26800 Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Rules and Regulations

Frequency or frequency band Subpart Class of station Remarks

136.950 MHz ............................................................. I MA, FAE International and domestic VHF.

136.975 MHz ............................................................. I MA, FAE International and domestic VHF.

*******

9. Amend § 87.187 by adding new

paragraph (dd) to read as follows:

§ 87.187 Frequencies.

* * * * *

(dd) The frequencies 136.425,

136.450, 136.475, and 136.500 MHz are

designated for flight information

services-broadcast (FIS–B) and may not

be used by aircraft for transmission.

10. In § 87.263, amend by revising

paragraphs (a)(1) and (a)(5) to read as

follows:

§ 87.263 Frequencies.

(a) Domestic VHF service. (1)

Frequencies in the 128.8125–132.125

MHz and 136.4875–137.00 MHz bands

are available to serve domestic routes,

except that the frequency 136.750 MHz

is available only to aeronautical enroute

stations located at least 288 kilometers

(180 miles) from the Gulf of Mexico

shoreline (outside the Gulf of Mexico

region). The frequencies 136.900 MHz,

136.925 MHz, 136.950 MHz and 136.975

MHz are available to serve domestic and

international routes. Frequency

assignments are based on 25 kHz

spacing. Use of these frequencies must

be compatible with existing operations

and must be in accordance with

pertinent international treaties and

agreements.

* * * * *

(5) The frequency 136.750 MHz is

available in the Gulf of Mexico Region

to serve domestic routes over the Gulf

of Mexico and adjacent coastal areas.

Assignment of this frequency in the Gulf

of Mexico Region shall be to licensees

first licensed on this frequency in the

Gulf of Mexico Region prior to January

1, 1994, their successors and assigns,

and is not subject to the conditions in

§ 87.261(c) and paragraph (a)(2) of this

section. For the purpose of this

paragraph, the Gulf of Mexico Region is

defined as an area bounded on the east,

north, and west by a line 288 km (180

miles) from the Gulf of Mexico shore

line. Inland stations must be located

within forty-eight kilometers (30 miles)

of the Gulf of Mexico shore line.

* * * * *

[FR Doc. 01–12162 Filed 5–14–01; 8:45 am]

BILLING CODE 6712–01–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 51

[CC Docket Nos. 96–98, 99–68; FCC 01–

131]

Implementation of the Local

Competition Provisions in the

Telecommunications Act of 1996;

Intercarrier Compensation for ISPBound Traffic

AGENCY: Federal Communications

Commission.

ACTION: Final rule; order on remand and

report and order.

SUMMARY: In this final rule, the

Commission reconsiders the proper

treatment of telecommunications traffic

delivered to Internet service providers

(ISPs) for purposes of inter-carrier

compensation. The Commission

reaffirms its previous conclusion that

traffic delivered to an ISP is

predominantly interstate access traffic,

in particular, information access, subject

to section 201 of the Communications

Act of 1934, as amended (the Act), and

the Commission establishes an

appropriate cost recovery mechanism

for the exchange of such traffic.

DATES: The amendments to 47 CFR part

51 are effective June 14, 2001. However

the portion of the Order specified in the

ordering clauses takes effect upon May

15, 2001.

FOR FURTHER INFORMATION CONTACT:

Tamara Preiss, Deputy Chief, Common

Carrier Bureau, Competitive Pricing

Division, (202) 418–1520.

SUPPLEMENTARY INFORMATION: This is a

summary of the Commission’s Order on

Remand and Report and Order in CC

Docket Nos. 96–98, 99–68, adopted

April 18, 2001, and released on April

27, 2001. The full text of this document

is available for public inspection

Monday through Thursday from 8:00

a.m. to 4:30 p.m. and Friday from 8:00

a.m. to 11:30 a.m. in the FCC Reference

Information Center, Room CY–A257,

445 Twelfth Street, S.W., Washington,

DC 20554. The complete text of the

order may be purchased from the

Commission’s duplicating contractor,

ITS, Inc., at 1231 20th Street N.W.,

Washington, DC 20036 (202–857–3800).

Synopsis of Order on Remand and

Report and Order

1. After a remand by the U.S. Court

of Appeals for the D.C. Circuit in Bell

Atlantic Telephone Cos. v. FCC, 206

F.3d 1 (D.C. Cir. 2000), in this final rule

the Commission reconsiders the

rationales underlying its regulatory

treatment of telecommunications traffic

delivered to ISPs to determine whether

ISP-bound traffic is subject to statutory

reciprocal compensation requirements.

A more comprehensive review of the

statute reveals that Congress intended to

exempt certain enumerated categories of

service from the universe of

‘‘telecommunications’’ subject to the

reciprocal compensation requirements

of section 251(b)(5), 47 U.S.C. 251(b)(5).

The statute does not mandate reciprocal

compensation for ‘‘exchange access,

information access, and exchange

services for such access’’ when the

service is provided by local exchange

carriers (LECs) to interexchange carriers

(IXCs) or information service providers.

The Commission finds that Congress

specifically exempted the services

enumerated under section 251(g), 47

U.S.C. 251(g), from the newly-imposed

reciprocal compensation requirement in

order to ensure that section 251(b)(5) is

not interpreted to override either

existing or future regulations prescribed

by the Commission. Because the

Commission interprets paragraph (g) as

a carve-out provision, the focus of the

inquiry is on the universe of traffic that

falls within paragraph (g) and not the

universe of traffic that falls within

paragraph (b)(5).

2. The Commission specifically finds

that ISP-bound traffic falls within at

least one of the three enumerated

categories in section 251(g). Regardless

of whether this traffic falls under the

category of ‘‘exchange access,’’ an issue

pending before the U.S. Court of

Appeals for the D.C. Circuit in a

separate proceeding, the Commission

concludes that this traffic, at a

minimum, falls under the rubric of

‘‘information access,’’ a legacy term

imported into section 251(g) of the 1996

Act from the Modified Final Judgment

(MFJ), but not expressly defined in the

Communications Act. See United States

v. AT&T, 552 F. Supp. 131 (D.D.C.

1982), aff’d sub nom. Maryland v.

United States, 460 U.S. 1001 (1983). The

Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Rules and Regulations 26801

ISP-bound traffic at issue here falls

within that category because it is access

traffic destined for an information

service provider. Because the legacy

term ‘‘information access’’ in section

251(g) encompasses ISP-bound traffic,

this traffic is excepted from the scope of

the ‘‘telecommunications’’ subject to

reciprocal compensation under section

251(b)(5). For these reasons, the

Commission finds that Congress,

through section 251(g), expressly

limited the reach of section 251(b)(5) to

exclude ISP-bound traffic.

3. For services that qualify under

section 251(g), compensation is based

on rules, regulations, and policies that

preceded the Telecommunications Act

of 1996 (1996 Act), and not on section

251(b)(5) which was minted by the 1996

Act. At least until the Commission by

regulation should determine otherwise,

Congress preserved the pre-1996 Act

regulatory treatment of all the interstate

access services enumerated under

section 251(g). Although section 251(g)

does not itself compel this outcome

with respect to intrastate access regimes

(because it expressly preserves only the

Commission’s traditional policies and

authority over interstate access

services), it nevertheless highlights an

ambiguity in the scope of

‘‘telecommunications’’ subject to section

251(b)(5)—demonstrating that the term

must be construed in light of other

provisions in the statute. In this regard,

the Commission again concludes that it

is reasonable to interpret section

251(b)(5) to exclude traffic subject to

parallel intrastate access regulations,

because it would be incongruous to

conclude that Congress was concerned

about the effects of potential disruption

to the interstate access charge system,

but had no such concerns about the

effects on analogous intrastate

mechanisms.

4. Accordingly, the Commission

affirms, although for different reasons,

the conclusion in Implementation of the

Local Competition Provisions in the

Telecommunications Act of 1996;

Intercarrier Compensation for ISPBound Traffic, Declaratory Ruling in CC

Docket No. 96–98 and Notice of

Proposed Rulemaking (NPRM) in CC

Docket No. 99–68, 14 FCC Rcd 3689

(1999), 64 FR 14239 (March 24,1999)

(Declaratory Ruling), that ISP-bound

traffic is not subject to the reciprocal

compensation obligations of section

251(b)(5).

5. Having found that ISP-bound traffic

is excluded from section 251(b)(5) by

section 251(g), the Commission finds

that it has authority pursuant to section

201 to establish rules governing

intercarrier compensation for such

traffic. Under section 201, the

Commission has long exercised its

jurisdictional authority to regulate the

interstate access services that local

exchange carriers (LECs) provide to

connect callers with IXCs or information

service providers in order to originate or

terminate calls that travel across state

lines. Access services to ISPs for

Internet-bound traffic are no exception.

The Commission has held, and the

Eighth Circuit has recently concurred,

that traffic bound for information

service providers (including Internet

access traffic) often has an interstate

component. Indeed, that court observed

that the interstate and intrastate

components cannot be reliably

separated. Thus, ISP traffic is properly

classified as interstate. Hence, it falls

under the Commission’s section 201

jurisdiction.

6. The Commission further concludes

that section 251(i) provides additional

support for the finding that Congress

has granted the Commission the

authority on a going-forward basis to

establish a compensation regime for ISPbound traffic.

7. Because the Commission

determines that intercarrier

compensation for ISP-bound traffic is

within the jurisdiction of this

Commission under section 201, it is

incumbent upon the Commission to

establish an appropriate cost recovery

mechanism for delivery of this traffic.

Based upon the record before it, the

Commission believes that the most

efficient recovery mechanism for ISPbound traffic is likely to be bill and

keep, whereby each carrier recovers

costs from its own end-users.

8. As the Commission recognizes in

the accompanying Notice of Proposed

Rulemaking, Developing a Unified

Intercarrier Compensation Regime, CC

Docket Nos. 01–92, 98–98, Notice of

Proposed Rulemaking, FCC 01–132

(April 27, 2001), compensation regimes

that require carrier-to-carrier payments

are likely to distort the development of

competitive markets by divorcing cost

recovery from the ultimate consumer of

services. In the NPRM, the Commission

suggests that, given the opportunity,

carriers always will prefer to recover

their costs from other carriers rather

than their own end-users in order to

gain competitive advantage. Thus,

carriers have every incentive to

compete, not on the basis of quality and

efficiency, but on the basis of their

ability to shift costs to other carriers, a

troubling distortion that prevents

market forces from distributing limited

investment resources to their most

efficient uses.

9. The Commission believes that this

situation is particularly acute in the case

of carriers delivering traffic to ISPs

because these customers generate

extremely high volumes of traffic that

are entirely one-directional. Indeed, the

weight of the evidence in the current

record indicates that precisely the types

of market distortions identified above

are taking place with respect to ISP

traffic. For example, comments in the

record indicate that competitive local

exchange carriers (CLECs), on average,

terminate eighteen times more traffic

than they originate, resulting in annual

CLEC reciprocal compensation billings

of approximately two billion dollars,

ninety percent of which is for ISPbound traffic. Moreover, the traffic

imbalances for some competitive

carriers are in fact much greater, with

several carriers terminating more than

forty times more traffic than they

originate. There is nothing inherently

wrong with carriers having substantial

traffic imbalances arising from a

business decision to target specific types

of customers. In this case, however, the

Commission believes that such

decisions are driven by regulatory

opportunities that disconnect costs from

end-user market decisions. Thus, under

the current carrier-to-carrier recovery

mechanism, it is conceivable that a

terminating carrier could serve an ISP

free of charge and recover all of its costs

from originating carriers. This result

distorts competition by subsidizing one

type of service at the expense of others.

10. Based upon the current record in

this proceeding, however, bill and keep

appears to be the preferable cost

recovery mechanism for ISP-bound

traffic because it eliminates a substantial

opportunity for regulatory arbitrage. The

Commission does not fully adopt a bill

and keep regime in this Order, however,

because there are specific questions

regarding bill and keep that require

further inquiry, and the Commission

believes that a more complete record on

these issues is desirable before requiring

carriers to recover most of their costs

from end-users. Because these questions

are equally relevant to its evaluation of

a bill and keep approach for other types

of traffic, the Commission will consider

them in the context of the NPRM.

Moreover, the Commission believes that

there are significant advantages to a

global evaluation of the intercarrier

compensation mechanisms applicable to

different types of traffic to ensure a

more systematic, symmetrical treatment

of these issues.

11. Because the record in this

proceeding indicates a need for

immediate action with respect to ISPbound traffic, however, in this final rule

26802 Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Rules and Regulations

the Commission implements an interim

recovery scheme that: (i) moves

aggressively to eliminate arbitrage

opportunities presented by the existing

recovery mechanism for ISP-bound by

lowering payments and capping growth;

and (ii) initiates a 36-month transition

towards a complete bill and keep

recovery mechanism while retaining the

ability to adopt an alternative

mechanism based upon a more

extensive evaluation in the NPRM

proceeding. Specifically, the

Commission adopts a gradually

declining cap on the amount that

carriers may recover from other carriers

for delivering ISP-bound traffic. The

Commission also caps the amount of

traffic for which any such compensation

is owed, in order to eliminate incentives

to pursue new arbitrage opportunities.

In sum, the Commission’s goal in this

Order is decreased reliance by carriers

upon carrier-to-carrier payments and an

increased reliance upon recovery of

costs from end-users. In this regard, the

Commission emphasizes that the rate

caps the Commission imposes are not

intended to reflect the costs incurred by

each carrier that delivers ISP traffic.

Some carriers’ costs may be higher;

some are probably lower. Rather, the

Commission concludes, based upon all

of the evidence in this record, that these

rates are appropriate limits on the

amounts recovered from other carriers

and provide a reasonable transition from

rates that have (at least until recently)

typically been much higher. Carriers

whose costs exceed these rates are (and

will continue to be) able to collect

additional amounts from their ISP

customers. As noted, and explained in

more detail in the Order, the

Commission believes that such end-user

recovery likely is the most efficient

mechanism.

12. Beginning on the effective date of

the final rule, and continuing for six

months, intercarrier compensation for

ISP-bound traffic will be capped at a

rate of $.0015/minute-of-use (mou).

Starting in the seventh month, and

continuing for eighteen months, the rate

will be capped at $.0010/mou. Starting

in the twenty-fifth month, and

continuing through the thirty-sixth

month or until further Commission

action (whichever is later), the rate will

be capped at $.0007/mou. In addition to

the rate caps, the Commission imposes

a cap on total ISP-bound minutes for

which a LEC may receive this

compensation. For the year 2001, a LEC

may receive compensation, pursuant to

a particular interconnection agreement,

for ISP-bound minutes up to a ceiling

equal to, on an annualized basis, the

number of ISP-bound minutes for which

that LEC was entitled to compensation

under that agreement during the first

quarter of 2001, plus a ten percent

growth factor. For 2002, a LEC may

receive compensation, pursuant to a

particular interconnection agreement,

for ISP-bound minutes up to a ceiling

equal to the minutes for which it was

entitled to compensation under that

agreement in 2001, plus another ten

percent growth factor. In 2003, a LEC

may receive compensation, pursuant to

a particular interconnection agreement,

for ISP-bound minutes up to a ceiling

equal to the 2002 ceiling applicable to

that agreement. This interim regime

affects only the intercarrier

compensation (i.e., the rates) applicable

to the delivery of ISP-bound traffic. It

does not alter carriers’ other obligations

under the Commission’s part 51 rules,

47 CFR part 51, or existing

interconnection agreements, such as

obligations to transport traffic to points

of interconnection. These caps are

consistent with projections of the

growth of dial-up Internet access for the

first two years of the transition and are

necessary to ensure that such growth

does not undermine the goal of limiting

intercarrier compensation and

beginning a transition toward bill and

keep. Nothing in the final rule prevents

any carrier from serving or indeed

expanding service to ISPs, so long as

they recover the costs of additional

minutes from their ISP customers.

13. Because the transitional rates are

caps on intercarrier compensation, they

have no effect to the extent that states

have ordered LECs to exchange ISPbound traffic either at rates below the

caps or on a bill and keep basis (or

otherwise have not required payment of

compensation for this traffic). The rate

caps are designed to provide a transition

toward bill and keep, and no transition

is necessary for carriers already

exchanging traffic at rates below the

caps. Thus, if a state has ordered all

LECs to exchange ISP-bound traffic on

a bill and keep basis, or if a state has

ordered bill and keep for ISP-bound

traffic in a particular arbitration, those

LECs subject to the state order would

continue to exchange ISP-bound traffic

on a bill and keep basis.

14. In order to limit disputes and

costly measures to identify ISP-bound

traffic, the Commission adopts a

rebuttable presumption that traffic

exchanged between LECs that exceeds a

3:1 ratio of terminating to originating

traffic is ISP-bound traffic subject to the

compensation mechanism set forth in

the final rule. This ratio is consistent

with those adopted by state

commissions to identify ISP or other

convergent traffic that is subject to

lower intercarrier compensation rates.

Carriers that seek to rebut this

presumption, by showing that traffic

above the ratio is not ISP-bound traffic

or, conversely, that traffic below the

ratio is ISP-bound traffic, may seek

appropriate relief from their state

commissions pursuant to section 252 of

the Act.

15. It would be unwise as a policy

matter, and patently unfair, to allow

incumbent LECs to benefit from reduced

intercarrier compensation rates for ISPbound traffic, with respect to which

they are net payors, while permitting

them to exchange traffic at state

reciprocal compensation rates, which

are much higher than the caps the

Commission adopts here, when the

traffic imbalance is reversed. Because

the Commission is concerned about the

superior bargaining power of incumbent

LECs, the Commission will not allow

them to ‘‘pick and choose’’ intercarrier

compensation regimes, depending on

the nature of the traffic exchanged with

another carrier. The rate caps for ISPbound traffic that the Commission

adopts here apply, therefore, only if an

incumbent LEC offers to exchange all

traffic subject to section 251(b)(5) at the

same rate. Thus, if the applicable rate

cap is $.0010/mou, the ILEC must offer

to exchange section 251(b)(5) traffic at

that same rate. Similarly, if an ILEC

wishes to continue to exchange ISPbound traffic on a bill and keep basis in

a state that has ordered bill and keep, it

must offer to exchange all section

251(b)(5) traffic on a bill and keep basis.

If, however, a state has ordered bill and

keep for ISP-bound traffic only with

respect to a particular interconnection

agreement, as opposed to state-wide, the

Commission does not require the

incumbent LEC to offer to exchange all

section 251(b)(5) traffic on a bill and

keep basis. This limitation is necessary

so that an incumbent is not required to

deliver all section 251(b)(5) in a state on

a bill and keep basis even though it

continues to pay compensation for most

ISP-bound traffic in that state. For those

incumbent LECs that choose not to offer

to exchange section 251(b)(5) traffic

subject to the same rate caps the

Commission adopts for ISP-bound

traffic, the Commission orders them to

exchange ISP-bound traffic at the stateapproved or state-arbitrated reciprocal

compensation rates reflected in their

contracts. This ‘‘mirroring’’ rule ensures

that incumbent LECs will pay the same

rates for ISP-bound traffic that they

receive for section 251(b)(5) traffic.

16. Finally, a different rule applies in

the case where carriers are not

exchanging traffic pursuant to

Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Rules and Regulations 26803

interconnection agreements prior to the

adoption date of this Order (April 18,

2001), where, for example, a new carrier

enters the market or an existing carrier

expands into a market it previously had

not served. In such a case, as of the

effective date of the final rule, carriers

must exchange ISP-bound traffic on a

bill-and-keep basis during this interim

period.

17. The interim compensation regime

the Commission establishes here applies

as carriers re-negotiate expired or

expiring interconnection agreements. It

does not alter existing contractual

obligations, except to the extent that

parties are entitled to invoke contractual

change-of-law provisions. This Order

does not preempt any state commission

decision regarding compensation for

ISP-bound traffic for the period prior to

the effective date. Because the

Commission now exercises its authority

under section 201 to determine the

appropriate intercarrier compensation

for ISP-bound traffic, however, state

commissions will no longer have

authority to address this issue. For this

same reason, as of the date this Order is

published in the Federal Register,

carriers may no longer invoke section

252(i) to opt into an existing

interconnection agreement with regard

to the rates paid for the exchange of ISPbound traffic. Section 252(i) applies

only to agreements arbitrated or

approved by state commissions

pursuant to section 252; it has no

application in the context of an

intercarrier compensation regime set by

this Commission pursuant to section

201. The Commission finds there is

good cause under 5 U.S.C. 553(d)(3),

however, to prohibit carriers from

invoking section 252(i) with respect to

rates paid for the exchange of ISP-bound

traffic upon publication of this Order in

the Federal Register, in order to prevent

carriers from exercising opt in rights

during the thirty days after Federal

Register publication. To permit a carrier

to opt into a reciprocal compensation

rate higher than the caps the

Commission has adopted during that

window would seriously undermine the

Commission’s effort to curtail regulatory

arbitrage and to begin a transition from

dependence on intercarrier

compensation and toward greater

reliance on end-user recovery. In any

event, the Commission’s rule

implementing section 252(i) requires

incumbent LECs to make available

‘‘[i]ndividual interconnection, service,

or network element arrangements’’ to

requesting telecommunications carriers

only ‘‘for a reasonable period of time.’’

47 CFR 51.809(c). The Commission

concludes that any ‘‘reasonable period

of time’’ for making available rates

applicable to the exchange of ISP-bound

traffic expires upon the Commission’s

adoption in this Order of an intercarrier

compensation mechanism for ISP-bound

traffic.

18. In summary, the interim regime

the Commission adopts in this final rule

‘‘provides relative certainly in the

marketplace’’ pending further

Commission action, thereby allowing

carriers to develop business plans,

attract capital, and make intelligent

investments. The interim regime should

reduce carriers’ reliance on carrier-tocarrier payments as they recover more of

their costs from end-users, while

avoiding a ‘‘flash cut’’ to bill and keep

which might upset legitimate business

expectations. The Commission believes

that the analysis supplied in the Order

amply responds to the court mandate

that the Commission explains how its

conclusions regarding ISP-bound traffic

fit within the governing statute.

Paperwork Reduction Act

19. This order contains no new or

modified information collections subject

to the Paperwork Reduction Act of 1995

(PRA).

Final Regulatory Flexibility Analysis

20. As required by the Regulatory

Flexibility Act (RFA), 5 U.S.C. 603, an

Initial Regulatory Flexibility Analysis

(IRFA) was incorporated in the

Declaratory Ruling and NPRM.

Declaratory Ruling, 14 FCC Rcd at

3710–13. The Commission sought and

received written comments on the IRFA.

The Final Regulatory Flexibility

Analysis (FRFA) in this Order on

Remand and Report and Order conforms

to the RFA, as amended. See 5 U.S.C.

604. The Regulatory Flexibility Act, 5

U.S.C. 601 et seq., was amended by the

‘‘Small Business Regulatory

Enforcement Fairness Act of 1996’’

(SBREFA), which was enacted as Title

II of the Contract With America

Advancement Act of 1996, Public Law

No. 104–121, 110 Stat. 847 (1996)

(CWAAA).

21. To the extent that any statement

contained in this FRFA is perceived as

creating ambiguity with respect to the

Commission’s rules, or statements made

in preceding sections of this Order on

Remand and Report and Order, the rules

and statements set forth in those

preceding sections shall be controlling.

Need for, and Objectives of, This Order

on Remand and Report and Order

22. In the Declaratory Ruling, the

Commission found that it did not have

an adequate record upon which to adopt

a rule regarding intercarrier

compensation for ISP-bound traffic, but

the Commission indicated that adoption

of a rule would serve the public interest.

Declaratory Ruling and NPRM, 14 FCC

Rcd at 3707. The Commission sought

comment on two alternative proposals,

and stated that the Commission might

issue new rules or alter existing rules in

light of the comments received.

Declaratory Ruling and NPRM, 14 FCC

Rcd at 3711. Prior to the release of a

decision on such intercarrier

compensation, the U.S. Court of

Appeals for the District of Columbia

Circuit vacated certain provisions of the

Declaratory Ruling and remanded the

matter to the Commission. See Bell

Atlantic, 206 F.3d 1.

23. This Order on Remand and Report

and Order addresses the concerns of

various parties to this proceeding and

responds to the court’s remand. The

Commission exercises jurisdiction over

ISP-bound traffic pursuant to section

201, and establishes a three-year interim

intercarrier compensation mechanism

for the exchange of ISP-bound traffic

that applies if incumbent LECs offer to

exchange section 251(b)(5) traffic at the

same rates. During this interim period,

intercarrier compensation for ISP-bound

traffic is subject to a rate cap that

declines over the three-year period,

from $.0015/mou to $.0007/mou. The

Commission also imposes a cap on the

total ISP-bound minutes for which a

LEC may receive this compensation

under a particular interconnection

agreement equal to, on an annualized

basis, the number of ISP-bound minutes

for which that LEC was entitled to

receive compensation during the first

quarter of 2001, increased by ten

percent in each of the first two years of

the transition. If an incumbent LEC does

not offer to exchange all section

251(b)(5) traffic subject to the rate caps

set forth herein, the exchange of ISPbound traffic will be governed by the

reciprocal compensation rates approved

or arbitrated by state commissions.

Summary of Significant Issues Raised by

the Public Comments in Response to the

IRFA

24. The Office of Advocacy, U.S.

Small Business Administration (Office

of Advocacy) submitted two filings in

response to the IRFA. Office of

Advocacy, U.S. Small Business

Administration ex parte, May 27, 1999;

Office of Advocacy, U.S. Small Business

Administration ex parte, June 14, 1999.

In these filings, the Office of Advocacy

raises significant issues regarding the

Commission’s description, in the IRFA,

of small entities to which the

Commission’s rules will apply, and the

26804 Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Rules and Regulations

discussion of significant alternatives

considered and rejected. Specifically,

the Office of Advocacy argues that the

Commission has failed accurately to

identify all small entities affected by the

rulemaking by refusing to characterize

small incumbent local exchange carriers

(LECs), and failing to identify small

ISPs, as small entities. Office of

Advocacy, U.S. Small Business

Administration ex parte, May 27, 1999,

at 1–3; Office of Advocacy, U.S. Small

Business Administration ex parte, June

14, 1999, at 2–3. The Commission notes

that, in the IRFA, the Commission stated

that the Commission excluded small

incumbent LECs from the definitions of

‘‘small entity’’ and ‘‘small business

concern’’ because such companies are

either dominant in their field of

operations or are not independently

owned and operated. Declaratory Ruling

and NPRM, 14 FCC Rcd at 3711. The

Commission also stated, however, that

the Commission would nonetheless, out

of an abundance of caution, include

small incumbent LECs in the IRFA, and

did so. Declaratory Ruling and NPRM,

14 FCC Rcd at 3711. Small incumbent

LECs and other relevant small entities

are included in the Commission’s

present analysis as described.

25. The Office of Advocacy also states

that Internet service providers (ISPs) are

directly affected by the Commission’s

actions, and therefore should be

included in its regulatory flexibility

analysis. The Commission finds,

however, that rates charged to ISPs are

only indirectly affected by its actions.

The Commission has, nonetheless,

briefly discussed the effect on ISPs in

the primary text of this Order.

26. Last, the Office of Advocacy also

argues that the Commission has failed

adequately to address significant

alternatives that accomplish its stated

objective and minimize any significant

economic impact on small entities.

Office of Advocacy, U.S. Small Business

Administration ex parte, June 14, 1999,

at 3. The Commission notes that, in the

IRFA, it described the nature and effect

of its proposed actions, and encouraged

small entities to comment (including

giving comment on possible

alternatives). The Commission also

specifically sought comment on the two

alternative proposals for implementing

intercarrier compensation—one that

resolved intercarrier compensation

pursuant to the negotiation and

arbitration process set forth in section

252, and another that would have had

the Commission adopt a set of federal

rules to govern such intercarrier

compensation. Declaratory Ruling [IRFA],

14 FCC Rcd at 3711 (para. 39); see also

Declaratory Ruling, 14 FCC Rcd at

3707–08 (paras. 30–31). The

Commission believes, therefore, that

small entities had a sufficient

opportunity to comment on alternative

proposals.

27. NTCA also filed comments, not

directly in response to the IRFA, urging

the Commission to fulfill its obligation

to consider small telephone companies.

NTCA NPRM Comments at vi, 15. Some

commenters also raised the issue of

small entity concerns over increasing

Internet traffic and the use of Extended

Area Service (EAS) arrangements. See,

e.g., ICORE NPRM Comments at 1–7;

IURC NPRM Comments at 7; Richmond

Telephone Company NPRM Comments

at 1–8. The Commission is especially

sensitive to the needs of rural and small

LECs that handle ISP-bound traffic, but

the Commission finds that the costs that

LECs incur in originating this traffic

extends beyond the scope of the present

proceeding and should not dictate the

appropriate approach to compensation

for delivery of ISP-bound traffic.

Description and Estimate of the Number

of Small Entities to Which Rules Will

Apply

28. The rules the Commission is

adopting apply to local exchange

carriers. To estimate the number of

small entities that would be affected by

this economic impact, the Commission

first considers the statutory definition of

‘‘small entity’’ under the RFA. The RFA

generally defines ‘‘small entity’’ as

having the same meaning as the term

‘‘small business,’’ ‘‘small organization,’’

and ‘‘small governmental jurisdiction.’’

5 U.S.C. 601(6). 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. 5 U.S.C. 601(3)

(incorporating by reference the

definition of ‘‘small business concern’’

in 5 U.S.C. 632). 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 Small Business

Administration (SBA). 15 U.S.C. 632.

The SBA has defined a small business

for Standard Industrial Classification

(SIC) categories 4812 (Radiotelephone

Communications) and 4813 (Telephone

Communications, Except

Radiotelephone) to be small entities

when they have no more than 1,500

employees. 13 CFR 121.201.

29. The most reliable source of

information regarding the total numbers

of certain common carrier and related

providers nationwide, as well as the

numbers of commercial wireless

entities, appears to be data the

Commission publishes annually in its

Carrier Locator report, derived from

filings made in connection with the

Telecommunications Relay Service

(TRS). FCC, Carrier Locator: Interstate

Service Providers, Figure 1 (Jan. 2000)

(Carrier Locator). According to data in

the most recent report, there are 4,144

interstate carriers. Carrier Locator at Fig.

1. These carriers include, inter alia,

incumbent local exchange carriers,

competitive local exchange carriers,

competitive access providers,

interexchange carriers, other wireline

carriers and service providers (including

shared-tenant service providers and

private carriers), operator service

providers, pay telephone operators,

providers of telephone toll service,

wireless carriers and services providers,

and resellers.

30. The Commission has included

small incumbent local exchange carriers

(LECs) in this present regulatory

flexibility 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.’’ 5 U.S.C. 601(3). 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. Office of

Advocacy, U.S. Small Business

Administration ex parte, May 27, 1999,

at 1–3; Office of Advocacy, U.S. Small

Business Administration ex parte, June

14, 1999, at 2–3. The Small Business

Act contains a definition of ‘‘small

business concern,’’ which the RFA

incorporates into its own definition of

‘‘small business.’’ See 15 U.S.C. 632(a)

(Small Business Act); 5 U.S.C. 601(3)

(RFA). SBA regulations interpret ‘‘small

business concern’’ to include the

concept of dominance on a national

basis. 13 CFR 121.102(b). Since 1996,

out of an abundance of caution, the

Commission has included small

incumbent LECs in its regulatory

flexibility analyses. See, e.g.,

Implementation of the Local

Competition Provisions of the

Telecommunications Act of 1996, CC

Docket, 96–98, First Report and Order,

11 FCC Rcd 15499, 16144–45 (1996).

The Commission has therefore included

small incumbent LECs in this regulatory

flexibility analysis, although the

Commission emphasizes that this

regulatory flexibility analysis action has

Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Rules and Regulations 26805

no effect on the Commission’s analyses

and determinations in other, non-RFA

contexts.

31. Total Number of Telephone

Companies Affected. The United States

Bureau of the Census (the Census

Bureau) reports that, at the end of 1992,

there were 3,497 firms engaged in

providing telephone services, as defined

therein, for at least one year. United

States Department of Commerce, Bureau

of the Census, 1992 Census of

Transportation, Communications, and

Utilities: Establishment and Firm Size,

at Firm Size 1–123 (1995) (1992

Census). This number contains a variety

of different categories of carriers,

including local exchange carriers,

interexchange carriers, competitive

access providers, cellular carriers,

mobile service carriers, operator service

providers, pay telephone operators, PCS

providers, covered SMR providers, and

resellers. It seems certain that some of

those 3,497 telephone service firms may

not qualify as small entities or small

incumbent LECs because they are not

‘‘independently owned and operated.’’

15 U.S.C. 632(a)(1). For example, a PCS

provider that is affiliated with an

interexchange carrier having more than

1,500 employees would not meet the

definition of a small business. It seems

reasonable to conclude, therefore, that

fewer than 3,497 telephone service firms

are small entity telephone service firms

or small incumbent LECs that may be

affected by the decisions and rule

changes adopted in this proceeding.

32. Wireline Carriers and Service

Providers. The SBA has developed a

definition of small entities for telephone

communications companies other than

radiotelephone companies. The Census

Bureau reports that, there were 2,321

such telephone companies in operation

for at least one year at the end of 1992.

1992 Census at Firm Size 1–123.

According to the SBA’s definition, a

small business telephone company

other than a radiotelephone company is

one employing no more than 1,500

persons. 13 CFR 121.201, Standard

Industrial Classification (SIC) Code

4813. All but 26 of the 2,321 nonradiotelephone companies listed by the

Census Bureau were reported to have

fewer than 1,000 employees. Thus, even

if all 26 of those companies had more

than 1,500 employees, there would still

be 2,295 non-radiotelephone companies

that might qualify as small entities or

small incumbent LECs. Although it

seems certain that some of these carriers

are not independently owned and

operated, the Commission is unable at

this time to estimate with greater

precision the number of wireline

carriers and service providers that

would qualify as small business

concerns under the SBA’s definition.

Consequently, the Commission

estimates that there are fewer than 2,295

small entity telephone communications

companies other than radiotelephone

companies that may be affected by the

decisions and rule changes adopted in

this proceeding.

33. Local Exchange Carriers,

Interexchange Carriers, Competitive

Access Providers, Operator Service

Providers, and Resellers. Neither the

Commission nor the SBA has developed

a definition particular to small LECs,

interexchange carriers (IXCs),

competitive access providers (CAPs),

operator service providers (OSPs), or

resellers. The closest applicable

definition for these carrier-types under

the SBA rules is for telephone

communications companies other than

radiotelephone (wireless) companies. 13

CFR 121.201, SIC Code 4813. According

to the Commission’s most recent TRS

data, there are 1,348 incumbent LECs

and 212 CAPs and competitive LECs.

Carrier Locator at Fig. 1. Although it

seems certain that some of these carriers

are not independently owned and

operated, or have more than 1,500

employees, the Commission is unable at

this time to estimate with greater

precision the number of these carriers

that would qualify as small business

concerns under the SBA’s definition.

Consequently, the Commission

estimates that there are fewer than 1,348

incumbent LECs and fewer than 212

CAPs and competitive LECs that may be

affected by the decisions and rule

changes adopted in this proceeding.

Description of Projected Reporting,

Recordkeeping, and Other Compliance

Requirements

34. The rule the Commission is

adopting imposes direct compliance

requirements on interconnected

incumbent and competitive LECs,

including small LECs. In order to

comply with this rule, these entities will

be required to exchange their ISP-bound

traffic subject to the rules the

Commission is adopting.

Steps Taken To Minimize Significant

Economic Impact on Small Entities, and

Significant Alternatives Considered

35. In the Declaratory Ruling and

NPRM the Commission proposed

various approaches to intercarrier

compensation for ISP-bound traffic.

Declaratory Ruling, 14 FCC Rcd at

3707–10. During the course of this

proceeding the Commission has

considered and rejected several

alternatives. None of the significant

alternatives considered would appear to

succeed as much as the Commission’s

present rule in balancing its desire to

minimize any significant economic

impact on relevant small entities with

its desire to deal with the undesirable

incentives created under the current

reciprocal compensation regime that

governs the exchange of ISP-bound

traffic in most instances. The

Commission also finds that for small

ILECs and CLECs the administrative

burdens and transaction costs of

intercarrier compensation will be

minimized to the extent that LECs begin

a transition toward recovery of costs

from end-users, rather than other

carriers.

36. Although a longer transition

period was considered by the

Commission, it was rejected because a

three-year period was considered

sufficient to accomplish the

Commission’s policy objectives with

respect to all LECs. Differing

compliance requirements for small LECs

or exemption from all or part of this rule

is inconsistent with the Commission’s

policy goal of addressing the market

distortions attributable to the prevailing

intercarrier compensation mechanism

for ISP-bound traffic and beginning a

smooth transition to bill-and-keep.

37. Report to Congress: The

Commission will send a copy of this

Order on Remand and Report and

Order, including this FRFA, in a report

to be sent to Congress pursuant to the

Congressional Review Act of 1996. 5

U.S.C. 801(a)(1)(A). In addition, the

Commission will send a copy of this

Order on Remand and Report and

Order, including FRFA, to the Chief

Counsel for Advocacy of the Small

Business Administration. See also 5

U.S.C. 604(b). A copy of this Order on

Remand and Report and Order and

FRFA (or summaries thereof) will be

published in the Federal Register. See

5 U.S.C. 604(b).

Ordering Clauses

Accordingly, IT IS ORDERED,

pursuant to sections 1, 4(i) and (j), 201–

209, 251, 252, 332, and 403 of the

Communications Act, as amended, 47

U.S.C. 151, 154(i), 154(j), 201–209, 251,

252, 332, and 403, and section 553 of

Title 5, United States Code, 5 U.S.C.

553, that this Order on Remand and

Report and Order and revisions to part

51 of the Commission’s rules, 47 CFR

part 51, ARE ADOPTED. This Order on

Remand and Report and Order and the

rule revisions adopted herein will be

effective 30 days after publication in the

Federal Register except that, for good

cause shown, as set forth in paragraph

82 of this Order and as described in

paragraph 17 of this Federal Register

26806 Federal Register / Vol. 66, No. 94 / Tuesday, May 15, 2001 / Rules and Regulations

document, the provision of this Order

prohibiting carriers from invoking

section 252(i) of the Act to opt into an

existing interconnection agreement as it

applies to rates paid for the exchange of

ISP-bound traffic will be effective

immediately upon publication of this

Order in the Federal Register.

It is further ordered that the

Commission’s Consumer Information

Bureau, Reference Information Center,

shall send a copy of this Order on

Remand and 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 51

Communications, common carriers,

Interconnection, Telecommunications,

Internet service providers.

Federal Communications Commission.

Magalie Roman Salas,

Secretary.

For the reasons discussed in the

preamble, the Federal Communications

Commission amends 47 CFR part 51 as

follows:

PART 51—INTERCONNECTION

1. The authority citation for part 51

continues to read:

Authority: Sections 1–5, 7, 201–05, 207–

09, 218, 225–27, 251–54, 271, 332, 48 Stat.

1070, as amended, 1077; 47 U.S.C. §§ 151–55,

157, 201–05, 207–09, 218, 225–27, 251–54,

271, 332, unless otherwise noted.

2. The heading in part 51, subpart H,

is revised to read as follows:

Subpart H—Reciprocal Compensation

for Transport and Termination of

Telecommunications Traffic

3. Section 51.701(b) is revised to read

as follows:

§ 51.701 Scope of transport and

termination pricing rules.

* * * * *

(b) Telecommunications traffic. For

purposes of this subpart,

telecommunications traffic means:

(1) Telecommunications traffic

exchanged between a LEC and a

telecommunications carrier other than a

CMRS provider, except for

telecommunications traffic that is

interstate or intrastate exchange access,

information access, or exchange services

for such access (see FCC 01–131,

paragraphs 34, 36, 39, 42–43); or

(2) Telecommunications traffic

exchanged between a LEC and a CMRS

provider that, at the beginning of the

call, originates and terminates within

the same Major Trading Area, as defined

in § 24.202(a) of this chapter.

* * * * *

4. Sections 51.701(a), 51.701(c)

through (e), 51.703, 51.705, 51.707,

51.709, 51.711, 51.713, 51.715, and

51.717 are amended by removing the

term ‘‘local telecommunications traffic’’

and adding in its place

‘‘telecommunications traffic’’ each place

it appears.

[FR Doc. 01–12165 Filed 5–14–01; 8:45 am]

BILLING CODE 6712–01–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 73

[DA No. 01–1082; MM Docket No. 97–86;

RM–9025 & RM–9084]

Radio Broadcasting Services;

Camdenton and Laurie, MO

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: Camdenton Community

Broadcasters proposed the allotment of

Channel 265A at Camdenton, Missouri,

as the community’s first local

commercial FM service. See 62 FR

10010, March 5, 1997. In response to a

counterproposal filed by Bott

Communications, Inc., we shall allot

Channel 265C3 at Laurie, Missouri, as a

first local service, at coordinates 38–08–

30 and 92–50–37. There is a site

restriction 6 kilometers south of the

community. No allotment will be made

at Camdenton, Missouri. A filing

window for Channel 265C3 at Laurie

will not be opened at this time. Instead,

the issue of opening this allotment for

auction will be addressed by the

Commission in a subsequent order.

DATES: Effective June 11, 2001.

FOR FURTHER INFORMATION CONTACT:

Kathleen Scheuerle, Mass Media

Bureau, (202) 418–2180.

SUPPLEMENTARY INFORMATION: This is a

summary of the Commission’s Report

and Order, MM Docket No. 97–86,

adopted April 18, 2001, and released

April 27, 2001. The full text of this

Commission decision is available for

inspection and copying during normal

business hours in the Commission’s

Reference Center, 445 12th Street, SW.,

Washington, DC. The complete text of

this decision may also be purchased

from the Commission’s copy

contractors, International Transcription

Services, Inc., 1231 20th Street, NW.,

Washington, DC 20036, (202) 857–3800,

facsimile (202) 857–3805.

List of Subjects in 47 CFR Part 73

Radio broadcasting.

Part 73 of title 47 of the Code of

Federal Regulations is amended as

follows:

PART 73—RADIO BROADCASTING

SERVICES

1. The authority citation for part 73

continues to read as follows:

Authority: 47 U.S.C. 154, 303, 334 and 336.

§ 73.202 [Amended]

Section 73.202(b), the Table of FM

Allotments under Missouri, is amended

by adding Laurie, Channel 265C3.

Federal Communications Commission.

John A. Karousos,

Chief, Allocations Branch, Policy and Rules

Division, Mass Media Bureau.

[FR Doc. 01–12091 Filed 5–14–01; 8:45 am]

BILLING CODE 6712–01–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 73

[DA 01–1081; MM Docket No. 00–6; RM–

9791; RM–9890]

Radio Broadcasting Services; McCook,

Alliance, Imperial, NE, Limon, Parker,

Aspen, Avon, Westcliffe, CO

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: The Commission, at the

request of McCook Radio Group, LLC,

allots Channel 271C1 to McCook, NE, as

the community’s fifth local FM service.

At the request of The Meadowlark

Group, Inc., the Commission substitutes

Channel 276C for Channel 276C1 at

Limon, CO, reallots Channel 276C to

Parker, CO, and modifies the license of

Station KAVD accordingly. To

accommodate the allotment of Channel

276C to Parker, the Commission also

substitutes: (1) Channel 276C3 for

Channel 249C3 at Aspen, CO, and

modifies the license of Station KSPN;

(2) Channel 249C2 for Channel 276C2 at

Avon, CO, and modifies the license of

Station KZYR; (3) Channel 227A for

vacant and unapplied for Channel 276A

at Westcliffe, CO; (4) Channel 275CO for

Channel 275C at Imperial, NE, and

modifies the construction permit of

Imperial Media Association. See 65 FR

4798, February 1, 2000. A filing window

for Channel 271C1 at McCook, NE, will

not be opened at this time. Instead, the

issue of opening this allotment for

auction will be addressed by the

Commission in a subsequent Order.