[Federal Register Volume 66, Number 100 (Wednesday, May 23, 2001)]
[Proposed Rules]
[Pages 28410-28418]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-12759]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Ch. I

[FCC 01-132; CC Docket No. 01-92]


Intercarrier Compensation; Reciprocal Compensation

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document seeks comment on the concept of a unified 
intercarrier compensation regime, including alternative approaches such 
as ``bill and keep.'' It addresses intercarrier compensation-related 
problems arising from the introduction of local competition, and of new 
services and technologies, into telecommunications markets.

DATES: Submit comments on or before August 21, 2001, and submit reply 
comments on or before October 5, 2001.

ADDRESSES: All filings must be sent to the Commission's Secretary, 
Magalie Roman Salas, Office of the Secretary, Federal Communications 
Commission, Room TW-B204, 445 12th Street, SW., Washington, DC 20554. 
Comments may also be filed using the Commission's Electronic Comment 
Filing System (ECFS) via the Internet at http://www.fcc.gov/e-file/ecfs.html. See ``Comment Filing Procedures,'' below, for more detailed 
instructions on filing comments and reply comments in this proceeding.

FOR FURTHER INFORMATION CONTACT: Jane Jackson, Chief, Competitive 
Pricing Division, Common Carrier Bureau, (202) 418-1520.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM) in CC Docket No. 01-92, FCC 01-132, 
adopted April 19, 2001, and released April 27, 2001. The full text of 
the NPRM is available for inspection and copying during normal business 
hours in the FCC Reference Center, 445 12th Street, SW., Room CY-A257, 
Washington, DC 20554. The full text of the NPRM may also be purchased 
from the Commission's copy contractor, International Transcription 
Services, 1231 20th Street, N.W., Washington, D.C. 20036, telephone 
(202) 857-3800, facsimile (202) 857-3805. The full text of the NPRM may 
also be downloaded at: http://www.fcc.gov/Bureaus/Common Carrier/
Notices/2001/fcc01132.doc. Alternative formats (computer diskette, 
large print, audio cassette, and Braille) are available to persons with 
disabilities by contacting Martha Contee at (202) 418-0260, TTY (202) 
418-2555, or at <a href="/cdn-cgi/l/email-protection#c7aaa4a8a9b3a2a287a1a4a4e9a0a8b1"><span class="__cf_email__" data-cfemail="49242a26273d2c2c092f2a2a672e263f">[email protected]</span></a>>.

Synopsis of the Notice of Proposed Rulemaking

    The NPRM seeks comment on the appropriate goals for a new 
intercarrier compensation regime, including efficient use of the 
network, and efficient investment in, and deployment of, network 
infrastructure (including investment in broadband). The NPRM seeks 
comment on the extent to which any proposed regime achieves 
technological and competitive neutrality, while minimizing regulatory 
intervention. It also seeks comment on the feasibility of a new regime, 
the relative trade-offs, and the importance of having a unified regime 
altogether.
    The NPRM seeks comment on certain assumptions about intercarrier 
compensation. For example, do both parties benefit from a call, despite 
the current regime's simplifying requirement for originating callers to 
pay for both origination and termination? What is the extent to which 
terminating carriers have monopoly power over loop access? How much 
does that bill and keep avoid regulatory intervention in the allocation 
of common costs, and empower end users to exercise direct control over 
their access arrangements?
    The NPRM seeks comment on the relative efficiencies of bill-and-
keep arrangements. It questions the validity of the Commission's 
previous determination that bill and keep is only efficient when there 
are no traffic-sensitive costs of termination, and only

[[Page 28411]]

permissible when traffic between two networks is relatively balanced 
while the rates are symmetric. It asks whether bill and keep would 
preclude efficient forms of price discrimination (e.g., differential 
rates for network cost recovery). Furthermore, the NPRM seeks comment 
on how to address the treatment of transport costs, including 
approaches proposed by two Commission staff working papers that are 
discussed in the NPRM. It also seeks comment on the relative sizes of 
transactions costs (i.e., measuring and billing) for the various 
alternatives, and the impact of bill-and-keep on the opportunities for 
regulatory arbitrage that currently exist in, e.g., Internet telephony, 
termination of ISP-bound traffic, and terminating access charges for 
interstate voice traffic.
    The NPRM also seeks comment on the potential disadvantages of a 
bill-and-keep arrangement, including: (a) Incentives for carriers to 
locate central offices inefficiently; (b) how to determine the 
incremental cost of interconnection when networks are less-than-fully 
provisioned; (c) the potential for unwanted calls to increase; and (d) 
the potential for ISPs to begin to charge traffic-sensitive rates or 
higher flat rates to end users.
    With regard to specific services, the NPRM seeks comment on whether 
the Commission should adopt bill and keep for ISP-bound traffic. The 
NPRM asks about local exchange carrier (LEC) cost recovery, and any 
effects on unbundled network element (UNE) pricing, if the Commission 
should move to a bill-and-keep regime for all ISP-bound traffic.
    The NPRM also seeks comment on the relative benefits of bill and 
keep for all traffic subject to section 251(b)(5) of the Communications 
Act of 1934 (``the Communications Act''), versus the current per-minute 
reciprocal compensation rates imposed by most states. The NPRM 
specifically addresses issues concerning points of interconnection, 
three-carrier calls, and the question of whether bill-and-keep rate 
structures satisfy the requirements of sections 251(b)(5) and 252(d)(2) 
of the Communications Act.
    In addition, the NPRM seeks comment on the Commission's legal 
authority over interconnection between LECs and commercial mobile radio 
services (CMRS) under section 332 of the Communications Act, and on the 
adoption of a new LEC-CMRS intercarrier compensation regime. With 
regard to interstate access charges, the NPRM seeks comment on the 
eventual application of a bill-and-keep regime, and asks whether it is 
appropriate to phase in a new access charge regime in stages.
    Apart from moving to a bill-and-keep regime, the NPRM seeks comment 
on whether the existing calling-party's-network-pays regime could be 
reformed to address the problems that motivate this rulemaking. As 
such, it seeks comment on rate level issues (e.g., identifying 
``additional costs'' under section 252(d)(2) of the Communications Act, 
and applying presumptive ILEC cost proxies), rate structure issues, 
single point of interconnection issues, virtual central office codes, 
and administrative feasibility.
    The NPRM also seeks comment on the impacts of moving to a new 
regime on end user rates, and universal service. Furthermore, it seeks 
comment on legal issues concerning the authority for a new regime, 
together with the effect of proposals for a unified regime on the 
division of jurisdictional responsibility between the Commission and 
the states.
    Finally, the NPRM seeks comment on the impact of a new regime on 
interconnection agreements between international carriers, and on 
interconnection agreements between Internet backbones. It asks about 
the potential impact on small entities that may result from the 
adoption of a new regime. It concludes by seeking comment on any 
further possible approaches to intercarrier compensation that are not 
addressed in the NPRM.

Regulatory Flexibility Act Final Analysis

    As required by the Regulatory Flexibility Act (RFA), the Commission 
has prepared this present Initial Regulatory Flexibility Analysis 
(IRFA) of the possible significant economic impact on small entities by 
the policies and rules proposed in this NPRM. Written public comments 
are requested on this IRFA. Comments must be identified as responses to 
the IRFA and must be filed by the deadlines for comments on the NPRM 
provided above. The Commission will send a copy of the NPRM, including 
this IRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration (SBA). See 5 U.S.C. 603(a). In addition, the NPRM and 
IRFA (or summaries thereof) will be published in the Federal Register. 
See id.

I. Need for, and Objectives of, the Proposed Rules

    The existing intercarrier compensation regime applies different 
sets of rules to different types of carriers and to different types of 
traffic. Basically, this patchwork of rules can be broken down into: 
(1) reciprocal compensation rules, which apply to the exchange of local 
traffic; and (2) access rules that apply to traffic exchanged between 
local carriers and long-distance carriers. Both sets of rules are 
``calling-party's-network-pays'' (CPNP) arrangements (i.e., they 
require the calling party's network to pay the called party's network 
to terminate a call). Both sets of rules are also subject to numerous 
exceptions, such as the enhanced service provider (ESP) exemption from 
access charges.
    This NPRM is motivated by numerous problems that have appeared 
recently concerning the existing rules governing intercarrier 
compensation. A primary concern is the opportunity, under the current 
regime, for profit-seeking behavior to take advantage of cost or 
revenue disparities that are due solely to regulation. For example, 
competitive local exchange carriers (CLECs) often target Internet 
service providers (ISPs) as customers in order to become net-recipients 
of traffic, and thus profit from reciprocal compensation revenues. 
Similarly, Internet Protocol (IP) telephony threatens to erode access 
revenues for LECs because it is exempt from the access charges that 
traditional long-distance carriers must pay. Another major concern is 
that local carriers possess monopoly power over terminating access. As 
a result, CLECs often impose access charges that far exceed the 
regulated access charges of incumbent LECs. Finally, the current regime 
can generate inefficient traffic-sensitive end-user rates, and can also 
create incentives for entities to claim to be networks in order to 
qualify for interconnection, rather than to simply subscribe as a 
customer.

II. Legal Basis

    The legal basis for any action that may be taken pursuant to the 
NPRM is contained in sections 4, 201-202, 303 and 403 of the 
Communications Act of 1934, as amended, 47 U.S.C. 154, 201-202, 303 and 
403, and sections 1.1, 1.411 and 1.412 of the Commission's rules, 47 
CFR 1.1, 1.411 and 1.412.

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

    The RFA directs agencies to provide a description of, and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. 5 U.S.C. 603(b)(3). The RFA 
defines the term ``small entity'' as having the same meaning as the 
terms ``small business,'' ``small organization'' and ``small business 
concern'' under section 3 of the Small Business Act. 5

[[Page 28412]]

U.S.C. 601(3). 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. 5 U.S.C. 632.
    A small organization is generally ``any not-for-profit enterprise 
which is independently owned and operated and is not dominant in its 
field.'' 5 U.S.C. 601(4). Nationwide, as of 1992, there were 
approximately 275,801 small organizations. ``Small governmental 
jurisdiction'' generally means ``governments of cities, counties, 
towns, townships, villages, school districts, or special districts, 
with a population of less than 50,000.'' As of 1992, there were 
approximately 85,006 such jurisdictions in the United States. This 
number includes 38,978 counties, cities, and towns; of these, 37,566, 
or 96 percent, have populations of fewer than 50,000. The Census Bureau 
estimates that this ratio is approximately accurate for all 
governmental entities. Thus, of the 85,006 governmental entities, we 
estimate that 81,600 (96 percent) are small entities. According to SBA 
reporting data, there were 4.44 million small business firms nationwide 
in 1992. Below, we further describe and estimate the number of small 
entity licensees and regulatees that may be affected by rules adopted 
pursuant to this NPRM.
    The most reliable source of information regarding the total numbers 
of certain common carrier and related providers nationwide, as well as 
the number of commercial wireless entities, appears to be the data that 
the Commission publishes in its Trends in Telephone Service report. In 
a recent news release, the Commission indicated that there are 4,822 
interstate carriers. These carriers include, inter alia, local exchange 
carriers, wireline carriers and service providers, interexchange 
carriers, competitive access providers, operator service providers, pay 
telephone operators, providers of telephone service, providers of 
telephone exchange service, and resellers.
    The SBA has defined establishments engaged in providing 
``Radiotelephone Communications'' and ``Telephone Communications, 
Except Radiotelephone'' to be small businesses when they have no more 
than 1,500 employees. Below, we discuss the total estimated number of 
telephone companies falling within the two categories, and the number 
of small businesses in each. We then attempt to further refine those 
estimates to correspond with the categories of telephone companies that 
are commonly used under our rules.
    We have included small incumbent LECs (small ILECs) 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 ILECs 
are not dominant in their field of operation because any such dominance 
is not ``national'' in scope. We have therefore included small 
incumbent LECs in this RFA analysis, although we emphasize that this 
RFA action has no effect on Commission analyses and determinations in 
other, non-RFA contexts.
    Total Number of Telephone Companies Affected. The U.S. Bureau of 
the Census (``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. 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, covered specialized mobile radio providers, and 
resellers. It seems certain that some of these 3,497 telephone service 
firms may not qualify as small entities or small ILECs because they are 
not ``independently owned and operated.'' 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 is 
reasonable to conclude that fewer than 3,497 telephone service firms 
are small entity telephone service firms or small ILECs that may be 
affected by the new rules.
    Wireline Carriers and Service Providers. The SBA has developed a 
definition of small entities for telephone communications companies 
except radiotelephone (i.e., wireless) 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. 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. All 
but 26 of the 2,321 non-radiotelephone companies listed by the Census 
Bureau were reported to have fewer than 1,000 employees. Thus, even if 
all 26 of those companies had more than 1,500 employees, there would 
still be 2,295 non-radiotelephone companies that might qualify as small 
entities or small ILECs. We do not have data specifying the number of 
these carriers that are not independently owned and operated, and thus 
are unable at this time to estimate with greater precision the number 
of wireline carriers and service providers that would qualify as small 
business concerns under the SBA's definition. Consequently, we estimate 
2,295 or fewer small telephone communications companies other than 
radiotelephone companies are small entities or small ILECs that may be 
affected by rules adopted pursuant to this NPRM. 
    Local Exchange Carriers. Neither the Commission nor the SBA has 
developed a definition for small providers of local exchange services 
(LECs). The closest applicable definition under the SBA rules is for 
telephone communications companies other than radiotelephone (i.e., 
wireless) companies. According to the most recent Telecommunications 
Industry Revenue data, 1,335 incumbent carriers reported that they were 
engaged in the provision of local exchange services. We do not have 
data specifying the number of these carriers that are either dominant 
in their field of operations, are not independently owned and operated, 
or have more than 1,500 employees, and thus are unable at this time to 
estimate with greater precision the number of LECs that would qualify 
as small business concerns under the SBA's definition. Consequently, we 
estimate that 1,335 or fewer providers of local exchange service are 
small entities or small ILECs that may be affected by the new rules.
    Interexchange Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
providers of interexchange services (IXCs). The closest applicable 
definition under the SBA rules is for telephone communications 
companies other than radiotelephone (i.e., wireless) companies. 
According to the most recent Trends in Telephone Service data, 204 
carriers reported that they were engaged in the provision of 
interexchange services. We do not have data specifying the number of 
these carriers that are not independently owned and operated or have 
more than 1,500 employees, and thus are unable at this time to estimate 
with greater precision the number of IXCs that would qualify as small 
business concerns under the SBA's definition. Consequently, we estimate 
that there are 204 or fewer small-entity IXCs that may be affected by 
rules adopted pursuant to this NPRM.

[[Page 28413]]

    Competitive Access Providers. Neither the Commission nor the SBA 
has developed a definition of small entities specifically applicable to 
competitive access services providers (CAPs). The closest applicable 
definition under the SBA rules is for telephone communications 
companies other than radiotelephone (i.e., wireless) companies. 
According to the most recent Trends in Telephone Service data, 349 CAP/
CLEC carriers and 60 other LECs reported that they were engaged in the 
provision of competitive local exchange services. We do not have data 
specifying the number of these carriers that are not independently 
owned and operated, or have more than 1,500 employees, and thus are 
unable at this time to estimate with greater precision the number of 
CAPs that would qualify as small business concerns under the SBA's 
definition. Consequently, we estimate that there are 349 or fewer 
small-entity CAPs and 60 or fewer other LECs that may be affected by 
rules adopted pursuant to this NPRM.
    Operator Service Providers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
providers of operator services. The closest applicable definition under 
the SBA rules is for telephone communications companies other than 
radiotelephone (i.e., wireless) companies. According to the most recent 
Trends in Telephone Service data, 21 carriers reported that they were 
engaged in the provision of operator services. We do not have data 
specifying the number of these carriers that are not independently 
owned and operated or have more than 1,500 employees, and thus are 
unable at this time to estimate with greater precision the number of 
operator service providers that would qualify as small business 
concerns under the SBA's definition. Consequently, we estimate that 
there are 21 or fewer small-entity operator service providers that may 
be affected by rules adopted pursuant to this NPRM.
    Pay Telephone Operators. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to pay 
telephone operators. The closest applicable definition under SBA rules 
is for telephone communications companies other than radiotelephone 
(i.e., wireless) companies. According to the most recent Trends in 
Telephone Service data, 758 carriers reported that they were engaged in 
the provision of pay telephone services. We do not have data specifying 
the number of these carriers that are not independently owned and 
operated or have more than 1,500 employees, and thus are unable at this 
time to estimate with greater precision the number of pay telephone 
operators that would qualify as small business concerns under the SBA's 
definition. Consequently, we estimate that there are 758 or fewer 
small-entity pay telephone operators that may be affected by rules 
adopted pursuant to this NPRM.
    Resellers (including debit card providers). Neither the Commission 
nor the SBA has developed a definition of small entities specifically 
applicable to resellers. The closest applicable SBA definition for a 
reseller is a telephone communications company other than 
radiotelephone (i.e., wireless) companies. According to the most recent 
Trends in Telephone Service data, 454 toll and 87 local entities 
reported that they were engaged in the resale of telephone service. We 
do not have data specifying the number of these carriers that are not 
independently owned and operated or have more than 1,500 employees, and 
thus are unable at this time to estimate with greater precision the 
number of resellers that would qualify as small business concerns under 
the SBA's definition. Consequently, we estimate that there are 454 or 
fewer small-toll-entity resellers and 87 or fewer small-local-entity 
resellers that may be affected by rules adopted pursuant to this NPRM.
    Toll-Free 800 and 800-Like Service Subscribers. Neither the 
Commission nor the SBA has developed a definition of small entities 
specifically applicable to 800 and 800-like service (``toll free'') 
subscribers. The most reliable source of information regarding the 
number of these service subscribers appears to be data the Commission 
collects on the 800, 888, and 877 numbers in use. According to our most 
recent data, at the end of January 1999, the number of 800 numbers 
assigned was 7,692,955; the number of 888 numbers that had been 
assigned was 7,706,393; and the number of 877 numbers assigned was 
1,946,538. We do not have data specifying the number of these 
subscribers that are not independently owned and operated or have more 
than 1,500 employees, and thus are unable at this time to estimate with 
greater precision the number of toll free subscribers that would 
qualify as small business concerns under the SBA's definition. 
Consequently, we estimate that there are 7,692,955 or fewer small-
entity 800 subscribers, 7,706,393 or fewer small-entity 888 
subscribers, and 1,946,538 or fewer small-entity 877 subscribers that 
may be affected by rules adopted pursuant to this NPRM.
    Cellular Licensees. Neither the Commission nor the SBA has 
developed a definition of small entities applicable to cellular 
licensees. Therefore, the applicable definition of small entity is the 
definition under the SBA rules applicable to radiotelephone (i.e., 
wireless) companies. This definition provides that a small entity is a 
radiotelephone company employing no more than 1,500 persons. According 
to the Bureau of the Census, only 12 radiotelephone firms out of a 
total of 1,178 such firms that operated during 1992 had 1,000 or more 
employees. Therefore, even if all 12 of these firms were cellular 
telephone companies, nearly all cellular carriers were small businesses 
under the SBA's definition. In addition, we note that there are 1,758 
cellular licenses; however, we do not know the number of cellular 
licensees, since a cellular licensee may own several licenses. The most 
reliable source of information regarding the number of cellular service 
providers nationwide appears to be data the Commission publishes 
annually in its Telecommunications Industry Revenue report, regarding 
the Telecommunications Relay Service (TRS). The report places cellular 
licensees and Personal Communications Service (PCS) licensees in one 
group. According to recent data, 808 carriers reported that they were 
engaged in the provision of either cellular or PCS services. We do not 
have data specifying the number of these carriers that are not 
independently owned and operated or have more than 1,500 employees, and 
thus are unable at this time to estimate with greater precision the 
number of cellular service carriers that would qualify as small 
business concerns under the SBA's definition. Consequently, we estimate 
that there are no more than 808 small cellular service carriers.
    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 4 nationwide licensees currently authorized to 
operate in the 220 MHz band. The Commission has not developed a 
definition of small entities specifically applicable to such incumbent 
220 MHz Phase I licensees. To estimate the number of such licensees 
that are small businesses, we apply the definition under the SBA rules 
applicable to radiotelephone communications companies. This definition 
provides that a small entity is a radiotelephone company employing no 
more than 1,500 persons. According to a 1995 estimate by the Bureau of 
the

[[Page 28414]]

Census, only 12 radiotelephone firms out of a total of 1,178 such firms 
that operated during 1992 had 1,000 or more employees. Therefore, 
assuming that this general ratio has not changed significantly in 
recent years in the context of Phase I 220 MHz licensees, we estimate 
that nearly all such licensees are small businesses under the SBA's 
definition.
    220 MHz Radio Service-Phase II Licensees. The Phase II 220 MHz 
service is a new service, and is subject to spectrum auctions. In the 
220 MHz Third Report and Order, 62 FR 15978, we adopted criteria for 
defining small businesses and very small businesses for purposes of 
determining their eligibility for special provisions such as bidding 
credits and installment payments. We have defined a small business as 
an entity that, together with its affiliates and controlling 
principals, has average gross revenues not exceeding $15 million for 
the preceding three years. Additionally, a very small business is 
defined as an entity that, together with its affiliates and controlling 
principals, has average gross revenues that are not more than $3 
million for the preceding three years. The SBA has approved these 
definitions. An auction of Phase II licenses commenced on September 15, 
1998, and closed on October 22, 1998. Nine hundred and eight (908) 
licenses were auctioned in three different-sized geographic areas: 3 
nationwide licenses, 30 Regional Economic Area Group (REAG) licenses, 
and 875 Economic Area (EA) licenses. Of the 908 licenses auctioned, 693 
were sold. Companies claiming small business status won: 1 of the 
Nationwide licenses, 67% of the Regional licenses, 47% of the REAG 
licenses and 54% of the EA licenses. As of January 22, 1999, the 
Commission announced that it was prepared to grant 654 of the Phase II 
licenses won at auction. A second 220 MHz Radio Service auction began 
on June 8, 1999 and closed on June 30, 1999. This auction offered 225 
licenses in 87 EAs and 4 REAGs. (A total of 9 REAG licenses and 216 EA 
licenses. No nationwide licenses were available in this auction.) Of 
the 215 EA licenses won, 153 EA licenses (71%) were won by bidders 
claiming small business status. Of the 7 REAG licenses won, 5 REAG 
licenses (71%) were won by bidders claiming small business status.
    Private and Common Carrier Paging. The Commission has adopted a 
two-tier definition of small businesses in the context of auctioning 
licenses in the Common Carrier Paging and exclusive Private Carrier 
Paging services. A small business will be defined as either: (1) An 
entity that, together with its affiliates and controlling principals, 
has average gross revenues for the three preceding years of not more 
than $3 million; or (2) an entity that, together with affiliates and 
controlling principals, has average gross revenues for the three 
preceding calendar years of not more than $15 million. Because the SBA 
has not yet approved this definition for paging services, we will 
utilize the SBA's definition applicable to radiotelephone companies, 
i.e., an entity employing no more than 1,500 persons. At present, there 
are approximately 24,000 Private Paging licenses and 74,000 Common 
Carrier Paging licenses. According to recent data, 172 carriers 
reported that they were engaged in the provision of either paging or 
``other mobile'' services, which are placed together in the data. We do 
not have data specifying the number of these carriers that are not 
independently owned and operated or have more than 1,500 employees, and 
thus are unable at this time to estimate with greater precision the 
number of paging carriers that would qualify as small business concerns 
under the SBA's definition. Consequently, we estimate that there are no 
more than 172 small paging carriers. We estimate that the majority of 
private and common carrier paging providers would qualify as small 
entities under the SBA definition.
    Mobile Service Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
mobile service carriers, such as paging companies. As noted above in 
the section concerning paging service carriers, the closest applicable 
definition under the SBA rules is that for radiotelephone (i.e., 
wireless) companies, and recent data show that 172 carriers reported 
that they were engaged in the provision of either paging or ``other 
mobile'' services. Consequently, we estimate that there are no more 
than 172 small mobile service carriers.
    Broadband Personal Communications Service (PCS). The broadband PCS 
spectrum is divided into six frequency blocks designated A through F, 
and the Commission has held auctions for each block. The Commission 
defined ``small entity'' for blocks C and F as an entity that has 
average gross revenues of less than $40 million 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 affiliates, has average gross revenues of not more than $15 
million for the preceding three calendar years. These regulations 
defining ``small entity'' in the context of broadband PCS auctions have 
been approved by the SBA. No small businesses within the SBA-approved 
definition bid successfully for licenses in blocks A and B. There were 
90 winning bidders that qualified as small entities in the C block 
auctions. A total of 93 small and very small business bidders won 
approximately 40% of the 1,479 licenses for blocks D, E and F. On March 
23, 1999, the Commission held another auction (Auction No. 22) of C, D, 
E and F block licenses for PCS spectrum returned to the Commission by 
previous license holders. In that auction, 48 bidders claiming small 
business, very small business or entrepreneurial status won 272 of the 
341 licenses (80%) offered. Based on this information, we conclude that 
the number of small broadband PCS licensees includes the 90 winning C 
block bidders, the 93 qualifying bidders in the D, E and F blocks, and 
the 48 winning bidders from Auction No. 22, for a total of 231 small-
entity PCS providers as defined by the SBA and the Commission's auction 
rules.
    Narrowband PCS. The Commission has auctioned nationwide and 
regional licenses for narrowband PCS. There are 11 nationwide and 30 
regional licensees for narrowband PCS. The Commission does not have 
sufficient information to determine whether any of these licensees are 
small businesses within the SBA-approved definition for radiotelephone 
companies. At present, there have been no auctions held for the major 
trading area (MTA) and basic trading area (BTA) narrowband PCS 
licenses. The Commission anticipates a total of 561 MTA licenses and 
2,958 BTA licenses will be awarded by auction. Such auctions, however, 
have not yet been scheduled. Given that nearly all radiotelephone 
companies have no more than 1,500 employees, and no reliable estimate 
of the number of prospective MTA and BTA narrowband licensees can be 
made, we assume, for our purposes here, that all of the licenses will 
be awarded to small entities, as that term is defined by the SBA.
    Rural Radiotelephone Service. The Commission has not adopted a 
definition of small entity specific to the Rural Radiotelephone 
Service. A significant subset of the Rural Radiotelephone Service is 
the Basic Exchange Telephone Radio Systems (BETRS). We will use the 
SBA's definition applicable to radiotelephone companies, i.e., an 
entity employing no more than 1,500 persons. There are approximately 
1,000 licensees in the Rural Radiotelephone Service, and we estimate 
that almost all of them qualify

[[Page 28415]]

as small entities under the SBA's definition.
    Air-Ground Radiotelephone Service. The Commission has not adopted a 
definition of small entity specific to the Air-Ground Radiotelephone 
Service. Accordingly, we will use the SBA's definition applicable to 
radiotelephone companies, i.e., an entity employing no more than 1,500 
persons. There are approximately 100 licensees in the Air-Ground 
Radiotelephone Service, and we estimate that almost all of them qualify 
as small under the SBA definition.
    Specialized Mobile Radio (SMR). The Commission awards bidding 
credits in auctions for geographic area 800 MHz and 900 MHz SMR 
licenses to two tiers of firms: (1) ``small entities,'' those with 
revenues of no more than $15 million in each of the three previous 
calendar years; and (2) ``very small entities,'' those with revenues of 
no more than $3 million in each of the three previous calendar years. 
The regulations defining ``small entity'' and ``very small entity'' in 
the context of 800 MHz SMR (upper 10 MHz and lower 230 channels) and 
900 MHz SMR have been approved by the SBA. 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. We assume, for our 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 (upper 10 MHz) and 900 MHz SMR bands. There were 60 
winning bidders that qualified as small and very small entities in the 
900 MHz auction. Of the 1,020 licenses won in the 900 MHz auction, 263 
licenses were won by bidders qualifying as small and very small 
entities. In the 800 MHz SMR auction, 38 of the 524 licenses won were 
won by small and very small entities.
    Marine Coast Service. Between December 3, 1998 and December 14, 
1998, the Commission held an auction of 42 VHF Public Coast licenses in 
the 157.1875-157.4500 MHz (ship transmit) and 161.775-162.0125 MHz 
(coast transmit) bands. For purposes of this auction, and for future 
public coast auctions, the Commission defines a ``small'' business as 
an entity that, together with controlling interests and affiliates, has 
average gross revenues for the preceding three years not to exceed $15 
million dollars. A ``very small'' business is one that, together with 
controlling interests and affiliates, has average gross revenues for 
the preceding three years not to exceed $3 million dollars. There are 
approximately 10,672 licensees in the Marine Coast Service, and the 
Commission estimates that almost all of them qualify as ``small'' 
businesses under the Commission's definition, which has been approved 
by the SBA.
    Fixed Microwave Services. Microwave services include common 
carrier, private-operational fixed, and broadcast auxiliary radio 
services. At present, there are approximately 22,015 common carrier 
fixed licensees and 61,670 private operational-fixed licensees and 
broadcast auxiliary radio licensees in the microwave services. The 
Commission has not yet defined a small business with respect to 
microwave services. For our purposes here, we will utilize the SBA's 
definition applicable to radiotelephone companies--i.e., an entity with 
no more than 1,500 persons. Under this definition, we estimate that all 
of the Fixed Microwave licensees (excluding broadcast auxiliary 
licensees) would qualify as small entities.
    Local Multipoint Distribution Service. The Commission held two 
auctions for licenses in the Local Multipoint Distribution Services 
(LMDS) (Auction No. 17 and Auction No. 23). For both of these auctions, 
the Commission defined a small business as an entity, together with its 
affiliates and controlling principals, having average gross revenues 
for the three preceding years of not more than $40 million. A very 
small business was defined as an entity, together with affiliates and 
controlling principals, having average gross revenues for the three 
preceding years of not more than $15 million. Of the 144 winning 
bidders in Auction Nos. 17 and 23, 125 bidders (87%) were small or very 
small businesses.
    24 GHz--Incumbent 24 GHz Licensees. The rules that we may later 
adopt could 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 Commission has not developed a definition of 
small entities applicable to licensees in the 24 GHz band. Therefore, 
the applicable definition of small entity is the definition under the 
SBA rules for the radiotelephone industry, providing that a small 
entity is a radiotelephone company employing fewer than 1,500 persons. 
The 1992 Census of Transportation, Communications and Utilities, 
conducted by the Bureau of the Census, which is the most recent 
information available, shows that only 12 radiotelephone firms out of a 
total of 1,178 such firms that operated during 1992 had 1,000 or more 
employees. This information notwithstanding, we believe that there are 
only two licensees in the 24 GHz band that were relocated from the 18 
GHz band, Teligent and TRW, Inc. Both Teligent and TRW, Inc. appear to 
have more than 1,500 employees. Therefore, it appears that no incumbent 
licensee in the 24 GHz band is a small business entity.
    Future 24 GHz Licensees. The rules that we may later adopt could 
also affect potential new licensees on the 24 GHz band. Pursuant to 47 
CFR 24.720(b), the Commission has defined ``small business'' for Blocks 
C and F broadband PCS licensees as firms that had average gross 
revenues of less than $40 million in the three previous calendar years. 
This regulation defining ``small business'' in the context of broadband 
PCS auctions has been approved by the SBA. With respect to new 
applicants in the 24 GHz band, we shall use this definition of ``small 
business'' and apply it to the 24 GHz band under the name 
``entrepreneur.'' With regard to ``small business,'' we shall adopt the 
definition of ``very small business'' used for 39 GHz licenses and PCS 
C and F block licenses: businesses with average annual gross revenues 
for the three preceding years not in excess of $15 million. Finally, 
``very small business'' in the 24 GHz band shall be defined as an 
entity with average gross revenues not to exceed $3 million for the 
preceding three years. The Commission will not know how many licensees 
will be small or very small businesses until the auction, if required, 
is held. Even after that, the Commission will not know how many 
licensees will partition their license areas or disaggregate their 
spectrum blocks, if partitioning and disaggregation are allowed.
    39 GHz. The Commission held an auction (Auction No. 30) for fixed 
point-to-point microwave licenses in the 38.6 to 40.0 GHz band (39 GHz 
Band). For this auction, the Commission defined a small business as an 
entity, together with affiliates and controlling interests, having 
average gross revenues for the three preceding years of not more than 
$40 million. A very small business was defined as an entity, together 
with affiliates and controlling principals, having average gross 
revenues for the three preceding years of not more than $15 million. 
The SBA has approved these definitions. Of the 29 winning bidders in 
Auction No. 30, 18 bidders (62%) were small business participants.
    Multipoint Distribution Service (MDS). This service involves a 
variety of transmitters, which are used to relay

[[Page 28416]]

data and programming to the home or office, similar to that provided by 
cable television systems. In connection with the 1996 MDS auction, the 
Commission defined small businesses as entities that had annual average 
gross revenues for the three preceding years not in excess of $40 
million. This definition of a small entity in the context of MDS 
auctions has been approved by the SBA. These stations were licensed 
prior to implementation of section 309(j) of the Communications Act of 
1934, as amended. Licenses for new MDS facilities are now awarded to 
auction winners in Basic Trading Areas (BTAs) and BTA-like areas. The 
MDS auctions resulted in 67 successful bidders obtaining licensing 
opportunities for 493 BTAs. Of the 67 auction winners, 61 meet the 
definition of a small business.
    MDS is also heavily encumbered with licensees of stations 
authorized prior to the MDS auction. SBA has developed a definition of 
small entities for pay television services, which includes all such 
companies generating $11 million or less in annual receipts. This 
definition includes MDS systems, and thus applies to incumbent MDS 
licensees and wireless cable operators which may not have participated 
or been successful in the MDS auction. Information available to us 
indicates that there are 832 of these licensees and operators that do 
not generate revenue in excess of $11 million annually. Therefore, for 
purposes of this analysis, we find there are approximately 892 small 
MDS providers as defined by the SBA and the Commission's auction rules.
    Offshore Radiotelephone Service. This service operates on several 
UHF TV broadcast channels that are not used for TV broadcasting in the 
coastal area of the states bordering the Gulf of Mexico. At present, 
there are approximately 55 licensees in this service. We are unable at 
this time to estimate the number of licensees that would qualify as 
small under the SBA's definition for radiotelephone communications.
    Wireless Communications Services (WCS). This service can be used 
for fixed, mobile, radio-location and digital audio broadcasting 
satellite uses. The Commission defined ``small business'' for the WCS 
auction as an entity with average gross revenues of $40 million for 
each of the three preceding years, and a ``very small business'' as an 
entity with average gross revenues of $15 million for each of the three 
preceding years. 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 winning bidder that 
qualified as a small business entity. We conclude that the number of 
geographic area WCS licensees affected includes these eight entities.
    General Wireless Communication Service (GWCS). This service was 
created by the Commission on July 31, 1995 by transferring 25 MHz of 
spectrum in the 4660-4685 MHz band from the federal government to 
private sector use. The Commission sought and obtained SBA approval of 
a refined definition of ``small business'' for GWCS in this band. 
According to this definition, a small business is any entity, together 
with its affiliates and entities holding controlling interests in the 
entity, that has average annual gross revenues over the three preceding 
years that are not more than $40 million. By letter dated March 30, 
1999, NTIA reclaimed the spectrum allocated to GWCS and identified 
alternative spectrum at 4940-4990 MHz. On February 23, 2000, the 
Commission released its Notice of Proposed Rulemaking in WT Docket No. 
00-32 proposing to allocate and establish licensing and service rules 
for the 4.9 GHz band.

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

    There are certain transaction costs for terminating access, 
including measuring and billing. Under the existing CPNP regime, the 
terminating LEC bills the originating network, whereas under bill and 
keep, the terminating LEC may bill its own customers. The NPRM seeks 
comment on the relative transaction costs of each proposal, weighed 
against the other efficiencies of the various alternatives. Transaction 
costs can increase under a bill-and-keep arrangement, for example, 
since each carrier may be responsible for measuring and billing its own 
customers for all traffic, rather than merely measuring and billing the 
originating carrier.
    Apart from the transaction costs for termination, the NPRM more 
broadly suggests that a new regime could free regulators from 
allocating transport costs, and from setting the level and structure of 
termination rates. Where rates had once been set by regulation, 
individual carriers, including small entities, could inherit this 
responsibility.
    As a result of rules from this proceeding, incumbent LECs and CLECs 
may be required to discern the amount of traffic carried on their 
networks that is bound for ISPs. In addition, such incumbent LECs and 
competitive entrants may be required to produce information regarding 
the costs of carrying ISP-bound traffic on their networks.
    The NPRM seeks comment on the extent to which a new regime would 
comply with reciprocal compensation obligations regarding traffic 
balances and symmetrical rates. If rules should follow on this issue, 
they may require carriers to report traffic imbalances, corresponding 
to rate symmetry. This is especially true in the context of LEC-CMRS 
interconnection, in which the NPRM seeks comment on the feasibility of 
cost studies that CMRS carriers could use to justify separate 
treatment.

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

    The RFA requires an agency to describe any significant alternatives 
that it has considered in reaching its proposed approach, which may 
include the following four alternatives (among others): (1) The 
establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.
    Although the transaction costs for terminating access can increase 
under a bill-and-keep arrangement, the impact on small entities would 
be minimal since measuring and billing is already a fundamental 
component of their operations. Furthermore, the advantages of a bill-
and-keep regime, in providing clearer demarcations of cost between 
carriers, appear to outweigh the minimal increase in transaction costs 
that could occur under bill and keep. With regard to the related task 
of allocating transport costs, the same reasoning applies to small 
entities in that the clearer demarcations between carriers inherent in 
bill and keep outweighs the potential burden of setting the level and 
structure of termination rates. Regardless, many small entities are 
competitive entrants such as CLECs, which currently enjoy specific 
exemptions from ILEC rate regulation.
    A potential benefit may accrue to small-entity LECs transporting 
ISP-bound traffic. As discussed above, the Commission may adopt rules 
that may require incumbent LECs and CLECs to discern the amount of 
traffic carried on their networks that is bound for ISPs. As

[[Page 28417]]

a result of such rules, incumbent LECs and CLECs, including small-
entity incumbent LECs and CLECs, will be able to receive compensation 
for the delivery of ISP-bound traffic that they might not otherwise 
receive. The NPRM separately requests comment on alternative proposals.
    The NPRM seeks comment on the issue of asymmetrical compensation 
for unbalanced traffic. Although small entities could experience an 
increase in reporting and recordkeeping when submitting cost studies to 
this effect, if adopted, such a requirement would more accurately serve 
the revenue requirements of small entities in relation to larger 
competitors.
    Finally, the NPRM seeks comment on additional impacts on small 
entities that may result from any new intercarrier compensation regime. 
When seeking comment on the alternative of contractual arrangements for 
intercarrier compensation, the NPRM asks commenters to address the 
potential impacts of such a market-based approach on small entities, 
such as the refusal to carry traffic.

VI. Federal Rules That May Duplicate, Overlap or Conflict With the 
Proposed Rules

    None.

Comment Filing Procedures

    Pursuant to sections 1.415, 1.419, and 1.430 of the Commission's 
rules, 47 CFR 1.415, 1.419, 1.430, interested parties may file comments 
within 90 days after publication in the Federal Register, and reply 
comments within 135 days after publication in the Federal Register. All 
filings should refer to CC Docket No. 01-92. Comments may be filed 
using the Commission's Electronic Comment Filing System (ECFS) or by 
filing paper copies. Comments filed through the ECFS can be sent as an 
electronic file via the Internet to http://www.fcc.gov/e-file/ecfs.html. Generally, only one copy of an electronic submission must be 
filed. In completing the transmittal screen, commenters should include 
their full name, Postal Service mailing address, and the applicable 
docket number, which in this instance is CC Docket No. 01-92. Parties 
may also submit an electronic comment by Internet e-mail. To get filing 
instructions for e-mail comments, commenters should send an e-mail to 
<a href="/cdn-cgi/l/email-protection#583d3b3e2b183e3b3b763f372e"><span class="__cf_email__" data-cfemail="4421272237042227276a232b32">[email protected]</span></a>>, and should include the following words in the body of 
the message: ``get form your e-mail address>.'' A sample form and 
directions will be sent in reply.
    Parties who choose to file by paper must file an original and four 
copies of each filing. All filings must be sent to the Commission's 
Secretary, Magalie Roman Salas, Office of the Secretary, Federal 
Communications Commission, Room TW-B204, 445 12th Street, SW., 
Washington, DC 20554. Regardless of whether parties choose to file 
electronically or by paper, parties should also serve: (1) Paul Moon, 
Common Carrier Bureau, 445 12th Street, SW., Room 3-C423, Washington, 
DC 20554; (2) Jane Jackson, Common Carrier Bureau, 445 12th Street, 
SW., Room 5-A225, Washington, DC 20554; and (3) the Commission's copy 
contractor, International Transcription Service, Inc. (ITS), 445 12th 
Street, SW., Room CY-B402, Washington, DC 20554, (202) 857-3800, with 
copies of any documents filed in this proceeding. Comments and reply 
comments will be available for public inspection during regular 
business hours in the FCC Reference Center, Room CY-A257, 445 12th 
Street, SW., Washington, DC 20554.
    Parties who choose to file by paper should also submit their 
comments on diskette. These diskettes should be submitted to Wanda 
Harris, Common Carrier Bureau, 445 12th Street, SW., Room 5-A452, 
Washington, DC 20554. Such a submission should be on a 3.5-inch 
diskette formatted in a Windows-compatible format using Microsoft Word 
or compatible software. The diskette should be accompanied by a cover 
letter and should be submitted in ``read only'' mode. The diskette 
should be clearly labeled with the commenter's name, proceeding 
(including the docket number--in this case, CC Docket No. 01-92), type 
of pleading (comment or reply comment), date of submission, and the 
name of the electronic file on the diskette. The label should also 
include the following phrase: ``Disk Copy--Not an Original.'' Each 
diskette should contain only one party's pleadings, preferably in a 
single electronic file. In addition, commenters must send diskette 
copies to the Commission's copy contractor, International Transcription 
Service, Inc., 1231 20th Street, NW., Washington, DC 20036.
    Comments and reply comments must include a short and concise 
summary of the substantive arguments raised in the pleading. Comments 
and reply comments must also comply with section 1.49 and all other 
applicable sections of the Commission's rules. We also direct all 
interested parties to include the name of the filing party and the date 
of the filing on each page of their comments and reply comments. All 
parties are encouraged to utilize a table of contents, regardless of 
the length of their submission. We also strongly encourage that parties 
track the organization set forth in the NPRM to facilitate our internal 
review process.
    Pursuant to 47 CFR 1.200(a), which permits the Commission to adopt 
modified or more stringent ex parte procedures in particular 
proceedings if the public interest so requires, we announce that this 
proceeding will be governed by ``permit-but-disclose'' ex parte 
procedures that are applicable to non-restricted proceedings under 47 
CFR 1.1206. Designating this proceeding as ``permit-but-disclose'' will 
provide an opportunity for all interested parties to receive notice of 
the various technical, legal, and policy issues raised in ex parte 
presentations made to the Commission in the course of this proceeding. 
This will allow interested parties to file responses or rebuttals to 
proposals made on the record in this proceeding. Accordingly, we find 
that it is in the public interest to designate this proceeding as 
``permit-but-disclose.''
    Parties making oral ex parte presentations are reminded that 
memoranda summarizing the presentation must contain a summary of the 
substance of the presentation and not merely a listing of the subjects 
discussed. More than a one or two sentence description of the views and 
arguments presented is generally required. See 47 CFR 1.1206(b)(2), as 
revised. Other rules pertaining to oral and written presentations are 
set forth in section 1.206(b) as well. Interested parties are to file 
any written ex parte presentations in this proceeding with the 
Commission Secretary, Magalie Roman Salas, 445 12th Street, SW., TW-
B204, Washington, DC 20554, and serve with copies: (1) Paul Moon, 
Common Carrier Bureau, 445 12th Street, SW., Room 3-C423, Washington, 
DC 20554; (2) Jane Jackson, Common Carrier Bureau, 445 12th Street, 
SW., Room 5-A225, Washington, DC 20554; and (3) International 
Transcription Service, Inc. (ITS), 445 12th Street, SW., Room CY-B402, 
Washington, DC 20554, (202) 857-3800.
    Because many of the matters on which we request comment in this 
NPRM may call on parties to disclose proprietary information such as 
market research and business or technical plans, we suggest that 
parties consult 47 CFR 0.459 about the submission of confidential 
information.

Ordering Clauses

    The actions of the Commission herein ARE TAKEN pursuant to sections 
4, 201-202, 303 and 403 of the Communications Act of 1934, as amended, 
47 U.S.C. 154, 201-202, 303

[[Page 28418]]

and 403, and sections 1.1, 1.411 and 1.412 of the Commission's rules, 
47 CFR 1.1, 1.411 and 1.412.
    The Commission's Consumer Information Bureau, Reference Information 
Center, Shall Send a copy of this NPRM, including the Initial 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 01-12759 Filed 5-22-01; 8:45 am]
BILLING CODE 6712-01-P


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