[Federal Register Volume 74, Number 151 (Friday, August 7, 2009)]
[Rules and Regulations]
[Pages 39551-39563]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-18716]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 63

[WC Docket No. 04-36; FCC 09-40]


IP-Enabled Services

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document amends the Commission's rules so that providers 
of interconnected Voice over Internet Protocol (VoIP) service will be 
required to comply with the same discontinuance rules as domestic non-
dominant telecommunications carriers. These rules protect consumers of 
interconnected VoIP service from the abrupt discontinuance, reduction 
or impairment of their service by requiring

[[Page 39552]]

prior notice to customers and the filing of an application with the 
Commission.

DATES: Effective September 8, 2009 except for Sec. Sec.  63.60(a) and 
(f) which affect information collection requirements that are not 
effective until approved by the Office of Management and Budget. The 
FCC will publish a document in the Federal Register announcing the 
effective date for those sections.

ADDRESSES: Federal Communications Commission, 445 12th Street, SW., 
Washington, DC 20554.
    Interested parties may submit PRA comments by any of the following 
methods:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Federal Communications Commission's Web Site: http://www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
    <bullet> E-mail: Parties who choose to file by e-mail should submit 
their comments to <a href="/cdn-cgi/l/email-protection#3e6c515a505b4710735d7a51505f525a7e585d5d10595148"><span class="__cf_email__" data-cfemail="095b666d676c7027446a4d666768656d496f6a6a276e667f">[email protected]</span></a>. Please include WC Docket 
Number 04-36 and FCC No. 09-40 in the subject line of the message.
    <bullet> Mail: Parties who choose to file by paper should submit 
their comments to Rodney McDonald, Federal Communications Commission, 
Wireline Competition Bureau, Room 6-A430, 445 12th Street, SW., 
Washington, DC 20554.
    In addition to filing comments with the Office of the Secretary, a 
copy of any comments on the Paperwork Reduction Act information 
collection requirements contained herein should be submitted to Judith 
B. Herman, Federal Communications Commission, Room 1-B441, 445 12th 
Street, SW., Washington, DC 20554, or via the Internet to <a href="/cdn-cgi/l/email-protection#89d9dbc8c9efeaeaa7eee6ff"><span class="__cf_email__" data-cfemail="5b0b091a1b3d3838753c342d">[email protected]</span></a>.

FOR FURTHER INFORMATION CONTACT: Rodney McDonald, Wireline Competition 
Bureau, (202) 418-1580. For additional information concerning the 
Paperwork Reduction Act information collection requirements contained 
in this document, contact Judith B. Herman at (202) 418-0214, or via 
the Internet at <a href="/cdn-cgi/l/email-protection#efa59a8b869b87c2adc1a78a9d828e81af898c8cc1888099"><span class="__cf_email__" data-cfemail="df95aabbb6abb7f29df197baadb2beb19fb9bcbcf1b8b0a9">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order (Order) in WC Docket No. 04-36; FCC 09-40, adopted and 
released May 13, 2009. In this Order, the Commission extends to 
providers of interconnected VoIP service the discontinuance obligations 
that apply to domestic non-dominant telecommunications carriers under 
section 214 of the Communications Act of 1934, as amended (the Act). 
Consequently, before an interconnected VoIP provider may discontinue, 
reduce, or impair service, it must comply with the streamlined 
discontinuance requirements under part 63 of the Commission's rules, 
including the requirements to provide written notice to all affected 
customers, notify relevant state authorities, and file an application 
for authorization of the planned action with the Commission.
    The complete text of this document is available for inspection and 
copying during normal business hours in the FCC Reference Information 
Center, Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC 
20554. This document may also be purchased from the Commission's 
duplicating contractor, Best Copy and Printing, Inc., 445 12th Street, 
SW., Room CY-B402, Washington, DC 20554, telephone (800) 378-3160 or 
(202) 863-2893, facsimile (202) 863-2898, or via e-mail at http://www.bcpiweb.com. It is also available on the Commission's Web site at 
http://www.fcc.gov.

Final Paperwork Reduction Act of 1995 Analysis

    This document contains new information collection requirements. The 
Commission, as part of its continuing effort to reduce paperwork 
burdens, invites the general public to comment on the information 
collection requirements contained in this Order as required by the 
Paperwork Reduction Act of 1995, Public Law 104-13. In addition, the 
Commission notes that pursuant to the Small Business Paperwork Relief 
Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), we 
previously sought specific comment on how the Commission might 
``further reduce the information collection burden for small business 
concerns with fewer than 25 employees.''
    In this present document, we have assessed the effects of extending 
the Commission's discontinuance obligations to interconnected VoIP 
providers and find these changes warranted. The reasons for this 
conclusion are explained in more detail below.

Report to Congress

    The Commission will send a copy of the Order, including this FRFA, 
in a report to Congress and the Government Accountability Office 
pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A). In 
addition, the Commission will send a copy of the Order, including this 
FRFA, to the Chief Counsel for Advocacy of the SBA. [A copy of this 
present summarized Order and FRFA is also hereby published in the 
Federal Register.]
    In this Order, the Commission extends to providers of 
interconnected VoIP service the discontinuance obligations that apply 
to domestic non-dominant telecommunications carriers under section 214 
of the Communications Act of 1934, as amended (the Act). Consequently, 
before an interconnected VoIP provider may discontinue, reduce, or 
impair service, it must comply with the streamlined discontinuance 
requirements under part 63 of the Commission's rules, including the 
requirements to provide written notice to all affected customers, 
notify relevant state authorities, and file an application for 
authorization of the planned action with the Commission.

Synopsis of Order

    1. On March 10, 2004, the Commission initiated a rulemaking 
proceeding to examine issues relating to IP-enabled services--services 
and applications making use of IP, including, but not limited to, VoIP 
services. In the IP-Enabled Services Notice, published at 69 FR 16193, 
March 29, 2004, the Commission sought comment on numerous issues, 
including whether to extend certain consumer protection obligations, 
such as the discontinuance obligations of section 214, to any class of 
IP-enabled service provider.
    2. Consumers increasingly use interconnected VoIP service as a 
replacement for traditional voice service, and as interconnected VoIP 
service improves and proliferates, consumers' expectations for this 
type of service trend toward their expectations for other telephone 
services. Thus, in this Order, the Commission takes steps to protect 
consumers of interconnected VoIP service from the abrupt 
discontinuance, reduction, or impairment of their service without 
notice. Specifically, the Commission extends to providers of 
interconnected VoIP service the discontinuance obligations that apply 
to domestic non-dominant telecommunications carriers under section 214 
of the Communications Act of 1934, as amended (the Act). Consequently, 
before an interconnected VoIP provider may discontinue service, it must 
comply with the streamlined discontinuance requirements under part 63 
of the Commission's rules, including the requirements to provide 
written notice to all affected customers, notify relevant state 
authorities, and file an application

[[Page 39553]]

for authorization of the planned discontinuance with the Commission.
    3. Scope. The exit certification requirements adopted in this Order 
apply to interconnected VoIP service and providers of such service. The 
Commission's rules in 47 CFR 9.3 define ``interconnected VoIP service'' 
as ``a service that: (1) Enables real-time, two-way voice 
communications; (2) requires a broadband connection from the user's 
location; (3) requires Internet protocol-compatible customer premises 
equipment (CPE); and (4) permits users generally to receive calls that 
originate on the public switched telephone network and to terminate 
calls to the public switched telephone network.'' To date, the 
Commission has not classified interconnected VoIP service as a 
telecommunications service or information service as those terms are 
defined in the Act, and does not make that determination with this 
Order. In general, providers of facilities-based interconnected VoIP 
services and ``over-the-top'' interconnected VoIP services are subject 
to the rules in this Order. However, section 214 requirements are not 
extended to providers of interconnected VoIP services that are ``mobile 
services'' under the Act. If anything, these services would be more 
akin to Commercial Mobile Radio Service (CMRS) than to traditional 
wireline services. Therefore, for purposes of the rules at issue here, 
it makes more sense to treat providers of interconnected VoIP services 
that are mobile in the same way as CMRS providers, which are not 
subject to the Commission's section 214 discontinuance obligations. The 
Commission may revisit this issue if circumstances warrant, and in 
other contexts may decline to exempt these services from rules that 
apply to interconnected VoIP services generally.
    4. As the Commission has found before, unlike certain other IP-
enabled services, interconnected VoIP service increasingly is used as a 
replacement for traditional voice service. Customers therefore 
reasonably expect their interconnected VoIP service to include the 
regulatory protections that they would receive with traditional voice 
services. The Commission believes it is critically important that all 
customers of interconnected VoIP service receive the protections of the 
section 214 discontinuance requirements. Importantly, if customers were 
to lose their telephone service without sufficient notice, they would 
also lose access to 911 service--possibly with disastrous consequences. 
This Order, therefore, is consistent with, and a necessary extension 
of, the Commission's prior exercises of authority to ensure public 
safety.
    5. Authority. In this Order, the Commission concludes that it has 
authority under Title I of the Act to impose section 214 discontinuance 
obligations on providers of interconnected VoIP services. Ancillary 
jurisdiction may be employed, at the Commission's discretion, when 
Title I of the Act gives the Commission subject matter jurisdiction 
over the service to be regulated and the assertion of jurisdiction is 
``reasonably ancillary to the effective performance of [its] various 
responsibilities.'' The Commission finds that both predicates for 
ancillary jurisdiction are satisfied here.
    6. First, as the Commission previously has concluded, 
interconnected VoIP service falls within the subject matter 
jurisdiction granted to the Commission under the Act. Second, the 
Commission must evaluate whether imposing service discontinuance 
obligations on interconnected VoIP providers is reasonably ancillary to 
the effective performance of the Commission's responsibilities. As 
discussed further below, the Commission finds that sections 1 and 214 
of the Act provide the requisite nexus, with additional support from 
section 706. Specifically, the Commission finds that extending the 
section 214 discontinuance procedures to interconnected VoIP service 
providers is ``reasonably ancillary to the effective performance of 
[our] responsibilities'' under these statutory provisions, and ``will 
`further the achievement of long-established regulatory goals' '' to 
ensure that the public is not adversely affected by the discontinuance, 
reduction, or impairment of service.
    7. The Commission finds that extending domestic discontinuance 
requirements to interconnected VoIP providers is reasonably ancillary 
to the Commission's effective performance of its responsibility to 
promote safety of life and property through the use of wire and radio 
communication. Section 1 of the Act charges the Commission with 
responsibility for making available ``a rapid, efficient, Nation-wide, 
and world-wide wire and radio communication service * * * for the 
purpose of promoting safety of life and property through the use of 
wire and radio communication.'' By extending the section 214 
discontinuance procedures to interconnected VoIP providers, the 
Commission protects American consumers from the unanticipated and 
harmful consequences that could follow the loss of telephone service 
without sufficient notice. Most notably, as mentioned above, if an 
interconnected VoIP provider discontinued service without notice, 
customers would lose the ability to call 911 through that service. In 
addition, extending the section 214 discontinuance rules to 
interconnected VoIP providers ensures customers' ability to transition 
to alternative service providers in an orderly fashion. The Commission 
thereby fosters ``rapid, efficient, Nation-wide, and world-wide wire 
and radio communication service'' by safeguarding the public interest 
in continuity of such services--irrespective of which provider makes 
those services available.
    8. Section 214(a) of the Act states that ``[n]o carrier shall 
discontinue, reduce, or impair service to a community, or part of a 
community, unless and until there shall first have been obtained from 
the Commission a certificate that neither the present nor future public 
convenience and necessity will be adversely affected thereby.'' The 
primary purpose of this requirement is to reduce the harm to consumers 
caused by discontinuances of service. The Commission finds that the 
extension of section 214 service discontinuance requirements to 
providers of interconnected VoIP service is reasonably ancillary to the 
effective performance of the Commission's duty to protect the public 
from the adverse effects of service discontinuances. The Commission 
already has found that interconnected VoIP service ``is increasingly 
used to replace analog voice service''--a trend that the Commission 
expects will continue. From the perspective of a customer making an 
ordinary telephone call, the Commission believes that interconnected 
VoIP service is functionally indistinguishable from traditional 
telephone service. It therefore is reasonable for American consumers to 
have similar expectations for these services. In particular, the 
Commission finds it reasonable for customers of interconnected VoIP 
service to expect some advance notice before the discontinuance of 
their voice service, and notes that customers receiving traditional 
telephone service from wireline carriers are already entitled to such 
notice under the Commission's discontinuance requirements. By extending 
the Commission's discontinuance requirements to interconnected VoIP 
services, the Commission advances the public interest by helping ensure 
that such notice is actually given to customers that are making and 
receiving calls regardless of whether they are receiving service from a 
traditional

[[Page 39554]]

carrier or an interconnected VoIP provider.
    9. The Commission is also guided by section 706 of the 1996 Act, 
which, among other things, directs the Commission to encourage the 
deployment of advanced telecommunications capability to all Americans 
by using measures that ``promote competition in the local 
telecommunications market.'' The assurance that providers of 
interconnected VoIP services are subject to service-discontinuance 
procedures comparable to those that apply to non-dominant carriers may 
spur consumer demand for those services, in turn driving demand for 
broadband connections, and consequently encouraging more broadband 
investment and deployment consistent with the goals of section 706.
    10. Interconnected VoIP Provider Discontinuance Obligations. To 
protect customers from an abrupt discontinuance, reduction, or 
impairment of service without adequate notice, the Commission requires 
providers of interconnected VoIP service to comply with the same 
service discontinuance obligations as domestic non-dominant carriers. 
The Commission disagrees with commenters who assert that such action is 
unnecessary in light of competitive market conditions. Service 
discontinuance can be disruptive to all customers, regardless of 
whether their provider has market power or utilizes new technology. As 
the Commission has previously concluded with respect to other 
competitive telephone services, even customers with competitive 
alternatives need fair notice and information to choose a substitute 
service. Therefore, in order to protect customers of interconnected 
VoIP service from interrupted service and its associated consequences, 
providers of interconnected VoIP service must notify all affected 
customers of their plans to discontinue, reduce, or impair service, and 
must provide affected customers with an opportunity to inform the 
Commission of resultant hardships.
    11. The Commission's rules do not provide an exhaustive list of 
what constitutes the discontinuance, reduction, or impairment of 
service. In the context of interconnected VoIP service, the Commission 
finds that a discontinuance, reduction, or impairment of service would 
include, but is not limited to, the conversion of an interconnected 
VoIP service to one that permits only inbound, but not outbound, calls 
to the PSTN--or one that permits only outbound, but not inbound, calls 
to the PSTN.
    12. By requiring interconnected VoIP providers to comply with the 
Commission's streamlined domestic discontinuance requirements 
applicable to non-dominant carriers, the Commission balances the need 
to protect consumers with the goal, set forth in section 230 of the 
Act, of minimizing the regulation of the Internet and other interactive 
computer services. As the Commission previously has found, Sec.  63.71 
of the Commission's rules strikes a good balance between the 
Commission's dual objectives of permitting ease of exit from 
competitive markets and ensuring that the public will be given a 
reasonable period of time to make other service arrangements. The 
Commission therefore disagrees with commenters who argue that applying 
section 214 exit regulations to interconnected VoIP service will unduly 
deter market entry, distort the market, or depress investment in new 
technologies. On the contrary, as the Commission has stated previously, 
disparate treatment of entities providing the same or similar services 
is not in the public interest as it creates distortions in the 
marketplace that may harm consumers.
    13. It is important to note that the Commission does not impose any 
economic regulation on providers of interconnected VoIP service by this 
Order. Title II and the Commission's rules subject all common carriers 
to a variety of non-economic regulations designed to further important 
public policy goals and protect consumers, and the Commission has 
stated previously that it ``will not hesitate to adopt any non-economic 
regulatory obligations that are necessary to ensure consumer protection 
and network security and reliability in this dynamically changing 
broadband era.'' Included among these are the obligations the 
Commission imposes, with this Order, on providers of interconnected 
VoIP service, which serve as important consumer protection measures. 
The Commission acknowledges that section 230 of the Act provides that 
``[i]t is the policy of the United States--to preserve the vibrant and 
competitive free market that presently exists for the Internet and 
other interactive computer services, unfettered by Federal or State 
regulation.'' The Commission's discussion of section 230 in Vonage 
Holdings Corporation Petition for Declaratory Ruling Concerning an 
Order of the Minnesota Public Utilities Commission, WC Docket No. 03-
211, Memorandum Opinion and Order, FCC 04-267, para. 35 (rel. Nov. 12, 
2004) (Vonage Order) acknowledged this policy and cautioned against the 
imposition of undue regulation by multiple jurisdictions, but was 
directed at ``traditional common carrier economic regulations.'' The 
Commission finds this order consistent with its previous decisions, and 
does not believe that the congressional policy statement in section 230 
of the Act precludes the Commission from extending consumer protection 
obligations, such as the section 214 discontinuance obligations, to 
interconnected VoIP providers. The Commission also notes that the 
extension of discontinuance obligations to providers of interconnected 
VoIP services has no effect on the Commission's preemption 
determinations in the Vonage Order.
    14. The Commission amends the part 63 domestic discontinuance rules 
to encompass interconnected VoIP service. Accordingly, before an 
interconnected VoIP provider may discontinue, reduce, or impair 
service, it must provide all affected customers with written notice 
that includes the provider's name and address, typically by postal mail 
to the customer's billing address; the date of the planned service 
discontinuance, reduction, or impairment; the geographic areas where 
service will be affected; a brief description of the affected service; 
and the statement found in Sec.  63.71(a)(5)(i) of the Commission's 
rules. The Commission recognizes that because of the potentially 
portable nature of some interconnected VoIP services, there may be 
additional and/or alternative means of providing effective notice to 
customers of interconnected VoIP providers. As such, upon request, the 
Commission may authorize in advance another form of notice for good 
cause shown.
    15. On or after the date it provides notice to its customers as 
specified above, the interconnected VoIP provider must file with the 
Commission an application for authorization of the planned 
discontinuance. The application shall identify that the provider is an 
interconnected VoIP provider seeking to discontinue, reduce, or impair 
interconnected VoIP services and shall include, in addition to the 
information set forth in the notice provided to affected customers, a 
caption, a brief description of the dates and methods of notice to all 
affected customers, and any other information the Commission may 
require. An interconnected VoIP provider shall also submit a copy of 
its application to the public utility commission and to the Governor of 
the State(s) in which it proposes to discontinue, reduce, or impair 
service, as well as to the

[[Page 39555]]

Secretary of Defense. In addition to providing existing customers with 
direct notice of a proposed discontinuance, providers seeking to 
discontinue, reduce or impair service to a community should copy the 
state public utility commissions (PUC) and governors' offices in the 
states where they no longer plan to offer services regardless of 
whether customers are currently subscribing to their service at the 
time of the application. The Commission believes this requirement will 
serve the public interest by, among other things, better enabling 
states to play an active role in customer notification efforts where 
circumstances warrant such involvement. The Commission recognizes that 
interconnected VoIP providers that offer service nationwide will need 
to notify every state PUC and governor's office before discontinuing 
service altogether. However, the Commission does not find this 
requirement to be unduly burdensome. In particular, notice to the 
states pursuant to Sec.  63.71(a) only requires providing state 
officials with a copy of the discontinuance application. This simple 
notice should adequately inform states of the impending loss of 
previously available services to their communities in a minimally 
burdensome manner--using the same procedures that apply to other non-
dominant providers that plan to discontinue nationwide offerings.
    16. The application to discontinue, reduce, or impair service shall 
be automatically granted on the 31st day after the Commission releases 
public notice of the application unless the Commission notifies the 
applicant that the grant will not be automatically effective. Thus the 
Commission believes that interconnected VoIP providers will be faced 
with discontinuance requirements that are no more burdensome than the 
reduced requirements that already apply to competitive carriers, and 
that their customers will be afforded a reasonable time to make 
alternative service arrangements in the event of a discontinuance, 
reduction, or impairment of service. The Commission expects that 
providers of wholesale inputs will coordinate and continue to work with 
interconnected VoIP providers in the event that a discontinuance of 
service becomes necessary so that the discontinuance of service can 
occur in an orderly fashion consistent with this Order, the 
Commission's rules, and the interest of customers.

Congressional Review Act

    17. The Commission will send a copy of this Order in a report to be 
sent to Congress and the Government Accountability Office pursuant to 
the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).

Final Paperwork Reduction Act of 1995 Analysis

    18. This document contains new or modified information collection 
requirements. The Commission, as part of its continuing effort to 
reduce paperwork burdens, invites the general public to comment on the 
information collection requirements contained in this Order as required 
by the Paperwork Reduction Act of 1995, Public Law 104-13. In addition, 
the Commission notes that pursuant to the Small Business Paperwork 
Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the 
Commission previously sought specific comment on how the Commission 
might ``further reduce the information collection burden for small 
business concerns with fewer than 25 employees.''
    19. In this present document, we have assessed the effects of 
imposing domestic non-dominant discontinuance rules on providers of 
interconnected VoIP service, and find that these requirements do not 
place a significant burden on businesses with fewer than 25 employees.

Final Regulatory Flexibility Analysis

    20. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the IP-Enabled Services Notice in WC Docket No. 04-36. 
The Commission sought written public comment on the proposals in the 
IP-Enabled Services Notice, including comment on the IRFA. The 
Commission received comments specifically directed toward the IRFA from 
three commenters in WC Docket No. 04-36. These comments are discussed 
below. This Final Regulatory Flexibility Analysis (FRFA) conforms to 
the RFA.

A. Need for, and Objectives of, the Rules

    21. This Order takes a series of steps designed to ensure that 
consumers of interconnected VoIP are afforded appropriate consumer 
protection measures consistent with the Communications Act of 1934, as 
amended (the Act). Today's telecommunications marketplace is one of 
rapidly changing technology, capability, and services. Since the 
Commission first described IP-enabled services nearly five years ago, 
the American public has embraced them, resulting in the widespread 
adoption of mass market interconnected VoIP and broadband services by 
millions of consumers for voice, video, and Internet communications. 
Consumers increasingly use interconnected VoIP service as a replacement 
for traditional voice service, and as interconnected VoIP service 
improves and proliferates, consumers' expectations for this type of 
service trend toward their expectations for other telephone services.
    22. This Order extends to providers of interconnected VoIP service 
the discontinuance obligations that apply to domestic non-dominant 
telecommunications carriers under section 214 of the Act. Consequently, 
before an interconnected VoIP provider may discontinue service, it must 
comply with the streamlined discontinuance requirements under part 63 
of the Commission's rules, including the requirements to provide 
written notice to all affected customers, notify relevant state 
authorities, and file an application for authorization of the planned 
discontinuance with the Commission.

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

    23. In this section, the Commission responds to comments filed in 
response to the IRFA. To the extent the Commission received comments 
raising general small business concerns during these proceedings, those 
comments are discussed in the Order.
    24. The Small Business Administration (SBA) comments that the 
Commission's IP-Enabled Services Notice does not contain concrete 
proposals and is more akin to an advance notice of proposed rulemaking 
or a notice of inquiry. The Commission disagrees with the SBA and 
Menard that the Commission should postpone acting in this proceeding, 
thereby postponing extending the application of the section 214 service 
discontinuance obligations to interconnected VoIP services. According 
to SBA and Menard, the Commission instead should reevaluate the 
economic impact and the compliance burdens on small entities and issue 
a further notice of proposed rulemaking in conjunction with a 
supplemental IRFA identifying and analyzing the economic impacts on 
small entities and less burdensome alternatives. The Commission 
believes these additional steps suggested by SBA and Menard are 
unnecessary because small entities already have received sufficient 
notice of the issues addressed in this Order, and because the 
Commission has considered the

[[Page 39556]]

economic impact on small entities and the feasibility of alternative 
approaches to minimize the burdens imposed on those entities.

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

    25. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that may be 
affected by the rules adopted herein. The RFA generally defines the 
term ``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A small business concern is one which: (1) Is independently owned 
and operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the SBA.
    26. Small Businesses. Nationwide, there are a total of 
approximately 22.4 million small businesses according to SBA data.
    27. Small Organizations. Nationwide, there are approximately 1.6 
million small organizations.
1. Telecommunications Service Entities
a. Wireline Carriers and Service Providers
    28. The Commission includes small incumbent local exchange carriers 
(LECs) in this present RFA analysis. As noted above, a ``small 
business'' under the RFA is one that, inter alia, meets the pertinent 
small business size standard (e.g., a telephone communications business 
having 1,500 or fewer employees) and ``is not dominant in its field of 
operation.'' 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. The 
Commission has therefore included small incumbent LECs in this RFA 
analysis, although the Commission emphasizes that this RFA action has 
no effect on Commission analyses and determinations in other, non-RFA 
contexts.
    29. Incumbent LECs. Neither the Commission nor the SBA has 
developed a small business size standard specifically for incumbent 
LECs. The appropriate size standard under SBA rules is for the category 
Wired Telecommunications Carriers. Under that size standard, such a 
business is small if it has 1,500 or fewer employees. According to 
Commission data, 1,311 carriers have reported that they are engaged in 
the provision of incumbent local exchange services. Of these 1,311 
carriers, an estimated 1,024 have 1,500 or fewer employees and 287 have 
more than 1,500 employees. Consequently, the Commission estimates that 
most providers of incumbent local exchange service are small businesses 
that may be affected by this action.
    30. Competitive LECs, Competitive Access Providers (CAPs), 
``Shared-Tenant Service Providers,'' and ``Other Local Service 
Providers.'' Neither the Commission nor the SBA has developed a small 
business size standard specifically for these service providers. The 
appropriate size standard under SBA rules is for the category Wired 
Telecommunications Carriers. Under that size standard, such a business 
is small if it has 1,500 or fewer employees. According to Commission 
data, 1,005 carriers have reported that they are engaged in the 
provision of either competitive access provider services or competitive 
LEC services. Of these 1,005 carriers, an estimated 918 have 1,500 or 
fewer employees and 87 have more than 1,500 employees. In addition, 16 
carriers have reported that they are ``Shared-Tenant Service 
Providers,'' and all 16 are estimated to have 1,500 or fewer employees. 
In addition, 89 carriers have reported that they are ``Other Local 
Service Providers,'' and all 89 are estimated to have 1,500 or fewer 
employees. Consequently, the Commission estimates that most providers 
of competitive local exchange service, competitive access providers, 
``Shared-Tenant Service Providers,'' and ``Other Local Service 
Providers'' are small entities.
    31. Local Resellers. The SBA has developed a small business size 
standard for the category of Telecommunications Resellers. Under that 
size standard, such a business is small if it has 1,500 or fewer 
employees. According to Commission data, 151 carriers have reported 
that they are engaged in the provision of local resale services. Of 
these, an estimated 149 have 1,500 or fewer employees and two have more 
than 1,500 employees. Consequently, the Commission estimates that the 
majority of local resellers are small entities that may be affected by 
this action.
    32. Toll Resellers. The SBA has developed a small business size 
standard for the category of Telecommunications Resellers. Under that 
size standard, such a business is small if it has 1,500 or fewer 
employees. According to Commission data, 815 carriers have reported 
that they are engaged in the provision of toll resale services. Of 
these, an estimated 787 have 1,500 or fewer employees and 28 have more 
than 1,500 employees. Consequently, the Commission estimates that the 
majority of toll resellers are small entities that may be affected by 
this action.
    33. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a small business size standard specifically for 
providers of interexchange services. The appropriate size standard 
under SBA rules is for the category Wired Telecommunications Carriers. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. According to Commission data, 300 carriers have 
reported that they are engaged in the provision of interexchange 
service. Of these, an estimated 268 have 1,500 or fewer employees and 
32 have more than 1,500 employees. Consequently, the Commission 
estimates that the majority of IXCs are small entities that may be 
affected by this action.
b. Satellite Telecommunications and All Other Telecommunications
    34. Satellite Telecommunications and All Other Telecommunications. 
These two economic census categories address the satellite industry. 
The first category has a small business size standard of $15 million or 
less in average annual receipts, under SBA rules. The second has a size 
standard of $25 million or less in annual receipts. The most current 
Census Bureau data in this context, however, are from the (last) 
economic census of 2002, and the Commission will use those figures to 
gauge the prevalence of small businesses in these categories.
    35. The category of Satellite Telecommunications ``comprises 
establishments primarily engaged in providing telecommunications 
services to other establishments in the telecommunications and 
broadcasting industries by forwarding and receiving communications 
signals via a system of satellites or reselling satellite 
telecommunications.'' For this category, Census Bureau data for 2002 
show that there were a total of 371 firms that operated for the entire 
year. Of this total, 307 firms had annual receipts of under $10 
million, and 26 firms had receipts of $10 million to $24,999,999. 
Consequently, the Commission estimates that the majority of Satellite 
Telecommunications firms are small entities that might be affected by 
this action.
    36. The second category of All Other Telecommunications comprises, 
inter alia, ``establishments primarily engaged in providing specialized

[[Page 39557]]

telecommunications services, such as satellite tracking, communications 
telemetry, and radar station operation. This industry also includes 
establishments primarily engaged in providing satellite terminal 
stations and associated facilities connected with one or more 
terrestrial systems and capable of transmitting telecommunications to, 
and receiving telecommunications from, satellite systems.'' For this 
category, Census Bureau data for 2002 show that there were a total of 
332 firms that operated for the entire year. Of this total, 303 firms 
had annual receipts of under $10 million and 15 firms had annual 
receipts of $10 million to $24,999,999. Consequently, the Commission 
estimates that the majority of All Other Telecommunications firms are 
small entities that might be affected by this action.
c. Wireless Telecommunications Carriers (Except Satellite)
    37. Below, for those services subject to auctions, the Commission 
notes that, as a general matter, the number of winning bidders that 
qualify as small businesses at the close of an auction does not 
necessarily represent the number of small businesses currently in 
service. Also, the Commission does not generally track subsequent 
business size unless, in the context of assignments or transfers, 
unjust enrichment issues are implicated.
    38. Wireless Telecommunications Carriers (except Satellite). Since 
2007, the Census Bureau has placed wireless firms within this new, 
broad, economic census category. Prior to that time, such firms were 
within the now-superseded categories of ``Paging'' and ``Cellular and 
Other Wireless Telecommunications.'' Under the present and prior 
categories, the SBA has deemed a wireless business to be small if it 
has 1,500 or fewer employees. Because Census Bureau data are not yet 
available for the new category, the Commission will estimate small 
business prevalence using the prior categories and associated data. For 
the category of Paging, data for 2002 show that there were 807 firms 
that operated for the entire year. Of this total, 804 firms had 
employment of 999 or fewer employees, and three firms had employment of 
1,000 employees or more. For the category of Wireless 
Telecommunications Carriers (except Satellite), data for 2002 show that 
there were 1,397 firms that operated for the entire year. Of this 
total, 1,378 firms had employment of 999 or fewer employees, and 19 
firms had employment of 1,000 employees or more. Thus, the Commission 
estimates that the majority of wireless firms are small.
    39. In the Paging Third Report and Order, published at 62 FR 15978, 
April 3, 1997, the Commission developed a small business size standard 
for ``small businesses'' and ``very small businesses'' for purposes of 
determining their eligibility for special provisions such as bidding 
credits and installment payments. A ``small business'' is an entity 
that, together with its affiliates and controlling principals, has 
average gross revenues not exceeding $15 million for the preceding 
three years. Additionally, a ``very small business'' is an entity that, 
together with its affiliates and controlling principals, has average 
gross revenues that are not more than $3 million for the preceding 
three years. The SBA has approved these small business size standards. 
An auction of Metropolitan Economic Area licenses commenced on February 
24, 2000, and closed on March 2, 2000. Of the 985 licenses auctioned, 
440 were sold. Fifty-seven companies claiming small business status 
won. An auction of MEA and Economic Area (EA) licenses commenced on 
October 30, 2001, and closed on December 5, 2001. Of the 15,514 
licenses auctioned, 5,323 were sold. One hundred thirty-two companies 
claiming small business status purchased 3,724 licenses. A third 
auction, consisting of 8,874 licenses in each of 175 EAs and 1,328 
licenses in all but three of the 51 MEAs commenced on May 13, 2003, and 
closed on May 28, 2003. Seventy-seven bidders claiming small or very 
small business status won 2,093 licenses. The Commission also notes 
that, currently, there are approximately 74,000 Common Carrier Paging 
licenses.
    40. Wireless Communications Services. This service can be used for 
fixed, mobile, radiolocation, and digital audio broadcasting satellite 
uses. The Commission established small business size standards for the 
wireless communications services (WCS) auction. A ``small business'' is 
an entity with average gross revenues of $40 million or less for each 
of the three preceding years, and a ``very small business'' is an 
entity with average gross revenues of $15 million or less for each of 
the three preceding years. The SBA has approved these small business 
size standards. The Commission auctioned geographic area licenses in 
the WCS service. In the auction, there were seven winning bidders that 
qualified as ``very small business'' entities, and one that qualified 
as a ``small business'' entity.
    41. Wireless Telephony. Wireless telephony includes cellular, 
personal communications services (PCS), and specialized mobile radio 
(SMR) telephony carriers. As noted earlier, the SBA has developed a 
small business size standard for ``Wireless Telecommunications Carriers 
(except Satellite)'' services. Under that SBA small business size 
standard, a business is small if it has 1,500 or fewer employees. 
According to Commission data, 434 carriers reported that they were 
engaged in the provision of wireless telephony. The Commission has 
estimated that 222 of these are small under the SBA small business size 
standard.
    42. 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 $40 
million or less in the three previous calendar years. For Block F, an 
additional classification for ``very small business'' was added and is 
defined as an entity that, together with its affiliates, has average 
gross revenues of not more than $15 million for the preceding three 
calendar years. These standards defining ``small entity'' in the 
context of broadband PCS auctions have been approved by the SBA. No 
small businesses, within the SBA-approved small business size standards 
bid successfully for licenses in Blocks A and B. There were 90 winning 
bidders that qualified as small entities in the Block C auctions. A 
total of 93 small and very small business bidders won approximately 40 
percent of the 1,479 licenses for Blocks D, E, and F. On March 23, 
1999, the Commission re-auctioned 347 C, D, E, and F Block licenses. 
There were 48 small business winning bidders. On January 26, 2001, the 
Commission completed the auction of 422 C and F Broadband PCS licenses 
in Auction No. 35. Of the 35 winning bidders in this auction, 29 
qualified as ``small'' or ``very small'' businesses. Subsequent events, 
concerning Auction 35, including judicial and agency determinations, 
resulted in a total of 163 C and F Block licenses being available for 
grant.
    43. Narrowband Personal Communications Services. The Commission 
held an auction for Narrowband PCS licenses that commenced on July 25, 
1994, and closed on July 29, 1994. A second auction commenced on 
October 26, 1994 and closed on November 8, 1994. For purposes of the 
first two Narrowband PCS auctions, ``small businesses'' were entities 
with average gross revenues for the prior three

[[Page 39558]]

calendar years of $40 million or less. Through these auctions, the 
Commission awarded a total of 41 licenses, 11 of which were obtained by 
four small businesses. To ensure meaningful participation by small 
business entities in future auctions, the Commission adopted a two-
tiered small business size standard in the Narrowband PCS Second Report 
and Order, published at 65 FR 35843, June 6, 2000. A ``small business'' 
is an entity that, together with affiliates and controlling interests, 
has average gross revenues for the three preceding years of not more 
than $40 million. A ``very small business'' is an entity that, together 
with affiliates and controlling interests, has average gross revenues 
for the three preceding years of not more than $15 million. The SBA has 
approved these small business size standards. A third auction commenced 
on October 3, 2001 and closed on October 16, 2001. Here, five bidders 
won 317 (Metropolitan Trading Areas and nationwide) licenses. Three of 
these claimed status as a small or very small entity and won 311 
licenses.
    44. 220 MHz Radio Service--Phase I Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. Phase I licensing was conducted 
by lotteries in 1992 and 1993. There are approximately 1,515 such non-
nationwide licensees and four nationwide licensees currently authorized 
to operate in the 220 MHz band. The Commission has not developed a 
small business size standard for small entities specifically applicable 
to such incumbent 220 MHz Phase I licensees. To estimate the number of 
such licensees that are small businesses, the Commission applies the 
small business size standard under the SBA rules applicable to 
``Wireless Telecommunications Carriers (except Satellite)'' companies. 
This category provides that a small business is a wireless company 
employing no more than 1,500 persons. Census Bureau data for 2002 show 
that there were 1,397 firms in this category that operated for the 
entire year. Of this total, 1,378 firms had employment of 999 or fewer 
employees, and 19 firms had employment of 1,000 employees or more. 
Thus, under this category and size standard, the majority of firms can 
be considered small.
    45. 220 MHz Radio Service--Phase II Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. The Phase II 220 MHz service is 
a new service and is subject to spectrum auctions. In the 220 MHz Third 
Report and Order, published at 62 FR 15978, April 3, 1997, the 
Commission adopted a small business size standard for ``small'' and 
``very small'' businesses for purposes of determining their eligibility 
for special provisions such as bidding credits and installment 
payments. This small business size standard indicates that a ``small 
business'' is an entity that, together with its affiliates and 
controlling principals, has average gross revenues not exceeding $15 
million for the preceding three years. A ``very small business'' is an 
entity that, together with its affiliates and controlling principals, 
has average gross revenues that do not exceed $3 million for the 
preceding three years. The SBA has approved these small business size 
standards. Auctions of Phase II licenses commenced on September 15, 
1998, and closed on October 22, 1998. In the first auction, 908 
licenses were auctioned in three different-sized geographic areas: 
Three nationwide licenses, 30 Regional Economic Area Group (EAG) 
Licenses, and 875 Economic Area (EA) Licenses. Of the 908 licenses 
auctioned, 693 were sold. Thirty-nine small businesses won licenses in 
the first 220 MHz auction. The second auction included 225 licenses: 
216 EA licenses and 9 EAG licenses. Fourteen companies claiming small 
business status won 158 licenses. A third auction included four 
licenses: 2 BEA licenses and 2 EAG licenses in the 220 MHz Service. No 
small or very small business won any of these licenses.
    46. 800 MHz and 900 MHz Specialized Mobile Radio Licenses. The 
Commission awards ``small entity'' and ``very small entity'' bidding 
credits in auctions for Specialized Mobile Radio (SMR) geographic area 
licenses in the 800 MHz and 900 MHz bands to firms that had revenues of 
no more than $15 million in each of the three previous calendar years, 
or that had revenues of no more than $3 million in each of the previous 
calendar years, respectively. 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. 
The Commission does not know how many firms provide 800 MHz or 900 MHz 
geographic area SMR service pursuant to extended implementation 
authorizations, nor how many of these providers have annual revenues of 
no more than $15 million. One firm has over $15 million in revenues. 
The Commission assumes, for purposes here, that all of the remaining 
existing extended implementation authorizations are held by small 
entities, as that term is defined by the SBA. The Commission has held 
auctions for geographic area licenses in the 800 MHz and 900 MHz SMR 
bands. There were 60 winning bidders that qualified as small or very 
small entities in the 900 MHz SMR auctions. Of the 1,020 licenses won 
in the 900 MHz auction, bidders qualifying as small or very small 
entities won 263 licenses. In the 800 MHz auction, 38 of the 524 
licenses won were won by small and very small entities.
    47. 700 MHz Guard Band Licensees. In the 700 MHz Guard Band Order, 
the Commission adopted a small business size standard for ``small 
businesses'' and ``very small businesses'' for purposes of determining 
their eligibility for special provisions such as bidding credits and 
installment payments. A ``small business'' is an entity that, together 
with its affiliates and controlling principals, has average gross 
revenues not exceeding $15 million for the preceding three years. 
Additionally, a ``very small business'' is an entity that, together 
with its affiliates and controlling principals, has average gross 
revenues that are not more than $3 million for the preceding three 
years. An auction of 52 Major Economic Area (MEA) licenses commenced on 
September 6, 2000, and closed on September 21, 2000. Of the 104 
licenses auctioned, 96 licenses were sold to nine bidders. Five of 
these bidders were small businesses that won a total of 26 licenses. A 
second auction of 700 MHz Guard Band licenses commenced on February 13, 
2001 and closed on February 21, 2001. All eight of the licenses 
auctioned were sold to three bidders. One of these bidders was a small 
business that won a total of two licenses. Subsequently, in the 700 MHz 
Second Report and Order, the Commission reorganized the licenses 
pursuant to an agreement among most of the licensees, resulting in a 
spectral relocation of the first set of paired spectrum block licenses, 
and an elimination of the second set of paired spectrum block licenses 
(many of which were already vacant, reclaimed by the Commission from 
Nextel). A single licensee that did not participate in the agreement 
was grandfathered in the initial spectral location for its two licenses 
in the second set of paired spectrum blocks. Accordingly, at this time 
there are 54 licenses in the 700 MHz Guard Bands and there is no 
auction data applicable to determine which are held by small 
businesses.
    48. 39 GHz Service. The Commission created a special small business 
size standard for 39 GHz licenses--an entity that has average gross 
revenues of $40 million or less in the three previous calendar years. 
An additional size standard for ``very small business'' is: An entity 
that, together with affiliates,

[[Page 39559]]

has average gross revenues of not more than $15 million for the 
preceding three calendar years. The SBA has approved these small 
business size standards. The auction of the 2,173 39 GHz licenses began 
on April 12, 2000 and closed on May 8, 2000. The 18 bidders who claimed 
small business status won 849 licenses. Consequently, the Commission 
estimates that 18 or fewer 39 GHz licensees are small entities that may 
be affected by the rules and polices adopted herein.
    49. Wireless Cable Systems. Wireless cable systems use 2 GHz band 
frequencies of the Broadband Radio Service (BRS), formerly Multipoint 
Distribution Service (MDS), and the Educational Broadband Service 
(EBS), formerly Instructional Television Fixed Service (ITFS), to 
transmit video programming and provide broadband services to 
residential subscribers. These services were originally designed for 
the delivery of multichannel video programming, similar to that of 
traditional cable systems, but over the past several years licensees 
have focused their operations instead on providing two-way high-speed 
Internet access services. The Commission estimates that the number of 
wireless cable subscribers is approximately 100,000, as of March 2005. 
Local Multipoint Distribution Service (LMDS) is a fixed broadband 
point-to-multipoint microwave service that provides for two-way video 
telecommunications. As described below, the SBA small business size 
standard for the broad census category of Cable and Other Program 
Distribution, which consists of such entities generating $13.5 million 
or less in annual receipts, appears applicable to MDS, ITFS and LMDS. 
Other standards also apply, as described.
    50. The Commission has defined small MDS (now BRS) and LMDS 
entities in the context of Commission license auctions. In the 1996 MDS 
auction, the Commission defined a small business as an entity that had 
annual average gross revenues of less than $40 million in the previous 
three calendar years. This definition of a small entity in the context 
of MDS auctions has been approved by the SBA. In the MDS auction, 67 
bidders won 493 licenses. Of the 67 auction winners, 61 claimed status 
as a small business. At this time, the Commission estimates that of the 
61 small business MDS auction winners, 48 remain small business 
licensees. In addition to the 48 small businesses that hold BTA 
authorizations, there are approximately 392 incumbent MDS licensees 
that have gross revenues that are not more than $40 million and are 
thus considered small entities. MDS licensees and wireless cable 
operators that did not receive their licenses as a result of the MDS 
auction fall under the SBA small business size standard for Cable and 
Other Program Distribution. Information available to the Commission 
indicates that there are approximately 850 of these licensees and 
operators that do not generate revenue in excess of $13.5 million 
annually. Therefore, the Commission estimates that there are 
approximately 850 small entity MDS (or BRS) providers, as defined by 
the SBA and the Commission's auction rules.
    51. Educational institutions are included in this analysis as small 
entities; however, the Commission has not created a specific small 
business size standard for ITFS (now EBS). The Commission estimates 
that there are currently 2,032 ITFS (or EBS) licensees, and all but 100 
of the licenses are held by educational institutions. Thus, the 
Commission estimates that at least 1,932 ITFS licensees are small 
entities.
    52. In the 1998 and 1999 LMDS auctions, the Commission defined a 
small business as an entity that has annual average gross revenues of 
less than $40 million in the previous three calendar years. Moreover, 
the Commission added an additional classification for a ``very small 
business,'' which was defined as an entity that had annual average 
gross revenues of less than $15 million in the previous three calendar 
years. These definitions of ``small business'' and ``very small 
business'' in the context of the LMDS auctions have been approved by 
the SBA. In the first LMDS auction, 104 bidders won 864 licenses. Of 
the 104 auction winners, 93 claimed status as small or very small 
businesses. In the LMDS re-auction, 40 bidders won 161 licenses. Based 
on this information, the Commission believes that the number of small 
LMDS licenses will include the 93 winning bidders in the first auction 
and the 40 winning bidders in the re-auction, for a total of 133 small 
entity LMDS providers as defined by the SBA and the Commission's 
auction rules.
    53. Local Multipoint Distribution Service. Local Multipoint 
Distribution Service (LMDS) is a fixed broadband point-to-multipoint 
microwave service that provides for two-way video telecommunications. 
The auction of the 1,030 LMDS licenses began on February 18, 1998 and 
closed on March 25, 1998. The Commission established a small business 
size standard for LMDS licensees as an entity that has average gross 
revenues of less than $40 million in the three previous calendar years. 
An additional small business size standard for ``very small business'' 
was added as an entity that, together with its affiliates, has average 
gross revenues of not more than $15 million for the preceding three 
calendar years. The SBA has approved these small business size 
standards in the context of LMDS auctions. There were 93 winning 
bidders that qualified as small entities in the LMDS auctions. A total 
of 93 small and very small business bidders won approximately 277 A 
Block licenses and 387 B Block licenses. On March 27, 1999, the 
Commission re-auctioned 161 licenses; there were 40 winning bidders. 
Based on this information, the Commission concludes that the number of 
small LMDS licenses consists of the 93 winning bidders in the first 
auction and the 40 winning bidders in the re-auction, for a total of 
133 small entity LMDS providers.
    54. 218-219 MHz Service. The first auction of 218-219 MHz spectrum 
resulted in 170 entities winning licenses for 594 Metropolitan 
Statistical Area (MSA) licenses. Of the 594 licenses, 557 were won by 
entities qualifying as a small business. For that auction, the small 
business size standard was an entity that, together with its 
affiliates, has no more than a $6 million net worth and, after federal 
income taxes (excluding any carry over losses), has no more than $2 
million in annual profits each year for the previous two years. In the 
218-219 MHz Report and Order and Memorandum Opinion and Order, 
published at 64 FR 59656, November 3, 1999, the Commission established 
a small business size standard for a ``small business'' as an entity 
that, together with its affiliates and persons or entities that hold 
interests in such an entity and their affiliates, has average annual 
gross revenues not to exceed $15 million for the preceding three years. 
A ``very small business'' is defined as an entity that, together with 
its affiliates and persons or entities that hold interests in such an 
entity and its affiliates, has average annual gross revenues not to 
exceed $3 million for the preceding three years. The Commission cannot 
estimate, however, the number of licenses that will be won by entities 
qualifying as small or very small businesses under its rules in future 
auctions of 218-219 MHz spectrum.
    55. 24 GHz--Incumbent Licensees. This analysis may affect incumbent 
licensees who were relocated to the 24 GHz band from the 18 GHz band 
and applicants who wish to provide services in the 24 GHz band. The 
applicable SBA small business size standard is that of ``Wireless 
Telecommunications Carriers (except Satellite)'' companies. This

[[Page 39560]]

category provides that such a company is small if it employs no more 
than 1,500 persons. According to Census Bureau data for 1997, there 
were 977 firms in this category, total, that operated for the entire 
year. Of this total, 965 firms had employment of 999 or fewer 
employees, and an additional 12 firms had employment of 1,000 employees 
or more. Thus, under this size standard, the great majority of firms 
can be considered small. These broader census data notwithstanding, the 
Commission believes that there are only two licensees in the 24 GHz 
band that were relocated from the 18 GHz band, Teligent and TRW, Inc. 
It is our understanding that Teligent and its related companies have 
less than 1,500 employees, though this may change in the future. TRW is 
not a small entity. Thus, only one incumbent licensee in the 24 GHz 
band is a small business entity.
    56. 24 GHz--Future Licensees. With respect to new applicants in the 
24 GHz band, the small business size standard for ``small business'' is 
an entity that, together with controlling interests and affiliates, has 
average annual gross revenues for the three preceding years not in 
excess of $15 million. ``Very small business'' in the 24 GHz band is an 
entity that, together with controlling interests and affiliates, has 
average gross revenues not exceeding $3 million for the preceding three 
years. The SBA has approved these small business size standards. These 
size standards will apply to the future auction, if held.
2. Cable and OVS Operators
    57. Cable Television Distribution Services. The ``Cable and Other 
Program Distribution'' census category includes cable systems 
operators, closed circuit television services, direct broadcast 
satellite services, multipoint distribution systems, satellite master 
antenna systems, and subscription television services. Since 2007, 
these services have been defined within the broad economic census 
category of Wired Telecommunications Carriers; that category is defined 
as follows: ``This industry comprises establishments primarily engaged 
in operating and/or providing access to transmission facilities and 
infrastructure that they own and/or lease for the transmission of 
voice, data, text, sound, and video using wired telecommunications 
networks. Transmission facilities may be based on a single technology 
or a combination of technologies. Establishments in this industry use 
the wired telecommunications network facilities that they operate to 
provide a variety of services, such as wired telephony services, 
including VoIP services; wired (cable) audio and video programming 
distribution; and wired broadband Internet services. By exception, 
establishments providing satellite television distribution services 
using facilities and infrastructure that they operate are included in 
this industry.'' The SBA has developed a small business size standard 
for this category, which is: All such firms having 1,500 or fewer 
employees. To gauge small business prevalence for these cable services 
the Commission must, however, use current census data that are based on 
the previous category of Cable and Other Program Distribution and its 
associated size standard; that size standard was: All such firms having 
$13.5 million or less in annual receipts. According to Census Bureau 
data for 2002, there were a total of 1,191 firms in this previous 
category that operated for the entire year. Of this total, 1,087 firms 
had annual receipts of under $10 million, and 43 firms had receipts of 
$10 million or more but less than $25 million. Thus, the majority of 
these firms can be considered small.
    58. Cable Companies and Systems. The Commission has also developed 
its own small business size standards, for the purpose of cable rate 
regulation. Under the Commission's rules, a ``small cable company'' is 
one serving 400,000 or fewer subscribers, nationwide. Industry data 
indicate that, of 1,076 cable operators nationwide, all but eleven are 
small under this size standard. In addition, under the Commission's 
rules, a ``small system'' is a cable system serving 15,000 or fewer 
subscribers. Industry data indicate that, of 7,208 systems nationwide, 
6,139 systems have fewer than 10,000 subscribers, and an additional 379 
systems have 10,000-19,999 subscribers. Thus, under this second size 
standard, most cable systems are small.
    59. Cable System Operators. The Communications Act of 1934, as 
amended, also contains a size standard for small cable system 
operators, which is ``a cable operator that, directly or through an 
affiliate, serves in the aggregate fewer than 1 percent of all 
subscribers in the United States and is not affiliated with any entity 
or entities whose gross annual revenues in the aggregate exceed 
$250,000,000.'' The Commission has determined that an operator serving 
fewer than 677,000 subscribers shall be deemed a small operator, if its 
annual revenues, when combined with the total annual revenues of all 
its affiliates, do not exceed $250 million in the aggregate. Industry 
data indicate that, of 1,076 cable operators nationwide, all but ten 
are small under this size standard. The Commission notes that it 
neither requests nor collects information on whether cable system 
operators are affiliated with entities whose gross annual revenues 
exceed $250 million, and therefore the Commission is unable to estimate 
more accurately the number of cable system operators that would qualify 
as small under this size standard.
    60. Open Video Systems (OVS). In 1996, Congress established the 
open video system (OVS) framework, one of four statutorily recognized 
options for the provision of video programming services by local 
exchange carriers (LECs). The OVS framework provides opportunities for 
the distribution of video programming other than through cable systems. 
Because OVS operators provide subscription services, OVS falls within 
the SBA small business size standard of Cable and Other Program 
Distribution Services, which consists of such entities having $13.5 
million or less in annual receipts. The Commission has certified 25 OVS 
operators, with some now providing service. Broadband service providers 
(BSPs) are currently the only significant holders of OVS certifications 
or local OVS franchises. As of June, 2005, BSPs served approximately 
1.4 million subscribers, representing 1.5 percent of all MVPD 
households. Affiliates of Residential Communications Network, Inc. 
(RCN), which serves about 371,000 subscribers as of June, 2005, is 
currently the largest BSP and 14th largest MVPD. RCN received approval 
to operate OVS systems in New York City, Boston, Washington, D.C. and 
other areas. The Commission does not have financial information 
regarding the entities authorized to provide OVS, some of which may not 
yet be operational. The Commission thus believes that at least some of 
the OVS operators may qualify as small entities.
    61. Satellite Carriers. The term ``satellite carrier'' includes 
entities providing services as described in 17 U.S.C. 119(d)(6) using 
the facilities of a satellite or satellite service licensed under part 
25 of the Commission's rules to operate in Direct Broadcast Satellite 
(DBS) or Fixed-Satellite Service (FSS) frequencies. As a general 
practice, not mandated by any regulation, DBS licensees usually own and 
operate their own satellite facilities as well as package the 
programming they offer to their subscribers. In contrast, satellite 
carriers using FSS facilities often lease capacity from another entity 
that is licensed to operate the satellite used to

[[Page 39561]]

provide service to subscribers. These entities package their own 
programming and may or may not be Commission licensees themselves. In 
addition, a third situation may include an entity using a non-U.S. 
licensed satellite to provide programming to subscribers in the United 
States pursuant to a blanket earth station license. Since 2007, the SBA 
has recognized satellite television distribution services within the 
broad economic census category of Wired Telecommunications Carriers. 
The SBA has developed a small business size standard for this category, 
which is: All such firms having 1,500 or fewer employees. The most 
current Census Bureau data, however, are from the last economic census 
of 2002, and the Commission will use those figures to gauge the 
prevalence of small businesses in this category. Those size standards 
are for the two census categories of ``Satellite Telecommunications'' 
and ``Other Telecommunications.'' Under both prior categories, such a 
business was considered small if it had $13.5 million or less in 
average annual receipts.
    62. Direct Broadcast Satellite (DBS) Service. DBS service is a 
nationally distributed subscription service that delivers video and 
audio programming via satellite to a small parabolic ``dish'' antenna 
at the subscriber's location. Because DBS provides subscription 
services, DBS falls within the SBA-recognized definition of Wired 
Telecommunications Carriers. However, as discussed above, the 
Commission relies on the previous size standard, Cable and Other 
Subscription Programming, which provides that a small entity is one 
with $13.5 million or less in annual receipts. Currently, only two 
operators--DirecTV and EchoStar Communications Corporation (EchoStar)--
hold licenses to provide DBS service, which requires a great investment 
of capital for operation. Both currently offer subscription services 
and report annual revenues that are in excess of the threshold for a 
small business. Because DBS service requires significant capital, the 
Commission believes it is unlikely that a small entity as defined by 
the SBA would have the financial wherewithal to become a DBS licensee. 
Nevertheless, given the absence of specific data on this point, the 
Commission acknowledges the possibility that there are entrants in this 
field that may not yet have generated $13.5 million in annual receipts, 
and therefore may be categorized as a small business, if independently 
owned and operated.
    63. Fixed-Satellite Service (FSS). The FSS is a radiocommunication 
service between earth stations at a specified fixed point or between 
any fixed point within specified areas and one or more satellites. The 
FSS, which utilizes many earth stations that communicate with one or 
more space stations, may be used to provide subscription video service. 
Therefore, to the extent FSS frequencies are used to provide 
subscription services, FSS falls within the SBA-recognized definition 
of Wired Telecommunications Carriers. However, as discussed above, the 
Commission relies on the previous size standard, Cable and Other 
Subscription Programming, which provides that a small entity is one 
with $13.5 million or less in annual receipts. Although a number of 
entities are licensed in the FSS, not all such licensees use FSS 
frequencies to provide subscription services. Both of the DBS licensees 
(EchoStar and DirecTV) have indicated interest in using FSS frequencies 
to broadcast signals to subscribers. It is possible that other entities 
could similarly use FSS frequencies, although the Commission is not 
aware of any entities that might do so.
3. Internet Service Providers
    64. Internet Service Providers. The 2007 Economic Census places 
these providers, which include voice over Internet protocol (VoIP) 
providers, in the category of All Other Telecommunications. The SBA 
small business size standard for such firms is: those having annual 
average receipts of $25 million or less. The most current Census Bureau 
data on such entities, however, are the 2002 data for the previous 
census category called Internet Service Providers. The 2002 data show 
that there were 2,529 such firms that operated for the entire year. Of 
those, 2,437 firms had annual receipts of under $10 million, and an 
additional 47 firms had receipts of between $10 million and $24, 
999,999. Consequently, the Commission estimates that the majority of 
ISP firms are small entities that may be affected by this action.
4. Other Internet-Related Entities
    65. Internet Publishing and Broadcasting and Web Search Portals. 
The Census Bureau defines this category as including ``establishments 
primarily engaged in (1) publishing and/or broadcasting content on the 
Internet exclusively or (2) operating Web sites that use a search 
engine to generate and maintain extensive databases of Internet 
addresses and content in an easily searchable format (and known as Web 
search portals) * * *. Establishments known as Web search portals often 
provide additional Internet services, such as e-mail, connections to 
other Web sites, auctions, news, and other limited content, and serve 
as a home base for Internet users.'' The SBA small business size 
standard for such firms is: those having 500 or fewer employees. The 
most current Census Bureau data on such entities, however, are the 2002 
data for the previous two separate categories of Internet Publishing 
and Broadcasting, and Web Search Portals entities. For the first 
previous category, the 2002 data show that there were 1,362 firms that 
operated for the entire year. Of these, 1,351 had employment of 499 or 
fewer employees, and 11 firms had employment of between 500 and 999. 
Consequently, the Commission estimates that the majority of these firms 
are small entities that may be affected by this action. For the second 
previous census category of Web Search Portals, the SBA had developed a 
small business size standard of $6.5 million or less in average annual 
receipts. According to the data for 2002, there were 342 firms in this 
category that operated for the entire year. Of these, 303 had annual 
receipts of under $5 million, and an additional 15 firms had receipts 
of between $5 million and $9,999,999. Consequently, the Commission 
estimates that the majority of Web Search Portals firms are small 
entities that may be affected by this action.
    66. Data Processing, Hosting, and Related Services. Entities in 
this category ``primarily * * * provid[e] infrastructure for hosting or 
data processing services.'' The SBA has developed a small business size 
standard for this category; that size standard is $23 million or less 
in average annual receipts. According to Census Bureau data for 2002, 
there were 6,877 firms in this category that operated for the entire 
year. Of these, 6,418 had annual receipts of under $10 million, and an 
additional 251 firms had receipts of between $10 million and 
$24,999,999. Consequently, the Commission estimates that the majority 
of these firms are small entities that may be affected by this action.
    67. All Other Information Services. ``This industry comprises 
establishments primarily engaged in providing other information 
services (except new syndicates and libraries and archives).'' The 
Commission's action pertains to VoIP services, which could be provided 
by entities that provide other services such as e-mail, online gaming, 
Web browsing, video conferencing, instant messaging, and other, similar 
IP-enabled services. The SBA has developed a small business size 
standard for this category; that size standard is $6.5 million or less 
in

[[Page 39562]]

average annual receipts. According to Census Bureau data for 2002, 
there were 155 firms in this category that operated for the entire 
year. Of these, 138 had annual receipts of under $5 million, and an 
additional four firms had receipts of between $5 million and 
$9,999,999. Consequently, the Commission estimates that the majority of 
these firms are small entities that may be affected by this action.

D. Description of Projected Reporting, Recordkeeping and Other 
Compliance Requirements

    68. In this Order, the Commission requires providers of 
interconnected VoIP service to take actions to comply with section 214 
service discontinuance obligations. For example, to protect against 
abrupt termination of service, the Order requires providers of 
interconnected VoIP services to be subject to the same service 
discontinuance procedures as non-dominant carriers. Thus, the 
Commission requires that a provider of interconnected VoIP service 
seeking to discontinue service provide all affected customers with 
notice of the planned discontinuance of service. Specifically, the 
Order requires an interconnected VoIP provider to provide all affected 
customers with its name and address, the date of the planned service 
discontinuance, the geographic areas where service will be 
discontinued, a brief description of the service to be discontinued, 
and the statement found in Sec.  63.71(a)(5)(i) of the Commission's 
rules. The Order requires written notice to be provided to each 
affected customer, but allows the Commission to authorize in advance 
another form of notice for good cause shown upon request.
    69. The Order also requires an interconnected VoIP provider to file 
with the Commission an application for authorization of the planned 
discontinuance. The application shall identify that the provider is an 
interconnected VoIP provider with respect to the service to be 
discontinued and shall include, in addition to the information set 
forth in the notice provided to affected customers, a caption, a brief 
description of the dates and methods of notice to all affected 
customers, and any other information the Commission may require. The 
Order also requires an interconnected VoIP provider to submit a copy of 
its application to the public utility commission and to the Governor of 
the State(s) in which it proposes to discontinue, reduce, or impair 
service, as well as to the Secretary of Defense.

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

    70. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include (among others) the following four alternatives: (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.
    71. The IP-Enabled Services Notice sought comment on whether to 
extend consumer protections afforded in the Act to subscribers of VoIP 
or other IP-enabled services, and invited comment on the effect on 
small entities. The Commission must assess the interests of small 
businesses in light of the overriding public interest in protecting 
consumers from interrupted voice service and its associated 
consequences.
    72. In the Order, the Commission found that allowing customers of 
interconnected VoIP services to receive the benefits of section 214 
discontinuance procedures is fundamentally important for the protection 
of consumers. Specifically, the Commission found that extending section 
214 discontinuance procedures to interconnected VoIP service customers 
is necessary to protect consumers from abrupt and unexpected 
telecommunications service interruptions. As the Commission stated, 
even customers with competitive alternatives need fair notice and 
information to choose a substitute service. The Commission thus found 
that notice of proposed service discontinuances is important for the 
protection of all customers of interconnected VoIP providers, including 
those of small businesses. In considering whether to impose section 214 
service discontinuance obligations on interconnected VoIP providers, 
the Commission considered several alternatives, including imposing 
streamlined obligations for dominant and non-dominant carriers and 
separate notice provisions. The Commission concluded that imposing the 
minimal streamlined obligations for non-dominant carriers on 
interconnected VoIP providers was appropriate, striking a good balance 
between the Commission's dual objectives of permitting ease of exit 
from competitive markets and ensuring that the public will be given a 
reasonable period of time to make other service arrangements. The 
Commission further concluded that given that these same minimal 
requirements were imposed on non-dominant carrier small entities and 
did not result in any hardship, imposing these requirements on all 
interconnected VoIP providers, including providers that may be small 
entities, would be appropriate.

Ordering Clauses

    73. Accordingly, it is ordered, pursuant to sections 1, 4(i), 4(j), 
214, and 303(r) of the Communications Act of 1934, as amended, 47 
U.S.C. 151, 154(i) through (j), 214, 303(r), that the Report and Order 
in WC Docket No. 04-36 is adopted and part 63 of the Commission's 
rules, 47 CFR part 63, is amended as set forth in Appendix B.
    74. It is further ordered that, pursuant to Sec. Sec.  1.103(a) and 
1.427(a) of the Commission's rules, 47 CFR 1.103(a), 1.427(a), this 
Report and Order shall be effective September 8, 2009. However, the 
information collection requirements contained in the Report and Order 
will become effective following Office of Management and Budget (OMB) 
approval.
    75. It is further ordered that the Commission's Consumer & 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Report and Order, including the Final Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

List of Subjects in 47 CFR Part 63

    Cable television, Communications, Communications common carriers, 
Discontinuance of service, IP-enabled services, Radio, Reporting and 
recordkeeping requirements, Telecommunications, Telegraph, Telephone, 
Voice over Internet Protocol, VoIP.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

0
For the reasons discussed in the preamble, the Federal Communications 
Commission amends 47 CFR part 63 as follows:

[[Page 39563]]

PART 63--EXTENSION OF LINES, NEW LINES, AND DISCONTINUANCE, 
REDUCTION, OUTAGE AND IMPAIRMENT OF SERVICE BY COMMON CARRIERS; AND 
GRANTS OF RECOGNIZED PRIVATE OPERATING AGENCY STATUS

0
1. The authority citation for part 63 continues to read as follows:

    Authority:  Sections 1, 4(i), 4(j), 10, 11, 201-205, 214, 218, 
403 and 651 of the Communications Act of 1934, as amended, 47 U.S.C. 
151, 154(i), 154(j), 160, 201-205, 214, 218, 403, and 571, unless 
otherwise noted.

0
2. Section 63.60 is amended by redesignating paragraph (d) as paragraph 
(g); redesignating paragraph (c) as paragraph (e); redesignating 
paragraphs (a) and (b) as paragraphs (b) and (c), respectively; and 
adding paragraphs (a), (b)(3), (d), and (f) to read as follows:


Sec.  63.60  Definitions.

* * * * *
    (a) For the purposes of Sec. Sec.  63.60 through 63.90, the term 
``carrier,'' when used to refer either to all telecommunications 
carriers or more specifically to non-dominant telecommunications 
carriers, shall include interconnected VoIP providers.
    (b) * * *
    (3) The conversion of an interconnected VoIP service to a service 
that permits users to receive calls that originate on the public 
switched telephone network but not terminate calls to the public 
switched telephone network, or the converse.
* * * * *
    (d) The term ``interconnected VoIP provider'' is an entity that 
provides interconnected VoIP service as that term is defined in Sec.  
9.3 of this chapter.
* * * * *
    (f) For the purposes of Sec. Sec.  63.60 through 63.90, the term 
``service,'' when used to refer to a real-time, two-way voice 
communications service, shall include interconnected VoIP service as 
that term is defined in Sec.  9.3 of this chapter but shall not include 
any interconnected VoIP service that is a ``mobile service'' as defined 
in Sec.  20.3 of this chapter.
* * * * *
[FR Doc. E9-18716 Filed 8-6-09; 8:45 am]
BILLING CODE 6712-01-P


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