap the interim period.[^34] For these reasons,
we deem the new data to be a better basis from which to predict typical
payphone usage.[^35] The updated data also more closely reflects call
volumes during the 1997 interim period than the previous estimates that
reflected 1996 call volumes. After a review of the record in this
proceeding, the Commission concludes that a reasonable approach is to
consider submissions of updated average monthly call volumes, collected
over a longer period of time, and, most significantly, collected during
time periods overlapping the interim period.

13\. The Commission has studied all of the call volume estimates for
access code and subscriber 800 calls submitted in this proceeding, and
the various criticisms of each estimate. The call volume data range from
132 calls to 163 calls per month, all of which appear to be accurate
numbers for the submitting company and none of which seems to be so
errant that we can exclude it on that basis. Indeed, while the estimates
vary, they do not vary by significant orders of magnitude and fall
within a relatively narrow range. We are thus not able to rationally
pick a single number from the range provided, nor are we aware of
methodologies that would result in a better estimate than empirical
observation. When faced with a similar situation in the *First Report
and Order*, we averaged the numbers, and such an approach remains
appropriate here. We are attempting, after all, to estimate the call
volume from an average payphone, so that technique would yield a good
assessment of that number. The average of the seven data points on the
record is 148 access code and subscriber 800 calls per payphone per
month.[^36]

14\. **Calculation**. In paragraphs 6-10 above, we determined that the
per-call compensation rate should be \$0.229. Multiplying that rate by
the 148 compensable calls we have determined originated from the average
payphone each month during the interim period yields a default
compensation amount for the interim period of \$33.892 per payphone per
month.[^37]

15\. **Appropriate Payors**. In the *First Report and Order*, the
Commission limited the duty to pay per-payphone compensation to carriers
with annual toll revenue above \$100 million. In the *Illinois* remand,
the court found that the Commission acted arbitrarily and capriciously
in requiring interim compensation payments only from IXCs with annual
toll revenues over \$100 million.

> \[T\]his limitation comes at a huge cost. For example, if small IXCs
> were included, they could be required to pay as much as \$4 million
> *per month*. As the small IXCs concede, this amount is \"far from *de
> minimis*.\" . . . Administrative convenience cannot possibly justify
> an interim plan that exempts all but large IXCs from paying for the
> costs of services received. Perhaps more fundamentally, the FCC did
> not adequately justify why it based its interim plan on total toll
> revenues, as it did not establish a nexus between total toll revenues
> and the number of payphone-originated calls.[^38]

Later, the court characterized it as a Commission \"decision that the 22
largest IXCs would have to pay millions of dollars per month for the
costs of services received by other, smaller IXCs.\"[^39] Accordingly,
the court requires that the Commission base any interim compensation
duty on payment for the payphone calls received by that particular
carrier, and no particular carrier must be required to pay for payphone
calls received by other carriers.

16\. A number of commenters in this proceeding argue that LECs and all
IXCs should be included as payors of interim compensation.[^40]
According to MCI, no commenter in

1997 opposed the inclusion of LECs, and only the RBOC/GTE/SNET Payphone
Coalition (the

Coalition)[^41] and the Telecommunications Resellers Association (TRA)
opposed the inclusion of small IXCs.[^42] Several commenters note that
LECs receive compensable calls from payphones, collect significant
revenues from interstate and intrastate access code and subscriber 800
services, and promote such services.[^43] In response to a public notice
query as to whether LECs should pay interim compensation,[^44] the
Coalition stated that it \"can see no principled reason why LECs should
be excluded. The Commission\'s per-call compensation system extends not
only to interstate or interLATA calls, but also to intrastate and
intraLATA toll calls; there seems to be no reason why the interim
compensation obligations should not extend to intrastate and intraLATA
toll calls as well.\"[^45]

17\. Significantly, the Commission specified in the *First Report and
Order* that LECs (both incumbent and non-incumbent) must pay per-call
compensation to the extent that LECs receive compensable payphone calls
as \"the primary economic beneficiary\" of these payphone calls.[^46]
The Commission also specified that \"all IXCs that carry calls from
payphones are required to pay per-call compensation.\"[^47] Upon further
consideration of the language of the *Illinois* decision and the
comments submitted on this issue after the court\'s remand, we conclude
that the duty to pay interim compensation should not be limited to
carriers with annual toll revenue above \$100 million, but should
include all IXCs, as well as LECs to the extent that LECs receive
compensable payphone calls.[^48]

18\. For the reasons articulated in the *Second Reconsideration Order*
and recently affirmed in the *Third Reconsideration Order*,[^49] the
Commission decides to omit resellers from a direct payment obligation
for interim compensation because the first underlying facilities-based
carrier \"is reasonably certain to have access to the information
necessary for per call tracking or to be able to arrange for per call
tracking in its arrangements with switch-based resellers that complete
the calls.\"[^50] The elimination of resellers from a direct payment
obligation should eliminate some of the non-payment problems described
in the *Second Reconsideration Order*.[^51]

19\. **Carrier Identification**. In the *First Report and Order*, the
Commission listed the 25 carriers who had a duty to pay interim
compensation, the percentage calculated for each of these 25 carriers,
and the amount per payphone per month to be paid by each of these 25
carriers.[^52] For example, AT&T Communications, Inc. is listed with a
percentage of 56.69 percent and an amount to be paid of \$25.9923406 per
payphone per month, while American Network Exchange, Inc. is listed with
a percentage of 0.15 percent and an amount to be paid of \$0.0689597 per
payphone per month.

20\. Instead of providing a list of carriers with a duty to pay interim
compensation as was done in the *First Report and Order*, the Commission
finds it appropriate at this time to identify carriers obligated to pay
interim compensation by reference to the Carrier Locator report of
November, 1997. This report lists 3,832 companies that provided
interstate telecommunications service as of June 30, 1997.[^53] We note,
however, that an IXC or LEC may have carried payphone-originated calls,
but failed to file a worksheet or for some other reason was not included
in the 1997 report. If an IXC or LEC did, in fact, carry
payphone-originated calls during the interim period, we hold that a
failure to file a worksheet and/or be included in the 1997 report does
not relieve a carrier of the obligation to pay payphone compensation for
the interim period.

21\. **0+ Calls**. Payphone calls made by dialing 0+ are routed to the
carrier presubscribed to that payphone.[^54] Although the Commission
made eligible for per-call compensation 0+ calls originating after
October 6, 1997,[^55] the Commission specifically excluded compensation
for 0+ calls during the interim period.[^56] In the *Illinois* decision,
the court found that the \"Commission\'s failure to provide interim
compensation for 0+ calls is patently inconsistent with § 276\'s command
that fair compensation be provided for \'each and every completed . . .
call.\'\"[^57] According to MCI, there is nearly unanimous support for
compensating PSPs for 0+ calls, at least for PSPs that were not already
receiving 0+ compensation for the interim period.[^58] After
consideration of the comments submitted and reexamination of the issue,
the Commission concludes that there should be interim compensation for
0+ calls that were not otherwise compensated.

22\. The Coalition urges the Commission to base interim compensation for
0+ calls on actual per-call tracking data from the interim period.[^59]
The Commission finds, however, that some IXCs did not retain per-call
tracking data for 0+ calls originating at payphones during the interim
period.[^60] The Commission declines, therefore, to mandate that interim
compensation for 0+ payphone calls be based on actual per-call tracking
data from that period. As an alternative, MCI proposes that compensation
for 0+ calls should be based on the interim compensation rate multiplied
by an estimated average number of 0+ calls originating at
payphones.[^61] The Commission concludes that MCI\'s approach is
reasonable and, therefore, adopts its proposal.

23\. For this purpose, the Commission needs to determine an average
number of 0+ calls per payphone per month to use in the calculation. The
record in this proceeding contains an APCC study which estimates an
average of 15 0+ calls per payphone per month. The record also contains
a Coalition study that supports an estimate of 24 0+ calls per payphone
per month.[^62] WorldCom derives an estimate of 17 0+ calls from data
submitted earlier by APCC.[^63] However, One Call Communications, Inc.
(One Call), a small operator services provider primarily serving LEC
payphones, objects to WorldCom\'s estimate of 17 0+ calls per payphone
per month as unrealistically exaggerated by a whole order of magnitude,
at least for LEC payphones.[^64] In 2000, One Call estimated that there
were no more than two 0+ calls per month at the typical LEC payphone
\"over the past few years.\"[^65] The Commission declines to use One
Call\'s estimate of two because it was submitted in 2000, with no
indication that it was based on 0+ calls during the interim period, but
instead indicated that it was based on call volumes from a few years
before 2000. The increased use of prepaid phone cards since the interim
period (that ended on October 6, 1997) may be reflected in a lower call
volume of 0+ calls in the few years before 2000. In addition, to the
extent that One Call provides operator services to LEC payphones, it is
possible that One Call\'s call volume estimate may not be representative
of nationwide 0+ call volumes for all PSPs.

24\. WorldCom objects to the Coalition\'s estimate of 24 0+ calls per
payphone per month as unrealistically high. We are taking into account
WorldCom\'s objections by including WorldCom\'s estimate of 17 in our
averaging of call volume estimates, thereby reducing the estimate from
24 to 18.6667. Sprint objects to the use of APCC\'s estimate of 15 calls
per month due to APCC\'s failure to demonstrate that the estimate is
statistically valid for the industry as a whole.[^66] We have responded
to Sprint\'s objection by averaging the APCC estimate with the estimates
provided by WorldCom and the Coalition.

25\. The Commission finds that the average of 18.6667 is a closer
approximation to how many 0+ calls originated at payphones each month
during the interim period than selecting to use alone either the
Coalition\'s estimate of 24, APCC\'s estimate of 15, or WorldCom\'s
estimate of 17. We see no basis to reject any of those numbers as
inaccurate. Therefore, employing the same method the Commission used in
the *First Report and Order* and in paragraphs 11-13 above for call
volumes of access code and subscriber 800 calls, the Commission has
averaged three estimates to derive an estimate of 18.6667 0+ calls per
payphone per month. Multiplying a rate of \$0.229, as derived in
paragraphs 7-10 above, by an estimate of 18.6667 0+ calls per payphone
per month yields \$4.2747 per payphone per month as the default
compensation amount for the interim period for 0+ calls that were not
otherwise compensated (\$0.229 x 18.6667 = \$4.27467).[^67] The
Commission emphasizes, however, that a PSP that received compensation
for 0+ calls originated during the interim period is not entitled to
this default interim compensation for 0+ calls.[^68]

26\. Many commenters on this issue assert that interim compensation for
0+ calls should be paid by the presubscribed IXC.[^69] The Commission
agrees that the IXC presubscribed during the interim period is the
appropriate payor of interim compensation for 0+ calls that were not
otherwise compensated.[^70] As many commenters explained, the
presubscribed IXC is the \"primary economic beneficiary\" of these
calls. Indeed, the presubscription process ensured that, by definition,
every 0+ call was routed to the presubscribed IXC for call completion,
and no other carrier could have carried such calls.[^71]

27\. **Inmate Calls**. PSPs provide inmate telephone service in
correctional institutions pursuant to a contract between the PSP and the
correctional institution.[^72] In turn, the PSP presubscribes the inmate
telephones to a specific IXC pursuant to a contract between the PSP and
the IXC.[^73] Compensation to the PSP from the presubscribed IXC
typically is covered by the terms of this second contract.[^74] In the
*Illinois* decision, the court rejected the Commission\'s exclusion of
interim compensation for inmate service. Upon further consideration of
the language in the *Illinois* decision and the comments submitted on
this issue after the court\'s remand, the Commission concludes that
default compensation must be paid for inmate service during the interim
period, if the PSP was not otherwise compensated.

28\. In the *First Report and Order*, the Commission considered and
rejected arguments by various commenters that interim compensation
should be higher for inmate service than for non-inmate payphone
service.[^75] The Commission specifically concluded \"that inmate
payphones are to receive the same compensation amount as other
payphones, in the absence of a contract that prescribes a compensation
methodology.\"[^76] No additional probative evidence has been introduced
into the record since that order to change the Commission\'s conclusion.
Consequently, the interim compensation default amount for inmate
services will be identical to the amount for non-inmate payphone
service, \$0.229.[^77] In addition, as discussed previously with regard
to 0+ calls,[^78] the Commission finds that the presubscribed IXC during
the interim period is the appropriate payor of interim compensation for
inmate calls that were not otherwise compensated.

29\. Accordingly, the IXC that was presubscribed during the interim
period must compensate a PSP providing inmate service that was not
otherwise compensated for the interim

period,[^79] at the rate of \$0.229 per inmate call originating during
the interim period, that otherwise would have been compensated.[^80] The
Commission emphasizes, however, that a PSP that received compensation
for inmate service during the interim period is not entitled to this
default interim compensation for inmate service. [^81]

30\. **Interest**. In the *Third Report and Order*, the Commission
decided that \"\[b\]ecause PSPs have not received full compensation for
this \[interim\] period, we will allow the recovery of interest on the
unpaid \[interim compensation\] amount.\"[^82] We made a similar
observation with respect to payments ultimately made for the
\"intermediate\" period, which is the period from October 7, 1997
through April 20, 1999.[^83] We did not, however, specify in the *Third
Report and Order* what rate we would use to calculate those interest
payments, and we turn now to that determination.[^84]

31\. The parties suggest a wide range of rates. The LECs urge us to use
the 11.25% rate we used as a payment delay cost when we computed the
cost of a call in the *Third Report and Order*.[^85] This rate reflects
the LECs\' cost of capital.[^86] The non-LEC PSPs ask us to use their
own costs of capital, which generally exceed the LEC rate, sometimes by
a substantial amount.[^87] IXCs, on the other hand, advocate the use of
interest rates established by the Internal Revenue Service (IRS).[^88]
On review of the matter, we determine that interest shall be paid on
interim and intermediate period compensation at the rate established
under Section 6621 of the Internal Revenue Code, 26 U.S.C. § 6621 (the
\"IRS rate\").[^89]

32\. We have traditionally used the IRS rate in other settings involving
payments reflecting the time value of money. For example, we have used
the IRS rate for refund obligations in the investigation of Access
Charge Reform tariffs,[^90] as well as an interest rate on

local number portability refunds,[^91] and unauthorized pole attachment
penalties.[^92] The IRS rate, adjusted quarterly, was designed as an
accurate way to assess appropriate interest on delayed payments,
reflects generally prevailing rates in the market, and is thus useful in
this context as a general measure of the time value of money. We
accordingly find that rate to be reasonable for use by IXCs in computing
interest owed on interim compensation payments, and for use by PSPs in
computing interest for refunds of overpayments already received for the
interim period.

33\. We find for several reasons that it is inappropriate to use in this
context the LECs\' cost of capital, as we did in calculating the costs
of a payphone call in the *Third Report and Order*. First, we used LEC
capital costs in the latter context where payments would be
predominantly flowing from IXCs to PSPs, and explicitly noted in the
*Second Report and Order* that \"\[m\]ost payphones . . . are owned by
large local exchange carriers.\"[^93] It was thus appropriate, as a
general matter, to apply a rate reflecting the weighted average of debt
and equity costs for the LECs, and it was reasonable to conclude this
rate accurately represented the cost to an average payphone provider of
payment regularly delayed. Here, as noted above, the interest rate could
apply to payments flowing both ways, with IXCs generally paying out for
the interim period and PSPs generally paying out for the intermediate
period.[^94] The LEC capital cost clearly is not appropriate for all
such transactions. Moreover, a unitary rate is extremely desirable in
order to achieve certainty, to reduce disputes, and for reasons of
fairness. We do not think it correct for a company that will both
receive some money and pay some money to receive interest at one rate,
but pay it at another rate. Further, given the one-time-payment nature
of the \"true ups\" at issue here, a rate that reflects generally
prevailing economics is most appropriate. A principle purpose in this
situation is to avoid unjust enrichment to the party holding money owed
to another carrier, and a commercially accepted measure such as the IRS
rate will best achieve that goal, but will not be unfair or punitive.
That is especially so given the potentially large payments that may be
involved in this situation. Finally, as noted above, we relied on the
LEC capital cost rate to reflect the unusual nature of billing and
compensation in the payphone industry, where calls are aggregated by
calendar quarter and bills are not typically paid for several months
after that. While that approach remains fitting in its context, in the
very different context of one-time interim and intermediate period true
up payments, a commercially oriented rate is most suitable.

34\. **Adjustments.** APCC urges the Commission to require overpaying
carriers and underpaying carriers to make retroactive adjustments for
the interim period between the two carriers. Otherwise, argues APCC,
PSPs will find themselves in the position of middlemen paying out
compensation to one carrier and collecting from another.[^95] In
contrast, AT&T argues that retroactive adjustments should be made only
between carriers and PSPs. In considering this issue, we note that since
November 7, 1996, the first day of the interim period, there has been
substantial turnover in the telecommunications industry as companies
merged, changed ownership, reorganized, changed names, or left the
industry. There are numerous problems that arise as to how much interim
compensation was paid, by whom and to whom, and further to determine who
is a successor company. These problems would be complicated by requiring
overpaying carriers and underpaying carriers to made retroactive
adjustments. Moreover, the statute and our regulations contemplate
payment relationships between carriers and PSPs, not the Commission
establishing complicated intercarrier adjustments. Although the
Commission does not prohibit carriers from entering into such
arrangements with the agreement of the PSP, the Commission decides that,
in the absence of such arrangements, retroactive adjustments are to be
made only between carriers and PSPs.

35\. **Intermediate Period**. The demarcation between per-payphone and
per-call compensation was October 7, 1997. The Commission initially
imposed a requirement that, by October 7, 1997, LECs provide
payphone-specific coding digits to PSPs, and that PSPs in turn provide
those digits from their payphones to IXCs.[^96] The interim period of
per payphone compensation ended on October 6 because it was the last day
before this coding digit requirement went into effect. At the time the
first two payphone orders were adopted in 1996, the Commission expected
that payphone-specific coding digits would be transmitted for each
payphone call on October 7, to enable per-call compensation for payphone
calls to go into effect on October 7. Accordingly, in 1996 the
Commission decided to begin the intermediate period on October 7, 1997.
The FlexANI software necessary to identify and track each payphone call

was not implemented by all LECs by October 6, 1997, however, so that
each payphone call could be counted and tracked starting on October 7,
1997.[^97] For this reason, some payphone compensation after October 6,
1997, the last day of the interim period, is due per call and some
compensation is due per payphone, depending on when or if FlexANI was
installed.[^98] The intermediate period ended on April 20, 1999, the day
before the effective date of the *Third Report and Order*.

36\. **Intermediate Per-Payphone Compensation.** Carriers must
compensate PSPs on a per-payphone basis during the intermediate period
for each payphone for which the carrier did not receive
payphone-specific coding digits. In prescribing a per-payphone
compensation amount for the intermediate period, the Commission will use
the same call volume estimate used above in prescribing a per-payphone
rate for the interim period, *i.e*., 148 access code and

subscriber 800 calls per payphone per month,[^99] as well as the same
rate as developed for the

interim period. By using the rate for the interim period of \$0.229 and
an estimate of 148 access code and subscriber 800 calls per payphone per
month, the Commission calculates the default per-payphone compensation
amount for the intermediate period to be \$33.892 per payphone per
month.[^100]

37\. **Intermediate Interest**. Because the Commission has reduced the
amount of per-payphone compensation for the intermediate period from the
amount set in the *Second Report and Order* using the \$0.284 rate, PSPs
that received compensation from carriers during the intermediate period
based on the \$0.284 rate may now have overpayments for the intermediate
period. In addressing these overpayments, the Commission stated,

> > Just as IXCs will be required to compensate PSPs for interest on the
> > money due the PSPs for the Interim Period, IXCs will be allowed to
> > recoup interest for overpayments to the PSPs for the
> > \[Intermediate\] Period. The same rate of interest shall apply for
> > both the Interim Period and \[Intermediate\] Period.[^101]

Therefore, the Commission requires that the same interest rate applied
to the interim period, i.e., the applicable interest rate set by the IRS
pursuant to Section 6621 of the Internal Revenue Code for refund
obligations, also be applied to the intermediate period.[^102]

38\. **Carrier Identification for the Intermediate Period**. The
Commission finds it appropriate to identify carriers obligated to pay
intermediate compensation by reference to the Carrier Locator report of
January, 2000. This report lists 4,144 companies that provided

interstate telecommunications service as of December 31, 1998.[^103] As
noted above, a failure to file a worksheet and/or be included in the
report of January, 2000 does not relieve a carrier of the obligation to
pay payphone compensation for the intermediate period.

39\. **Allocation Methodology**. In the *First Report and Order*, the
Commission used annual toll revenue as a basis for allocation between
the carriers of the duty to pay a specified amount per payphone per
month as interim compensation. The court in *Illinois* rejected this
allocation methodology and required that the compensation obligation be
based on payment for the services received by that particular carrier.
Consequently, the Commission must establish a nexus between the
allocation methodology and the number of payphone calls routed to a
specific carrier. The Commission is still considering the numerous
proposals for various allocation methodologies received in this
proceeding. Comments filed in this proceeding analyzing various proposed
allocation methodologies emphasized the lack of a nexus between each
proposed allocation methodology and the number of payphone calls routed
to any specific carrier. For this reason, in letters dated December 20,
2001,[^104] the Common Carrier Bureau requested that Qwest, Verizon,
BellSouth and SBC submit, no later than January 22, 2002, the number of
call attempts designated by coding digits of 27 (dumb payphone) or 70
(smart payphone), routed to an IXC point of presence or handled entirely
by RBOC facilities, for 1997, 1998, and fiscal year 2001.[^105] Now that
the record in this proceeding has been supplemented in this manner, this
specific call tracking data should allow the Commission to determine an
allocation of the interim and intermediate payphone compensation
obligations.[^106] We realize that this will effectively defer the
determination of compensation owed until we are able to establish a
reasonable allocation methodology. However, to avoid further delay in
establishing some of the preconditions for compensation, and to provide
the industry with some guidance as to how we intend to proceed, the
Commission decides to adopt this order at this time.

40\. **Remaining Remand Issues**. The Commission will determine in a
subsequent order additional issues remanded in *Illinois*, such as an
allocation methodology for the interim and intermediate periods, offsets
of interim and intermediate overpayments as contemplated in the *Third
Report and Order*,[^107] and the valuation of payphone assets
transferred by LECs to a separate affiliate or operating division.

**IV. Procedural Matters**

**A. Final Paperwork Reduction Act Analysis**

41\. This decision has been analyzed with respect to the Paperwork
Reduction Act of 1995, Pub. L. 104-13, and it contains no new or
modified information collections subject to Office of Management and
Budget review.

**B. Supplemental Final Regulatory Flexibility Act Analysis on
Reconsideration**

42\. Pursuant to the Regulatory Flexibility Act of 1980, as amended,
*see* 5 U.S.C. § 604, the Commission\'s Supplemental Final Regulatory
Flexibility Analysis for this order is attached as Appendix B.

**V. Ordering Clauses**

43\. Accordingly, pursuant to the authority contained in 47 U.S.C. §§
151, 154, 201-205, 215, 218, 219, 220, 226, 276 and 405, IT IS ORDERED
that the policies, rules and requirements set forth herein ARE ADOPTED.

44\. IT IS FURTHER ORDERED that the Commission\'s Consumer Information
Bureau, Reference Information Center, SHALL SEND a copy of this Fourth
Order on Reconsideration and Order on Remand, including the Supplemental
Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy
of the Small Business Administration.

FEDERAL COMMUNICATIONS COMMISSION

William F. Caton

Acting Secretary

**APPENDIX A**

The Federal Communications Commission amends 47 C.F.R. Part 64 as
follows:

1\. The authority citation for Part 64 is revised to read as follows:

AUTHORITY: 47 U.S.C. 154, 47 U.S.C. 225, 47 U.S.C. 251(e)(1), 47 U.S.C.
276. 151, 154, 201, 202, 205, 218-220, 254, 276, 302, 303, and 337
unless otherwise noted. Interpret or apply sections 201, 218, 225, 226,
227, 229, 332, 48 Stat. 1070, as amended. 47 U.S.C. 201-204, 208, 225,
226, 227, 229, 332, 501 and 503 unless otherwise noted.

2\. Add § 64.1301 to read as follows:

§ 64.1301 Per-payphone compensation.

\(a\) [Interim access code and subscriber 800 calls]{.underline}. In the
absence of a negotiated agreement to pay a different amount of
compensation, the amount of default compensation to be paid to payphone
service providers for payphone access code calls and payphone subscriber
800 calls is \$33.892 per payphone per month, for the period starting on
November 7, 1996 and ending on October 6, 1997, except that a payphone
service provider that is affiliated with a local exchange carrier is not
eligible to receive payphone compensation prior to April 16, 1997 or, in
the alternative, the first day following both the termination of
subsidies and payphone reclassification and transfer, whichever date is
latest.

\(b\) [Interim 0+calls]{.underline}. In the absence of a negotiated
agreement to pay a different amount of compensation, if a payphone
service provider was not compensated for 0+ calls originating during the
period starting on November 7, 1996 and ending on October 6, 1997, an
interexchange carrier to which the payphone was presubscribed during
this same time period must compensate the payphone service provider in
the default amount of \$4.2747 per payphone per month, except that a
payphone service provider that is affiliated with a local exchange
carrier is not eligible to receive payphone compensation prior to April
16, 1997 or, in the alternative, the first day following both the
termination of subsidies and payphone reclassification and transfer,
whichever date is latest.

\(c\) [Interim inmate calls]{.underline}. In the absence of a negotiated
agreement to pay a different amount of compensation, if a payphone
service provider providing inmate service was not compensated for calls
originating at an inmate telephone during the period starting on
November 7, 1996 and ending on October 6, 1997, an interexchange carrier
to which the inmate telephone was presubscribed during this same time
period must compensate the payphone service provider providing inmate
service at the default rate of \$0.229 per inmate call originating
during the same time period, except that a payphone service provider
that is affiliated with a local exchange carrier is not eligible to
receive payphone compensation prior to April 16, 1997 or, in the
alternative, the first day following both the termination of subsidies
and payphone reclassification and transfer, whichever date is latest.

\(d\) [Intermediate access code and subscriber 800 calls]{.underline}.
In the absence of a negotiated agreement to pay a different amount of
compensation, the amount of default compensation to be paid to payphone
service providers for payphone access code calls and payphone subscriber
800 calls is \$33.892 per payphone per month, for any payphone for any
month in which compensation was not paid on a per-call basis, for the
period starting on October 7, 1997 and ending on April 20, 1999.

\(e\) [Post-intermediate access code and subscriber 800
calls]{.underline}. In the absence of a negotiated agreement to pay a
different amount of compensation, the amount of default compensation to
be paid to payphone service providers for payphone access code calls and
payphone subscriber 800 calls is \$33.892 per payphone per month, for
any payphone for any month in which compensation was not paid on a
per-call basis, on or after April 21, 1999.

**APPENDIX B**

**Supplemental Final Regulatory Flexibility Act Analysis**

1\. As required by the Regulatory Flexibility Act (RFA),[^108] an
Initial Regulatory Flexibility Analysis (IRFA) was provided in the
*Payphone NPRM*.[^109] The Commission sought written public comment on
the proposals in the *Payphone* NPRM, including comment on the IRFA. A
Final Regulatory Flexibility Analysis (FRFA) was provided in the *First
Report and Order*,[^110] the *First Reconsideration Order*,[^111] the
*Second Report and Order*,[^112] and the *Third Report and Order*.[^113]
This present FRFA conforms to the RFA, as amended.[^114] To the extent
that any statement in this FRFA is perceived as creating ambiguity with
respect to our rules or statements made in the preceding sections of
this order, the rules and statements set forth in those preceding
sections are controlling.

**Need for, and Objectives of, the Rules**

2\. In adopting Section 276 in 1996, Congress mandated *inter alia* that
the Commission \"establish a per call compensation plan to ensure that
all payphone service providers are fairly compensated for each and every
completed intrastate and interstate call using their payphone

. . . .\"[^115] In this order, the Commission redetermines certain
aspects of the per-payphone compensation to be paid to payphone service
providers (PSPs) by interexchange carriers (IXCs) and local exchange
carriers (LECs) for the interim and intermediate periods pursuant to the
remand by the U.S. Court of Appeals for the District of Columbia Circuit
in the *Illinois* decision.[^116] To implement the remand, the
Commission establishes a new estimate of completed access charge and
subscriber 800 calls per payphone per month and an adjusted default
compensation rate, and resolves the issue of compensation for 0+ and
inmate calls, interest rates, and a number of other related matters.

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

3\. We received no comments in direct response to the FRFA in the *Third
Report and Order*. We believe that our rules as adopted in this order
minimize the burdens of the per payphone compensation scheme to the
benefit of all parties, including small entities.[^117]

**Description and Estimate of the Number of Small Entities to which
Rules Will Apply**

4\. The RFA directs agencies to provide a description of, and an
estimate of the number of small entities that may of the number of small
entities that may be affected by the rules adopted herein, where
feasible.[^118] The RFA generally defines \"small entity\" as having the
same meaning as the term \"small business,\" \"small organization,\" and
\"small governmental jurisdiction.\"[^119] In addition, the term \"small
business\" has the same meaning as the term \"small business concern\"
under the Small Business Act, unless the Commission has developed one or
more definitions that are appropriate to its activities.[^120] Under the
Small Business Act, a \"small business concern\" is one that: (1) is
independently owned and operated; (2) is not dominant in its field of
operation; and (3) meets any additional criteria established by the
SBA.[^121]

5\. We have included small incumbent LECs in this 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.\"[^122] 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.[^123] We have therefore included small incumbent
LECs in this RFA analysis, although we emphasize that this RFA action
has no effect on the Commission\'s analyses and determinations in other,
non-RFA contexts.

6\. *Incumbent Local Exchange Carriers*. Neither the Commission nor the
SBA has developed a specific definition of small providers of incumbent
local exchange services. The closest applicable definition under the SBA
rules is for Wired Telecommunications Carriers. Under that SBA
definition, such a business is small if it has 1,500 or fewer employees.
[^124] According to the most recent *Telephone Trends Report* data,
1,335 incumbent local exchange carriers reported that they were engaged
in the provision of local exchange services.[^125] Of these 1,335
carriers, 1,037 reported that they have 1,500 or fewer employees and 298
reported that, alone or in combination with affiliates, they have more
than 1,500 employees.[^126] We do not have data specifying the number of
these carriers that are either dominant in their field of operations or
are not independently owned and operated, and thus are unable at this
time to estimate with greater precision the number of incumbent local
exchange carriers that would qualify as small business concerns under
the SBA\'s definition. Consequently, we estimate that 1,037 or fewer
providers of local exchange service are small entitles that may be
affected by the rules and policies adopted herein.

7\. *Competitive Local Exchange Carriers.* Neither the Commission nor
the SBA has developed a specific definition for small providers of
competitive local exchange services. The closest applicable definition
under the SBA rules is for Wired Telecommunications Carriers. Under that
SBA definition, such a business is small if it has 1,500 or fewer
employees. [^127] According to the Commission\'s *Telephone Trends
Report* data, 349 companies reported that they were engaged in the
provision of either competitive access provider services or competitive
local exchange carrier services.[^128] Of these 349 companies, 297
reported that they have 1,500 or fewer employees and 52 reported that,
alone or in combination with affiliates, they have more than 1,500
employees.[^129] The Commission does not have data specifying the number
of these carriers that are either dominant in their field of operations
or are not independently owned and operated, and thus is unable at this
time to estimate with greater precision the number of competitive local
exchange carriers that would qualify as small business concerns under
the SBA\'s definition. Consequently, the Commission estimates that fewer
than 297 providers of competitive local exchange service are small
entities that may be affected by the rules.

8\. *Competitive Access Providers*. Neither the Commission nor the SBA
has developed a definition of small entities specifically applicable to
competitive access providers (CAPS). The closest applicable definition
under the SBA rules is for Wired Telecommunications Carriers. Under that
SBA definition, such a business is small if it has 1,500 or fewer
employees. [^130] According to the Commission\'s most recent *Telephone
Trends Report* data, 349 CAPs or competitive local exchange carriers and
60 other local exchange carriers reported that they were engaged in the
provision of either competitive access provider services or competitive
local exchange carrier services.[^131] Of these 349 competitive access
providers and competitive local exchange carriers, 297 reported that
they have 1,500 or fewer employees and 52 reported that, alone or in
combination with affiliates, they have more than 1,500 employees.[^132]
Of the 60 other local exchange carriers, 56 reported that they have
1,500 or fewer employees and 4 reported that, alone or in combination
with affiliates, they have more than 1,500 employees.[^133] The
Commission does not have data specifying the number of these carriers
that are not independently owned and operated, and thus is unable at
this time to estimate with greater precision the number of CAPS or other
local exchange carriers that would qualify as small business concerns
under the SBA\'s definition. Consequently, the Commission estimates that
there are 297 or fewer small entity CAPS and 56 or fewer other local
exchange carriers that may be affected by the rules.

9\. *Local Resellers*. The SBA has developed a definition for small
businesses within the category of Telecommunications Resellers. Under
that SBA definition, such a business is small if it has 1,500 or fewer
employees.[^134] According to the Commission\'s most recent *Telephone
Trends Report* data, 87 companies reported that they were engaged in the
provision of local resale services.[^135] Of these 87 companies, 86
reported that they have 1,500 or fewer employees and one reported that,
alone or in combination with affiliates, it had more than 1,500
employees.[^136] The Commission does not have data specifying the number
of these local resellers that are not independently owned and operated,
and thus is unable at this time to estimate with greater precision the
number of local resellers that would qualify as small business concerns
under the SBA\'s definition. Consequently, the Commission estimates that
there are 86 or fewer local resellers that may be affected by the rules.

10\. *Toll Resellers*. The SBA has developed a definition for small
businesses within the category of Telecommunications Resellers. Under
that SBA definition, such a business is small if it has 1,500 or fewer
employees.[^137] According to the Commission\'s most recent *Telephone
Trends Report* data, 454 companies reported that they were engaged in
the provision of toll resale services.[^138] Of these 454 companies, 423
reported that they have 1,500 or fewer employees and 31 reported that,
alone or in combination with affiliates, they have more than 1,500
employees.[^139] The Commission does not have data specifying the number
of these toll resellers that are not independently owned and operated,
and thus is unable at this time to estimate with greater precision the
number of toll resellers that would qualify as small business concerns
under the SBA\'s definition. Consequently, the Commission estimates that
there are 423 or fewer toll resellers that may be affected by the rules.

11\. *Payphone Service Providers*. Neither the Commission nor the SBA
has developed a definition of small entities specifically applicable to
payphone service providers (PSPs). The closest applicable definition
under the SBA rules is for Wired Telecommunications Carriers. Under that
SBA definition, such a business is small if it has 1,500 or fewer
employees. [^140] According to the Commission\'s most recent *Trends in
Telephone Service* data, 758 PSPs reported that they were engaged in the
provision of payphone services.[^141] Of these 758 payphone service
providers, 755 reported that they have 1,500 or fewer employees and 3
reported that, alone or in combination with affiliates, they have more
than 1,500 employees.[^142] The Commission does not have data specifying
the number of these payphone service providers that are not
independently owned and operated, and thus is unable at this time to
estimate with greater precision the number of PSPs that would qualify as
small business concerns under the SBA\'s definition. Consequently, the
Commission estimates that there are 755 or fewer PSPs that may be
affected by the rules.

12\. *Interexchange Carriers*. Neither the Commission nor the SBA has
developed a definition of small entities specifically applicable to
providers of interexchange services. The closest applicable definition
under the SBA rules is for Wired Telecommunications Carriers. Under that
SBA definition, such a business is small if it has 1,500 or fewer
employees. [^143] According to the most recent *Telephone Trends Report*
data, 204 carriers reported that their primary telecommunications
service activity was the provision of interexchange services.[^144] Of
these 204 carriers, 163 reported that they have 1,500 or fewer employees
and 41 reported that, alone or in combination with affiliates, they have
more than 1,500 employees.[^145] We do not have data specifying the
number of these carriers that are not independently owned and operated,
and thus are unable at this time to estimate with greater precision the
number of IXCs that would qualify as small business concerns under the
SBA\'s definition. Consequently, we estimate that there are 163 or fewer
small entity IXCs that may be affected by the rules.

13\. *Operator Service Providers*. Neither the Commission nor the SBA
has developed a definition of small entities specifically applicable to
operator service providers. The closest applicable definition under the
SBA rules is for Wired Telecommunications Carriers. Under that SBA
definition, such a business is small if it has 1,500 or fewer employees.
[^146] According to the Commission\'s most recent *Telephone Trends
Report* data, 21 companies reported that they were engaged in the
provision of operator services.[^147] Of these 21 companies, 20 reported
that they have 1,500 or fewer employees and one reported that, alone or
in combination with affiliates, it had more than 1,500 employees.[^148]
The Commission does not have data specifying the number of these
operator service providers that are not independently owned and
operated, and thus is unable at this time to estimate with greater
precision the number of operator service providers that would qualify as
small business concerns under the SBA\'s definition. Consequently, the
Commission estimates that there are 20 or fewer local resellers that may
be affected by the rules.

14\. *Prepaid Calling Card Providers*. The SBA has developed a
definition for small businesses within the category of
Telecommunications Resellers. Under that SBA definition, such a business
is small if it has 1,500 or fewer employees.[^149] According to the
Commission\'s most recent *Telephone Trends Report* data, 21 companies
reported that they were engaged in the provision of prepaid calling
cards.[^150] Of these 21 companies, 20 reported that they have 1,500 or
fewer employees and one reported that, alone or in combination with
affiliates, it had more than 1,500 employees.[^151] The Commission does
not have data specifying the number of these local resellers that are
not independently owned and operated, and thus is unable at this time to
estimate with greater precision the number of prepaid calling card
providers that would qualify as small business concerns under the SBA\'s
definition. Consequently, the Commission estimates that there are 20 or
fewer local resellers that may be affected by the rules.

15\. *Satellite Service Carriers*. The SBA has developed a definition
for small businesses within the category of Satellite
Telecommunications. Under that SBA definition, such a business is small
if it has 1,500 or fewer employees.[^152] According to the Commission\'s
most recent *Telephone Trends Report* data, 21 carriers reported that
they were engaged in the provision of satellite services.[^153] Of these
21 carriers, 16 reported that they have 1,500 or fewer employees and
five reported that, alone or in combination with affiliates, they have
more than 1,500 employees.[^154] The Commission does not have data
specifying the number of these carriers that are not independently owned
and operated, and thus is unable at this time to estimate with greater
precision the number of satellite service carriers that would qualify as
small business concerns under the SBA\'s definition. Consequently, the
Commission estimates that there are 21 or fewer satellite service
carriers that may be affected by the rules.

16\. *Other Toll Carriers*. Neither the Commission nor the SBA has
developed a definition of small entities specifically applicable to
\"Other Toll Carriers.\" This category includes toll carriers that do
not fall within the categories of interexchange carriers, operator
service providers, prepaid calling card providers, satellite service
carriers, or toll resellers. The closest applicable definition under the
SBA rules is for Wired Telecommunications Carriers. Under that SBA
definition, such a business is small if it has 1,500 or fewer employees.
[^155] According to the Commission\'s most recent *Telephone Trends
Report* data, 17 carriers reported that they were engaged in the
provision of \"Other Toll Services.\"[^156] Of these 17 carriers, 15
reported that they have 1,500 or fewer employees and two reported that,
alone or in combination with affiliates, they have more than 1,500
employees.[^157] The Commission does not have data specifying the number
of these other toll carriers that are not independently owned and
operated, and thus is unable at this time to estimate with greater
precision the number of \"Other Toll Carriers\" that would qualify as
small business concerns under the SBA\'s definition. Consequently, the
Commission estimates that there are 15 or fewer Other Toll Carriers\"
that may be affected by the rules.

17\. *Wireless Service Providers*. The SBA has developed a definition
for small businesses within the two separate categories of Cellular and
Other Wireless Telecommunications or Paging. Under that SBA definition,
such a business is small if it has 1,500 or fewer employees.[^158]
According to the Commission\'s most recent *Telephone Trends Report*
data, 1,495 companies reported that they were engaged in the provision
of wireless service.[^159] Of these 1,495 companies, 989 reported that
they have 1,500 or fewer employees and 506 reported that, alone or in
combination with affiliates, they have more than 1,500 employees. We do
not have data specifying the number of these carriers that are not
independently owned and operated, and thus are unable at this time to
estimate with greater precision the number of wireless service providers
that would qualify as small business concerns under the SBA\'s
definition. Consequently, we estimate that there are 989 or fewer small
wireless service providers that may be affected by the rules.

18\. *Broadband Personal Communications Service*. The broadband personal
communications service (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 less than \$40 million
in the three previous calendar years.[^160] 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.[^161] These regulations defining \"small entity\" in the context
of broadband PCS auctions have been approved by the SBA.[^162] 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 percent of the 1,479
licenses for Blocks D, E, and F.[^163] 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 Block auctions, for a total of 183 small entity PCS providers
as defined by the SBA and the Commission\'s auction rules.

19\. *800 MHz and 900 MHz Specialized Mobile Radio Licensees*. The
Commission awards bidding credits in auctions for geographic area 800
MHz and 900 MHz Specialized Mobile Radio (SMR) licenses to firms that
had revenues of no more than \$15 million in each of the three previous
calendar years.[^164] In the context of both the 800 MHz and 900 MHz
SMR, a definition of \"small entity\" has been approved by the SBA.
These bidding credits apply to SMR providers in the 800 MHz and 900 MHz
bands that either hold geographic area licenses or have obtained
extended implementation authorizations. 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.

20\. *Rural Radiotelephone Service*. The Commission has not adopted a
definition of small entity specific to the Rural Radiotelephone
Service.[^165] A significant subset of the Rural Radiotelephone Service
is the Basic Exchange Telephone Radio Systems (BETRS).[^166] We will use
the SBA\'s definition applicable to wireless companies, *i.e.*, an
entity employing no more than 1,500 persons.[^167] 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.

21\. *Fixed Microwave Services*. Microwave services include common
carrier,[^168] private-operational fixed,[^169] and broadcast auxiliary
radio services.[^170] At present, there are approximately 22,015 common
carrier fixed licensees and 61,670 private operational-fixed licensees
and broadcast auxiliary radio licensees in the microwave services. The
Commission has not defined a small business specifically with respect to
microwave services. For purposes of this Supplemental FRFA, we utilize
the SBA\'s definition applicable to wireless companies\--*i.e*., an
entity with no more than 1,500 persons.[^171] We do not have data
specifying the number of these licensees that have more than 1,500
employees, and thus are unable at this time to estimate with greater
precision the number of fixed microwave service licensees that would
qualify as small business concerns under the SBA\'s definition.
Consequently, we estimate that there are 22,015 or fewer small common
carrier fixed microwave licensees and 61,670 or fewer small private
operational-fixed microwave licensees and small broadcast auxiliary
radio licensees in the microwave services that may be affected by the
rules. We note, however, that the common carrier microwave fixed
licensee category includes some large entities.

22\. *39 GHz Licensees*. The Commission defined "small entity" for 39
GHz licenses as an entity that has average gross revenues of less than
\$40 million in the three previous calendar years.[^172] 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.[^173] The SBA approved these regulations defining "small entity"
in the context of 39 GHz auctions.[^174] 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.

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

23\. As mandated by the court in the *Illinois* decision, we established
a compensation scheme for inmate telephone service, starting on November
7, 1996 through October 6, 1997, if the payphone service provider (PSP)
was not otherwise compensated for its inmate service. As previously
explained, the PSP presubscribes the inmate telephones to a specific IXC
pursuant to a contract between the PSP and the IXC. If this previously
existing contract failed to establish a duty to count and track inmate
calls for compensation purposes, or if the IXC failed to retain its
records of the number of compensable inmate calls for the interim
period, we have established in this order a waiver procedure that
provides the maximum amount of flexibility for the IXC and the PSP,
including small IXCs and small PSPs, to propose the number of inmate
calls to be compensated for the interim period by the IXC presubscribed
during the interim period.[^175]

24\. With this exception, this order imposes no new reporting,
recordkeeping or other compliance requirements not previously adopted in
this or related payphone proceedings.

**Steps Taken To Minimize Significant Economic Impact on Small Entities,
and Significant Alternatives Considered**

25\. To minimize the economic impact and administrative burden for both
payors and recipients of payphone compensation, including small
entities, we required the payment of a flat fee of \$33.892 per payphone
per month for access code and subscriber 800 calls, originating from
October 7, 1997 through April 20, 1999 for those payphones for which
compensation is not paid on a per-call basis, and originating from
November 7, 1996 through October 6, 1997, for all payphones. The payment
of a prescribed flat fee of \$4.2747 per payphone per month for 0+
calls, originating from November 7, 1996 through October 6, 1997, that
were not otherwise compensated, minimizes the economic impact and
administrative burden for both IXCs and payphone service providers,
including small entities.

26\. Some of both payors and recipients of payphone compensation are
small entities. Over time, we have learned that steps we take to
minimize the economic impact on payors of payphone compensation that are
small entities diminish the compensation received by recipients of
payphone compensation that are small entities, which in turn contradicts
one of the mandates of Section 276 that payphone service providers
should receive compensation for each and every completed call
originating at one of their payphones. For example, to ease the burden
of implementing the per call payphone compensation scheme on midsize and
small local exchange carriers, the Common Carrier Bureau granted a
waiver in 1998 to midsize and small local exchange carriers relieving
such entities of the economic burden of installing FlexANI software on
their switches. Payphone calls of small payphone service providers
routed through these particular switches without FlexANI software may
not be counted, tracked, and compensated on a per-call basis. As a
result, compensation must be paid on a per payphone, not per call,
basis. The Bureau limited such payphone compensation to 16 calls per
month,[^176] even if a small payphone service provider\'s payphone calls
are more than 200 calls per payphone per month at a truck stop, for
example, instead of 16 payphone calls per month.[^177] Accordingly, in
this order, we have found it necessary to balance the equities between
these two groups of small entities.

27\. In another example of the Commission\'s attempt to ease an economic
impact, the Commission exempted in 1996 local exchange carriers and
interexchange carriers with annual toll revenues of \$100 million or
less from the economic burden of paying per payphone compensation. The
U.S. Court of Appeals for the District of Columbia Circuit vacated this
determination as arbitrary and capricious in the *Illinois* decision,
partially because it would deprive recipients of payphone compensation
of approximately \$4 million per month, according to the court.[^178]
After the *Illinois* decision, we were asked to again exempt carriers
with annual toll revenues of \$100 million or less from the economic
burden of paying interim compensation. In the alternative, we were asked
to exempt carriers with monthly toll revenues of \$1 million or less
from the economic burden of paying interim compensation. In this order,
we have followed the mandates of the court and decided not to exempt
carriers based on the amount of toll revenue.

**Report to Congress**

28\. The Commission will send a copy of this Order, including this
Supplemental FRFA, in a report to be sent to Congress pursuant to the
Congressional Review Act.[^179] In addition, the Commission will send a
copy of this Order, including this Supplemental FRFA, to the Chief
Counsel for Advocacy of the Small Business Administration. A copy of
this Order and Supplemental FRFA (or summaries thereof) will also be
published in the Federal Register.[^180]

**Appendix C**

TABLE OF OVERPAYMENTS INTEREST RATES

FROM OCTOBER 1, 1996 THROUGH DECEMBER 31, 1998

Oct. 1, 1996 \-- Dec. 31, 1996 8%

Jan. 1, 1997 \-- Mar. 31, 1997 8%

Apr. 1, 1997 \-- Jun. 30, 1997 8%

Jul. 1, 1997 \-- Sep. 30, 1997 8%

Oct. 1, 1997 \-- Dec. 31, 1997 8%

Jan. 1, 1998 \-- Mar. 31, 1998 8%

Apr. 1, 1998 \-- Jun. 30, 1998 7%

Jul. 1, 1998 \-- Sep. 30, 1998 7%

Oct. 1, 1998 \-- Dec. 31, 1998 7%

TABLE OF NONCORPORATE OVERPAYMENTS INTEREST RATES

FROM JANUARY 1, 1999 THROUGH MARCH 31, 2002

Jan. 1, 1999 \-- Mar. 31, 1999 7%

Apr. 1, 1999 \-- Jun. 30, 1999 8%

Jul. 1, 1999 \-- Sep. 30, 1999 8%

Oct. 1, 1999 \-- Dec. 31, 1999 8%

Jan. 1, 2000 \-- Mar. 31, 2000 8%

Apr. 1, 2000 \-- Jun. 30, 2000 9%

Jul. 1, 2000 \-- Sep. 30, 2000 9%

Oct. 1, 2000 \-- Dec. 31, 2000 9%

Jan. 1, 2001 \-- Mar. 31, 2001 9%

Apr. 1, 2001 \-- Jun. 30, 2001 8%

Jul. 1, 2001 \-- Sep. 30, 2001 7%

Oct. 1, 2001 \-- Dec. 31, 2001 7%

Jan. 1, 2002 \-- Mar. 31, 2002 6%

TABLE OF CORPORATE OVERPAYMENTS INTEREST RATES

FROM JANUARY 1, 1999 THROUGH MARCH 31, 2002

Jan. 1, 1999 \-- Mar. 31, 1999 6%

Apr. 1, 1999 \-- Jun. 30, 1999 7%

Jul. 1, 1999 \-- Sep. 30, 1999 7%

Oct. 1, 1999 \-- Dec. 31, 1999 7%

Jan. 1, 2000 \-- Mar. 31, 2000 7%

Apr. 1, 2000 \-- Jun. 30, 2000 8%

Jul. 1, 2000 \-- Sep. 30, 2000 8%

Oct. 1, 2000 \-- Dec. 31, 2000 8%

Jan. 1, 2001 \-- Mar. 31, 2001 8%

Apr. 1, 2001 \-- Jun. 30, 2001 7%

Jul. 1, 2001 \-- Sep. 30, 2001 6%

Oct. 1, 2001 \-- Dec. 31, 2001 6%

Jan. 1, 2002 \-- Mar. 31, 2002 5%

**Appendix D**

**Comments Filed in Response to Interim Compensation Public Notice of
September 26, 2000**

1\. The American Public Communications Council

2\. AT&T

3\. Cable and Wireless USA, Inc. and Global Crossing North America, Inc.

4\. Excel Communications, Inc., IDT Corporation, Network Plus, Inc.,
StarPower Communications, LLC & RCN Telecom Services, Inc.

5\. One Call Communications, Inc.

6\. Sprint Corporation

7\. WorldCom, Inc.

**Reply Comments Filed in Response to Interim Compensation Public
Notice**

1\. The American Public Communications Council

2\. AT&T

3\. Cable and Wireless USA, Inc. and Global Crossing North America, Inc.

4\. Excel Communications, Inc.

5\. National Payphone Clearinghouse

6\. One Call Communications, Inc.

7\. RBOC Payphone Coalition

8\. Sprint Corporation

9\. WorldCom, Inc.

[^1]: *Illinois Pub. Telecomm. Ass\'n v. FCC*, 117 F.3d 555 (D.C. Cir.
    1997), *clarified on reh'g,* 123 F.3d 693 (D.C. Cir. 1997), *cert.
    denied sub nom. Virginia State Corp. Comm'n v. FCC*, 523 U.S. 1046
    (1998) (hereinafter *Illinois)*.

[^2]: There are four types of calls that originate from payphones that
    are not at issue in this order: coin calls, directory assistance
    calls, Telecommunications Relay Service (TRS) calls, and 0- calls. A
    caller originates a 0- call by dialing 0 and then waiting for
    operator intervention. *See First Report and Order*, 11 FCC Rcd at
    20549, 20551; *Third Report and Order*, 14 FCC Rcd at 2551 n. 16,
    2568.

[^3]: *See Implementation of the Pay Telephone Reclassification and
    Compensation Provisions of the Telecommunications Act of 1996*, CC
    Docket No. 96-128, *Notice of Proposed Rulemaking*, 11 FCC Rcd 6716,
    6721 (1996) (hereinafter *Payphone NPRM*); *Report and Order*, 11
    FCC Rcd 20541 (1996) (hereinafter *First Report and Order*); *Order
    on Reconsideration*, 11 FCC Rcd 21233 (1996) (hereinafter *First
    Reconsideration Order*), *aff\'d in part and remanded in part sub
    nom. Illinois*, 117 F.3d at 555; *Second Report and Order*, 13 FCC
    Rcd 1778 (1997), *aff\'d in part and remanded in part sub nom. MCI
    v. FCC*, 143 F.3d 606 (D.C. Cir. 1998) (hereinafter *MCI*); *Third
    Report and Order and Order on Reconsideration of the Second Report
    and Order*, 14 FCC Rcd 2545 (1999)(hereinafter *Third Report and
    Order*), reconsideration petitions pending, *aff\'d sub nom.
    American Pub. Communications Council v. FCC*, 215 F.3d 51 (D.C. Cir.
    2000) (hereinafter *American*); *Second Order on Reconsideration*,
    16 FCC Rcd 8098 (2001) (hereinafter *Second Reconsideration Order*),
    *Third Order on Reconsideration and Order on Clarification*, 16 FCC
    Rcd 20922 (2001) (hereinafter *Third Reconsideration Order*).

[^4]: Pub. L. No. 104-104, 110 Stat. 56 (1996) (codified at 47 U.S.C. §
    276). Section 276 requires that the Commission \"establish a per
    call compensation plan to ensure that all payphone service providers
    are fairly compensated for each and every completed intrastate and
    interstate call using their payphone, except that emergency calls
    and telecommunications relay service calls for hearing disabled
    individuals shall not be subject to such compensation.\" The
    complete text of Section 276 is provided as Appendix A of the *First
    Report and Order*, 11 FCC Rcd at 20713-14.

[^5]: The provision of payphone-specific coding digits is a prerequisite
    to per-call compensation payments to PSPs for payphone calls.
    *Implementation of the Pay Telephone Reclassification and
    Compensation Provisions of the Telecommunications Act of 1996*, CC
    Docket No. 96-128, *Order*, 14 FCC Rcd 836, 837 (Network Serv. Div.
    1998). The Bureau noted that as of October 7, 1997, only 60 percent
    of payphones were able to provide payphone-specific coding digits.
    *See Implementation of the Pay Telephone Reclassification and
    Compensation Provisions of the Telecommunications Act of 1996*, CC
    Docket No. 96-128, *Memorandum Opinion and Order*, 13 FCC Rcd 4998,
    5027 ¶ 56 (Com. Car. Bur. 1998) (*Bureau Coding Digit Waiver
    Order*). This 60 percent includes LEC dumb payphones that were
    hardcoded at the switch. *Id*., 13 FCC Rcd at 5007 n. 57. Smart
    payphones rely on the intelligence within the payphone unit to
    transmit payphone-specific coding digits. *Id.,* 13 FCC Rcd at 5010
    n. 72. Dumb payphones, which are primarily owned by LECs, rely on
    LEC switches for functions and features to transmit
    payphone-specific coding digits. *See id.*, *Memorandum Opinion and
    Order*, 13 FCC Rcd 10893, 10894 n. 3 (Com. Car. Bur. 1998)
    (hereinafter *Bureau Per-call Waiver Order*).

[^6]: *Illinois*, 117 F.3d at 555, *see id.*, 123 F.3d at 694.

[^7]: *Illinois*, 117 F.3d at 563-64 (emphasis in original).

[^8]: *Illinois*, 117 F.3d at 565-66.

[^9]: *Illinois*, 117 F.3d at 564-65.

[^10]: 47 C.F.R. § 32.27.

[^11]: *Illinois*, 117 F.3d at 570.

[^12]: *Democratic Central Committee of the District of Columbia v.
    Washington Metro. Area Transit Comm\'n*, 485 F.2d 786 (D.C. Cir.
    1973), *cert. denied*, 415 U.S. 935, 94 S.Ct. 1451 (1974).

[^13]: *MCI v. FCC*, 143 F.3d 606 (D.C. Cir. 1998).

[^14]: *Id.*, 143 F.3d at 608.

[^15]: *Id.*

[^16]: *Third Report and Order*, 14 FCC Rcd at 2545.

[^17]: *American*, 215 F.3d at 51.

[^18]: Contrary to the assertion of several carriers, such as the Joint
    Comments at 24-25, the Commission is not engaging in retroactive
    rulemaking, but is engaging in implementing court mandates in the
    *Illinois* remand.

[^19]: The Commission established a default rate to be applied only if
    the PSP and the carrier are unable to negotiate some other rate of
    compensation for compensable calls. *Second Report and Order*, 13
    FCC Rcd at 1790; *see also* *First Report and Order*, 11 FCC Rcd at
    20577.

[^20]: *Illinois*, 117 F.3d at 563, 565.

[^21]: In the *Third Report and Order*, the Commission announced that
    the default compensation rate of \$0.24 per coinless payphone call
    would remain in place through January 31, 2002. *Third Report and
    Order*, 14 FCC Rcd at 2647-48. \"At the conclusion of the three year
    period, if parties have not invested the time, capital, and effort
    necessary to move these issues to a market-based resolution, parties
    may petition the Commission regarding the default amount, related
    issues pursuant to technological advances, and the expected
    resultant market changes.\" *Id.* at 2648.

[^22]: The Colorado Payphone Association and PocketScience filed
    separate reconsideration petitions to the *Third Report and Order*.
    In this order, the Commission does not address these two
    reconsideration petitions, but will address them in a separate
    order.

[^23]: Sprint Comments at 2; AT&T Comments at 1-2; Cable and Wireless
    USA, Inc. and Global Crossing North America, Inc. Comments at 4-5;
    Excel Communications, Inc., IDT Corporation, Network Plus, Inc.,
    StarPower Communications, LLC and RCN Telecom Services, Inc. Joint
    Comments (Joint Comments) at 16; WorldCom Reply Comments at 6; One
    Call Reply Comments at 3; RBOC/GTE/SNET Payphone Coalition
    (Coalition) Reply Comments at 10 n. 5.

[^24]: Payphone-specific coding digits are not transmitted from smart
    payphones through the switch unless LECs use hardcoding or install
    FlexANI at the switch. FlexANI is a switch software feature that
    allows carriers to identify payphone-originated calls. *Bureau
    Coding Digit Waiver Order*, 13 FCC Rcd at 5010-11. FlexANI coding
    digits are transmitted as part of the ANI signalling sequence and
    are used by the receiving switch to identify the type of originating
    line or the type of call being made. As the one alternative to using
    FlexANI, a LEC may choose to employ hardcoding of additional
    embedded ANI ii payphone-specific coding digits for all of the
    switches in its service area. *Bureau Coding Digit Waiver Order*, 13
    FCC Rcd at 5012. However, the Commission is not aware of any LEC
    that has chosen the hardcoding alternative. *Id.* Therefore, the
    Commission discusses only FlexANI in this order.

[^25]: \"Since PSPs were not paying for \[Flex\]ANI during \[the interim
    and intermediate\] time periods, it would be inappropriate to
    compensate PSPs for such costs.\" Joint Comments at 16.

[^26]: *Third Report and Order*, 14 FCC Rcd at 2636.

[^27]: Sprint Comments at 2; AT&T Comments at 1-2; Cable and Wireless
    USA, Inc. and Global Crossing North America, Inc. at 4-5; Joint
    Comments at 16; WorldCom Reply Comments at 6; One Call Reply
    Comments at 3; Coalition Reply Comments at 10 n. 5.

[^28]: This cost component was added for four months of delay due to the
    quarterly payment procedure that is standard in the payphone
    industry. Typically, an IXC or LEC is billed in April for payphone
    calls originating during the first quarter of the year, and the IXC
    or LEC issues a check to the PSP by July 1.

[^29]: *Third Report and Order*, 14 FCC Rcd at 2636.

[^30]: A caller originates an access code call by dialing a sequence of
    numbers that connects the caller to the operator service provider
    (OSP) associated with that sequence, instead of the OSP
    presubscribed to the originating line. Access codes include 10XXX in
    equal access areas, with the three-digit XXX denoting a particular
    IXC. Access codes also include 950 Feature Group B dialing anywhere
    (950-0XXX or 950-1XXX). Of course, some OSPs use an 800 number as an
    access code. *Policies and Rules Concerning Operator Service Access
    and Pay Telephone Compensation*, CC Docket No. 91-35, *Second Report
    and Order*, 7 FCC Rcd 3251 n. 1 (1992). Calls to a toll-free number
    assigned to a particular subscriber are called subscriber 800 calls,
    although this category includes calls made by dialing 800, 888 or
    877 numbers. *First Report and Order*, 11 FCC Rcd at 20549, 20551.

[^31]: APCC Comments at 19.

[^32]: APCC collected call volumes during a three-month period in the
    spring of 1996 to use as the basis for an estimate of average
    monthly call volumes of access code and subscriber 800 calls. CCI
    and Telaleasing used one-month periods.

[^33]: *First Report and Order*, 11 FCC Rcd at 20603.

[^34]: The Coalition provides average monthly call volumes per payphone
    for three Bell Operating Companies (BOCs): 146.15 for BOC A; 131.88
    for BOC B; and 140.61 for BOC C. *See* Letter to Rose M. Crellin,
    FCC, from Michael K. Kellogg (Mar. 27, 1998). Telaleasing
    Enterprises, Inc. (Telaleasing) reports 163 calls. Telaleasing
    Comments at 2. APCC reports 159 calls. *See* Letter to Magalie Roman
    Salas, Secretary, FCC, from Robert F. Aldrich, APCC at Attachment
    (Mar. 26, 1998). Communications Central, Inc. (CCI) reports 157
    calls. CCI Comments at 8. Peoples Telephone Company, Inc. (Peoples)
    reports 139 calls. Peoples Comments at 6. There is no suggestion
    that any of the companies used a different methodology for its 1997
    call volume study than the same company used for its 1996 call
    volume study.

[^35]: \"The more data that can be subject to analysis, the better.
    Although the collection of large samples of data . . . can be
    expensive and tedious, the payoff in . . . accuracy will invariably
    justify the effort.\" Hirschey, Mark and James L. Pappas,
    *Managerial Economics*, 271, 1996, The Dryden Press, Harcourt Brace
    College Publishers, Orlando. *See* Fomby, Thomas G., R. Carter Hill,
    Stanley R. Johnson, *Advanced Econometric Methods*, 1988,
    Springer-Verlag, Inc., New York, and Maddala, G.S., *Introduction to
    Econometrics*, 1992, Macmillan Publishing Co., New York.

[^36]: We reject the various IXC arguments that our initial estimate of
    131 calls was too high because the IXCs have not submitted any
    competing data of their own or called into serious question the data
    provided.

[^37]: PSPs that are affiliated with LECs \"will not be eligible for
    this interim compensation until the first day following their
    reclassification and transfer of payphone equipment along with the
    termination of subsidies, as discussed below.\" *First Report and
    Order*, 11 FCC Rcd at 20604; *First Reconsideration Order*, 11 FCC
    Rcd at 21293-94, 21307-08; *see also id.*, *Order*, 12 FCC Rcd
    20997, 21013 (Com. Car. Bur. 1997) (hereinafter *Bureau Tariff
    Waiver Order*).

[^38]: *Illinois*, 117 F.3d at 565 (emphasis in original).

[^39]: *Illinois on rehearing*, 123 F.3d at 694.

[^40]: These commenters include AT&T Corporation, Competitive
    Telecommunications Association (CompTel), Excel Telecommunications,
    Inc., LCI International Telecom Corporation (LCI), MCI
    Telecommunications Corporation (MCI), Sprint Corporation, WorldCom,
    Inc., CCI, MIDCOM Communication, Inc., America\'s Carriers
    Telecommunications Association, International Telecard Association,
    Cable and Wireless, Inc. and General Communication, Inc.

[^41]: Initially, the Coalition was comprised of GTE Service
    Corporation, Southern New England Telephone Company, the Bell
    Atlantic Telephone Companies, BellSouth Corporation, Pacific Telesis
    Group, Southwestern Bell Telephone Company, and US West, Inc. Due to
    mergers and acquisitions, the Coalition currently is comprised of
    BellSouth Public Communications, SBC Communications, Inc. and the
    Verizon telephone companies.

[^42]: MCI Comments at 6, citing Coalition Comments at 34 and TRA
    Comments at 34.

[^43]: AT&T Reply at 37, MCI Comments at 6, CompTel Comments at 15.

[^44]: *Pleading Cycle Established for Comment on Remand Issues in the
    Payphone Proceeding*, CC Docket No. 96-128, *Public Notice*, 13 FCC
    Rcd 4801 (1997) (hereinafter *Remand Public Notice*).

[^45]: Coalition Comments at 34-35.

[^46]: *First Report and Order*, 11 FCC Rcd at 20584 n. 293.

[^47]: *Id.* at 20584.

[^48]: The Coalition proposes that the Commission exempt carriers (LECs
    and IXCs) with toll revenues below \$1 million per month for the
    Commission\'s administrative convenience. Coalition Comments at 34.
    The Commission rejects the exclusion of carriers with monthly toll
    revenues below \$1 million, for the same reasons that the court in
    *Illinois* rejected the exclusion of carriers with annual toll
    revenues below \$100 million.

[^49]: *Third Reconsideration Order*, 16 FCC Rcd at 20922.

[^50]: *Second Reconsideration Order*, 16 FCC Rcd at 8098, 8106.

[^51]: Further, this elimination conforms to the determination in the
    *First Report and Order* that the first underlying facilities-based
    carrier should pay compensation to a PSP. *First Report and Order*,
    11 FCC Rcd at 20586.

[^52]: *First Report and Order*, 11 FCC Rcd at 20725-26.

[^53]: This report was compiled using information from 1997 TRS Fund
    worksheets and September 1997 Universal Service Fund (USF)
    worksheets. Each carrier that provides interstate service must file
    an annual TRS Fund worksheet. Most interstate telecommunications
    service providers are required to file a semi-annual USF worksheet
    with the USF Administrator (NECA). For each carrier, this report
    shows the types of services that the carrier provided. This
    publication should include all carriers that provided interstate
    telecommunication services in 1996, unless the company went out of
    business or merged or is not in compliance with filing requirements.
    It is possible for the TRS Fund Administrator at the National
    Exchange Carrier Association (NECA) to identify carriers who had an
    obligation to file, but did not file a TRS worksheet.

[^54]: 0+ calls are made by dialing 0, followed by a sequence of numbers
    for the telephone number called. 0+ calls include credit card,
    collect, and third number billing calls. *First Report and Order*,
    11 FCC Rcd at 20549.

[^55]: *First Report and Order*, 11 FCC Rcd at 20569.

[^56]: *First Report and Order*, 11 FCC Rcd at 20604.

[^57]: *Illinois*, 117 F.3d at 566.

[^58]: MCI Comments at 6.

[^59]: Coalition Reply Comments at 17.

[^60]: *See, e.g.*, MCI Comments at 8; AT&T Comments at 23; One Call
    Reply Comments at 5.

[^61]: MCI Comments at 9.

[^62]: *See* Letter to Magalie Roman Salas, Secretary, FCC, from Robert
    F. Aldrich, APCC (Sept. 28, 1998).

[^63]: WorldCom Comments at 13, citing APCC Comments, July 1, 1996,
    \"Industry Dial around Statistics, Page 1\" and APCC Comments,
    August 26, 1997, Attachment 4, page 36.

[^64]: Coalition Comments at 37, Anderson Report at 15-16.

[^65]: One Call Reply Comments at 5.

[^66]: Sprint Reply Comments at 3-4.

[^67]: PSPs that are affiliated with LECs \"will not be eligible for
    this interim compensation until the first day following their
    reclassification and transfer of payphone equipment along with the
    termination of subsidies, as discussed below.\" *First Report and
    Order*, 11 FCC Rcd at 20604; *First Reconsideration Order*, 11 FCC
    Rcd at 21293-94, 21307-08; *see also* *Bureau Tariff Waiver Order*,
    12 FCC Rcd at 21013.

[^68]: This is a default amount, used in the absence of a negotiated
    amount. *See Third Report and Order*, 14 FCC Rcd at 2569.

[^69]: \"0+ calls are routed exclusively to the presubscribed carrier
    for a given payphone, and it is that presubscribed carrier that
    should be responsible for payment, no one else.\" Coalition Reply
    Comments at 17; *see* AT&T Reply Comments at 4 n. 12.

[^70]: With regard to the recipients of interim compensation for 0+
    calls, some commenters urge us to include LEC-affiliated PSPs but
    exclude independent PSPs. We are unwilling to determine in this
    instance that no independent PSP may demonstrate that it did not
    receive compensation for the interim period for 0+ calls originating
    at a particular payphone. This is a fact-based determination that
    must be made for each payphone, whether the PSP is independent or
    LEC-affiliated.

[^71]: Joint Comments of Cable and Wireless USA, Inc. and Global
    Crossing North America, Inc. at 8-9.

[^72]: *Petition for Declaratory Ruling by Inmate Calling Services
    Providers Task Force*, RM-8181, *Declaratory Ruling*, 11 FCC Rcd
    7362, 7364-65 (1996).

[^73]: *Billed Party Preference for InterLATA 0+ Calls*, CC Docket No.
    92-77, *Second Report and Order and Order on Reconsideration,* 13
    FCC Rcd 6122, 6155-56 (1998).

[^74]: *First Reconsideration Order*, 11 FCC Rcd at 21252.

[^75]: *First Report and Order*, 11 FCC Rcd at 20579. In a separate
    order in this proceeding, the Commission is considering certain
    aspects of compensation for inmate service pursuant to the court\'s
    inmate remand. *Inmate Calling Services Providers Coalition v. FCC*,
    Order, No. 97-1046, 1998 WL 65655 (D.C. Cir. Jan. 30, 1998)
    (unpublished).

[^76]: *First Reconsideration Order*, 11 FCC Rcd at 21260.

[^77]: This is a default amount, used in the absence of a negotiated
    amount. *See Third Report and Order*, 14 FCC Rcd at 2569.

[^78]: Virtually all calls originated by inmate phones are 0+ calls.
    *Remand Public Notice*, 13 FCC Rcd at 4805.

[^79]: If the presubscribed IXC failed to retain the records of inmate
    calls originating during the interim period for which compensation
    now must be paid according to this paragraph, then that
    presubscribed IXC must file a waiver request with the Common Carrier
    Bureau, specifying an alternative number of inmate calls to be
    compensated for the interim period and the specific basis for its
    number. The specific PSP to be compensated will be allowed thirty
    (30) days to file an objection with the Common Carrier Bureau,
    specifying an alternative number of inmate calls to be compensated
    for the interim period and the specific basis for its number.

[^80]: For example, if the policy or practice of the specific
    presubscribed IXC was [not]{.underline} to pay compensation to a PSP
    for a collect call from an inmate when the called party refused to
    accept charges for that particular call during the interim period,
    then the specific presubscribed IXC is [not]{.underline} required
    now to pay compensation of \$0.229 for that particular inmate call.

[^81]: PSPs that are affiliated with LECs \"will not be eligible for
    this interim compensation until the first day following their
    reclassification and transfer of payphone equipment along with the
    termination of subsidies, as discussed below.\" *First Report and
    Order*, 11 FCC Rcd at 20604; *First Reconsideration Order*, 11 FCC
    Rcd at 21293-94, 21307-08; *see also* *Bureau Tariff Waiver Order,*
    12 FCC Rcd at 21013.

[^82]: *Third Report and Order*, 14 FCC Rcd at 2636 n. 427.

[^83]: *Id*. at 2636 ¶ 198.

[^84]: Several carriers assert that there should be no interest
    compensation at all. \"As a result of the prior Interim Period
    compensation plan being vacated \[in the *Illinois* decision\],
    there was no outstanding debt to be paid \[by carriers\]. Therefore,
    . . . \[t\]here was not, nor could be, any default that would
    entitle the PSPs to a windfall in the form of interest payments.\"
    Joint Comments at 20. However, the Commission previously decided
    that interest would be paid for interim compensation, and we
    continue to believe that it would be unfair to deny any carrier owed
    compensation a reasonable payment for the time value of money.
    Otherwise, the owing party would enjoy a windfall.

[^85]: *Third Report and Order*, 14 FCC Rcd at 2630-31.

[^86]: *See Represcribing the Authorized Rate of Return for Interstate
    Services of Local Exchange Carriers*, 5 FCC Rcd 7507 (1990).

[^87]: Petition of the Colorado Payphone Association for Partial
    Reconsideration, at 14-15, filed April 21, 1999.

[^88]: Sprint Comments at 5; AT&T Reply Comments at 7; One Call Reply
    Comments at 4; WorldCom Comments at 16.

[^89]: Appendix C provides IRS rates for the last quarter of 1996
    through March 31, 2002 pursuant to a Revenue Ruling published
    December 26, 2001. *See* Revenue Ruling 2001-63, 2001-52 Internal
    Revenue Bulletin (I.R.B.) 606 (Dec. 26, 2001), 2001 WL 1563674 (IRS
    RRU). For interest in subsequent quarters, interested parties must
    use subsequent IRS Revenue Rulings.

[^90]: *Tariffs Implementing Access Charge Reform*, CC Docket No.
    97-250, *Memorandum Opinion and* Order, 13 FCC Rcd 14683 (1998).

[^91]: *Long-Term Telephone Number Portability Tariff Filings of
    Ameritech Operating Companies, Pacific Bell, Southwestern Bell
    Telephone Companies, and US West Communications, Inc.*, 14 FCC Rcd
    17339 (Com. Car. Bur. 1999).

[^92]: *Mile Hi Cable Partners v. Public Service Company of Colorado*,
    15 FCC Rcd 11450 (Cable Serv. Bur. 2000).

[^93]: *Second Report and Order*, 13 FCC Rcd at 1806. In 1996, the
    Commission explained that there were approximately 1.5 million
    incumbent LEC payphones and approximately 350,000 independent PSP
    payphones. *First Report and Order*, 11 FCC Rcd at 6720.

[^94]: In addition, some PSPs may need to make payments for the interim
    period as well, if they were compensated at a rate above the rate we
    set in this order or were paid by a particular IXC more than that
    same IXC now owes to the specific PSP for interim compensation now
    that LECs and IXCs with annual toll revenue of \$100 million or
    below must pay interim compensation.

[^95]: APCC Reply Comments at 7.

[^96]: *First Report and Order*, 11 FCC Rcd at 20575; *First
    Reconsideration Order,* 11 FCC Rcd at 21265-66. The Bureau noted
    that as of October 7, 1997, only 60 percent of payphones were able
    to provide payphone-specific coding digits. *Bureau Coding Digit
    Waiver Order,* 13 FCC Rcd at 5027 ¶ 56. This 60 percent includes LEC
    dumb payphones that were hardcoded at the switch.

[^97]: *Implementation of the Pay Telephone Reclassification and
    Compensation Provisions of the Telecommunications Act of 1996*, CC
    Docket No. 96-128, *Order*, 12 FCC Rcd 16387 (Com. Car. Bur. 1997).

[^98]: The per-call compensation obligation generally started the first
    day of the next quarter after FlexANI was installed, unless FlexANI
    is installed less than 30 days before the quarter when payment is
    due. An IXC may choose to pay on a per-call basis earlier than the
    required date. *Bureau Per-Call Waiver Order*, 13 FCC Rcd at 10904
    n. 57.

[^99]: For a detailed discussion of the derivation of the 148 call
    volume number, see ¶¶ 11-13 above. We note that 0+ and inmate calls
    are excluded from the call volume total because the presubscribed
    IXC has been responsible for compensating PSPs for these calls since
    the first day of the intermediate period, October 7, 1997. *See
    Second Report and Order*, 13 FCC Rcd at 1780 ¶ 2.

[^100]: We note that, when payphone-specific coding digits are received
    by the carrier, the carrier is obligated to compensate PSPs on a
    per-call basis. Carriers should compensate PSPs on a per-payphone
    basis only when payphone-specific coding digits for a particular
    payphone are not received by the carrier.

[^101]: *See Third Report and Order*, 14 FCC Rcd at 2636 ¶ 198.

[^102]: *See* ¶¶ 30-33.

[^103]: This report was compiled using information from 1999 TRS Fund
    worksheets. Each carrier that provides interstate service must file
    an annual TRS Fund worksheet. For each carrier, this report shows
    the primary type of services that the carrier provided. This
    publication should include all carriers that provided interstate
    telecommunication services in 1998, unless the company went out of
    business or merged or is not in compliance with filing requirements.
    It is possible for the TRS Fund Administrator at the National
    Exchange Carrier Association (NECA) to identify carriers who had an
    obligation to file, but did not file a TRS worksheet.

[^104]: These four letters have been incorporated into the record of
    this proceeding.

[^105]: The federal fiscal year began October 1, 2000 and ended
    September 30, 2001.

[^106]: According to the *Trends in Telephone Service* report, released
    in August of 2001, calls originating at 88.5 percent of the
    payphones in the United States were routed through the facilities of
    these four RBOCs, as of March 31, 1999. FCC, Common Carrier Bureau,
    Industry Analysis Division, *Trends in Telephone Service*, Table 8.5
    (August 2001) (*Telephone Trends Report*).

[^107]: *Third Report and Order*, 14 FCC Rcd at 2636-37.

[^108]: *See* 5 U.S.C. § 603. The RFA, 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) (CWAA). Title II of the
    CWAA is the Small Business Regulatory Enforcement Fairness Act of
    1996 (SBREFA).

[^109]: *Payphone NPRM*, 11 FCC Rcd at 6762-63.

[^110]: *First Report and Order*, 11 FCC Rcd at 20691-20709.

[^111]: *First Reconsideration Order*, 11 FCC Rcd at 21345-48.

[^112]: *Second Report and Order*, 12 FCC Rcd at 1835-45.

[^113]: *Third Report and Order*, 14 FCC Rcd at 2637-47.

[^114]: *See* 5 U.S.C. § 604.

[^115]: Pub. L. No. 104-104, 110 Stat. 56 (1996) (codified at 47 U.S.C.
    § 276).

[^116]: *Illinois*, 117 F.3d. at 555.

[^117]: *See* \"Steps Taken to Minimize Significant Economic Impact on
    Small Entities, and Significant Alternatives Considered,\" ¶¶ 25-27
    *infra*.

[^118]: 5 U.S.C. § 604(a)(3).

[^119]: 5 U.S.C. § 601(6).

[^120]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    \"small business concern\" in 5 U.S.C. § 632). Pursuant to 5 U.S.C.
    § 601(3), the statutory definition of a small business applies
    \"unless an agency after consultation with the Office of Advocacy of
    the Small Business Administration and after opportunity for public
    comment, establishes one or more definitions of such term which are
    appropriate to the activities of the agency and publishes such
    definition in the Federal Register.\"

[^121]: 5 U.S.C. § 632.

[^122]: 5 U.S.C. § 601(3).

[^123]: *See* Letter from Jere W. Glover, Chief Counsel for Advocacy,
    SBA, to Chairman William E. Kennard, FCC (May 27, 1999). The Small
    Business Act contains a definition of \"small business concern,\"
    which the RFA incorporates into its own definition of \"small
    business.\" *See* 5 U.S.C. § 632(a) (Small Business Act); 5 U.S.C.
    601(3) (RFA). SBA regulations interpret \"small business concern\"
    to include the concept of dominance on a national basis. 13 C.F.R. §
    121.102(b).

[^124]: 13 C.F.R. § 121.201, NAICS code 513310.

[^125]: *Telephone Trends Report*, Table 5.3.

[^126]: *Id*.

[^127]: 13 C.F.R. § 121.201, NAICS code 513310.

[^128]: *Telephone Trends Report*, Table 5.3.

[^129]: *Id*.

[^130]: 13 C.F.R. § 121.201, NAICS code 513310.

[^131]: *Telephone Trends Report*, Table 5.3.

[^132]: *Id*.

[^133]: *Id*.

[^134]: 13 C.F.R. § 121.201, NAICS code 513330.

[^135]: *Telephone Trends Report*, Table 5.3.

[^136]: *Id*.

[^137]: 13 C.F.R. § 121.201, NAICS code 513330.

[^138]: *Telephone Trends Report*, Table 5.3.

[^139]: *Id*.

[^140]: 13 C.F.R. § 121.201, NAICS code 513310.

[^141]: *Telephone Trends Report*, Table 5.3.

[^142]: *Id*.

[^143]: 13 C.F.R. § 121.201, NAICS code 513310.

[^144]: *Telephone Trends Report*, Table 5.3.

[^145]: *Id*.

[^146]: 13 C.F.R. § 121.201, NAICS code 513310.

[^147]: *Telephone Trends Report*, Table 5.3.

[^148]: *Id*.

[^149]: 13 C.F.R. § 121.201, NAICS code 513330.

[^150]: *Telephone Trends Report*, Table 5.3.

[^151]: *Id*.

[^152]: 13 C.F.R. § 121.201, NAICS code 513340.

[^153]: *Telephone Trends Report*, Table 5.3.

[^154]: *Id*.

[^155]: 13 C.F.R. § 121.201, NAICS code 513310.

[^156]: *Telephone Trends Report*, Table 5.3.

[^157]: *Id*.

[^158]: 13 C.F.R. § 121.201, NAICS code 513322.

[^159]: *Telephone Trends Report*, Table 5.3.

[^160]: *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 ¶¶ 57-60 (1996), 61 Fed. Reg. 33859 (July 1, 1996);
    *see also* 47 C.F.R. § 24.720(b).

[^161]: *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 ¶¶ 57-60 (1996), 61 Fed. Reg. 33859 (July 1, 1996).

[^162]: *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 ¶¶ 115-17 (1994).

[^163]: FCC News, Broadband PCS, D, E and F Block Auction Closes, No.
    71744 (rel. Jan. 14, 1997).

[^164]: 47 C.F.R. § 90.814(b)(1).

[^165]: The service is defined in § 22.99 of the Commission\'s Rules. 47
    C.F.R. § 22.99.

[^166]: BETRS is defined in §§ 22.757 and 22.759 of the Commission\'s
    Rules. 47 C.F.R. §§ 22.757, 22.759.

[^167]: 13 C.F.R. § 121.201, NAICS codes 513321, 513322, and 51333.

[^168]: 47 C.F.R. §§ 101, *et seq*. (formerly Part 21 of the
    Commission\'s Rules).

[^169]: Persons eligible under Parts 80 and 90 of the Commission\'s
    rules can use Private Operational‑Fixed Microwave services. *See* 47
    C.F.R. Parts 80, 90. Stations in this service are called
    operational‑fixed to distinguish them from common carrier and public
    fixed stations. Only the licensee may use the operational‑fixed
    station, and only for communications related to the licensee\'s
    commercial, industrial, or safety operations.

[^170]: Auxiliary Microwave Service is governed by Part 74 of the
    Commission\'s rules. *See* 47 C.F.R. Part 74. The Auxiliary
    Microwave Service is available to licensees of broadcast stations
    and to broadcast and cable network entities, broadcast auxiliary
    microwave stations and are used for relaying broadcast television
    signals from the studio to the transmitter, or between two points
    such as a main studio and an auxiliary studio. The service also
    includes mobile TV pickups, which relay signals from a remote
    location back to the studio.

[^171]: 13 C.F.R. § 121.201, NAICS codes 513321, 513322, and 51333.

[^172]: *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).

[^173]: *Id.*

[^174]: *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).

[^175]: *See* ¶ 29 n. 79, *supra*.

[^176]: At a rate of \$0.229 per payphone call as calculated in this
    order, compensation would be limited to \$3.664 per payphone per
    month starting on November 7, 1996 through April 20, 1999, and to
    \$3.84 per payphone per month after April 20, 1999.

[^177]: *Bureau Per-call Waiver Order*, 13 FCC Rcd 10893 (Com. Car. Bur.
    1998).

[^178]: *Illinois*, 117 F.3d at 565.

[^179]: *See* 5 U.S.C. § 801(a)(1)(A).

[^180]: *See* 5 U.S.C. § 604(b).