[Federal Register Volume 66, Number 101 (Thursday, May 24, 2001)]
[Proposed Rules]
[Pages 28718-28725]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-13114]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket Nos. 96-45, 98-171, 90-571, 92-237, 99-200, 95-116; FCC 01-
145]


Federal-State Joint Board on Universal Service.

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission seeks comment on how to 
streamline and reform both the manner in which the Commission assesses 
carrier contributions to the universal service fund and the manner in 
which carriers may recover those costs from their customers.

DATES: Comments are due on or before June 25, 2001. Reply comments are 
due on or before July 9, 2001. Written

[[Page 28719]]

comments by the public on the proposed and/or modified information 
collections discussed in this Notice of Proposed Rulemaking are due on 
or before June 25, 2001. Written comments must be submitted by the 
Office of Management and Budget (OMB) on the proposed and/or modified 
information collections on or before July 23, 2001.

ADDRESSES: All filings must be sent to the Commission's Secretary, 
Magalie Roman Salas, Office of the Secretary, Federal Communications 
Commission, 445 12th Street, S.W., Washington, D.C. 20554. In addition 
to filing comments with the Secretary, a copy of any comments on the 
information collection(s) contained herein should be submitted to Judy 
Boley, Federal Communications Commission, Room 1-C804, 445 12th Street, 
SW, Washington, DC 20554, or via the Internet to <a href="/cdn-cgi/l/email-protection#eb818984878e92ab8d8888c58c849d"><span class="__cf_email__" data-cfemail="660c04090a031f2600050548010910">[email protected]</span></a> and to 
Edward C. Springer, OMB Desk Officer, 10236 NEOB, 725 17th Street, 
N.W., Washington, DC 20503, or via the Internet to <a href="/cdn-cgi/l/email-protection#cdbba5b8b9a58da2a0afe3a8a2bde3aaa2bb"><span class="__cf_email__" data-cfemail="8afce2fffee2cae5e7e8a4efe5faa4ede5fc">[email protected]</span></a>. 
Parties should also send three paper copies of their filings to Sheryl 
Todd, Accounting Policy Division, Common Carrier Bureau, Federal 
Communications Commission, 445 Twelfth Street, S.W., Room 5-B540, 
Washington, D.C. 20554. Parties who choose to file by paper should also 
submit their comments on diskette. These diskettes should be submitted 
to Sheryl Todd, Accounting Policy Division, Common Carrier Bureau, 
Federal Communications Commission, 445 Twelfth Street, S.W., Room 5-
B540, Washington, D.C. 20554. In addition, commenters must send 
diskette copies to the Commission's copy contractor, International 
Transcription Services, Inc., 1231 20th Street, N.W., Washington, D.C. 
20037.

FOR FURTHER INFORMATION CONTACT: Paul Garnett, Attorney, Common Carrier 
Bureau, Accounting Policy Division, (202) 418-7400.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM) in CC Docket Nos. 96-45, 98-171, 90-571, 
92-237, 99-200, 95-116 released on May 8, 2001. The full text of this 
document is available for public inspection during regular business 
hours in the FCC Reference Center, Room CY-A257, 445 Twelfth Street, 
S.W., Washington, D.C., 20554.
    This NPRM contains proposed information collection(s) subject to 
the Paperwork Reduction Act of 1995 (PRA). It has been submitted to the 
Office of Management and Budget (OMB) for review under the PRA. OMB, 
the general public, and other Federal agencies are invited to comment 
on the proposed information collections contained in this proceeding.

Paperwork Reduction Act

    The NPRM contains a proposed information collection. The 
Commission, as part of its continuing effort to reduce paperwork 
burdens, invites the general public and OMB to comment on the 
information collection(s) contained in this NPRM, as required by the 
PRA, Public Law 104-13. Public and agency comments on the proposed and/
or modified information collections discussed in this Notice of 
Proposed Rulemaking are due on or before June 25, 2001. Written 
comments must be submitted by the Office of Management and Budget (OMB) 
on the proposed and/or modified information collections on or before 
July 23, 2001.
    Comments should address: (a) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information 
collected; and (d) ways to minimize the burden of the collection of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology.
    OMB Control Number: 3060-0855.
    Title: Telecommunications Reporting Worksheet and Associated 
Requirements, CC Docket No. 96-45.
    Form No.: FCC Form 499.
    Type of Review: Proposed Revised Collection.
    Respondents: Business or other for-profit.

----------------------------------------------------------------------------------------------------------------
                                                                     Number of     Est. time per   Total annual
                              Title                                 respondents      response         burden
----------------------------------------------------------------------------------------------------------------
1. Assessment on a Revenue Basis................................           5,000            9.5*          81,250
                                                                                                 ---------------
    Total Annual Burden:........................................  ..............  ..............          81,250
Cost to Respondents: $0.
----------------------------------------------------------------------------------------------------------------
* 9.5 hours for respondents that file the annual filing and 6 hours for respondent that file the quarterly
  filing.


----------------------------------------------------------------------------------------------------------------
                                                                     Number of     Est. time per   Total annual
                              Title                                 respondents      response         burden
----------------------------------------------------------------------------------------------------------------
2. Assessment on a Flat Fee Basis...............................           5,000              6*          45,000
 
----------------------------------------------------------------------------------------------------------------
* 6 hours for respondents that file the annual filing and 3 hours for respondent that file the quarterly filing.


----------------------------------------------------------------------------------------------------------------
                                                                     Number of     Est. time per   Total annual
                              Title                                 respondents      response         burden
----------------------------------------------------------------------------------------------------------------
3. Recovery of Universal Service Contributions--Lifeline                   5,000              1*           7,500
 Exception......................................................
                                                                                                 ---------------
    Total Annual Burden:........................................  ..............  ..............           7,500
Cost to Respondents: $0.
----------------------------------------------------------------------------------------------------------------
* 1 hour for respondents that file the annual filing and .5 hour for respondent that file the quarterly filing.

     Needs and Uses: In this Notice of Proposed Rulemaking, we seek 
comment on how to streamline and reform both the manner in which the 
Commission assesses carrier contributions to the universal service

[[Page 28720]]

fund and the manner in which carriers may recover those costs from 
their customers. Section 254 of the Communications Act of 1934, as 
amended by the Telecommunications Act of 1996, requires carriers 
providing interstate telecommunications services to contribute to 
universal service. Under the current universal service rules, carriers' 
contributions are assessed as a percentage of their interstate and 
international end-user telecommunications revenues. The Universal 
Service Administrative Company would use information filed on carrier 
revenues, line counts, or number of accounts to determine the quarterly 
universal service contribution factor.

Synopsis of NPRM

I. Introduction

    1. In this Notice of Proposed Rulemaking (NPRM), we seek comment on 
how to streamline and reform both the manner in which the Commission 
assesses carrier contributions to the universal service fund and the 
manner in which carriers may recover those costs from their customers. 
Section 254 of the Communications Act of 1934, as amended by the 
Telecommunications Act of 1996 (the Act), requires carriers providing 
interstate telecommunications services to contribute to universal 
service. Under the current universal service rules, carriers' 
contributions are assessed as a percentage of their interstate and 
international end-user telecommunications revenues. For carriers 
electing to recover their universal service contributions from their 
customers, the Commission generally has not specified a particular 
method of recovery. Rather, the Commission has required that 
contributors not shift more than an equitable share of their 
contributions to any customer or group of customers, and that carriers 
provide accurate, truthful, and complete information regarding the 
nature of the charge.
    2. In this NPRM, we seek comment on whether and how to streamline 
and reform the universal service contribution methodology. We seek 
comment on specific proposals to require carriers to contribute based 
on a percentage of collected revenues, or to contribute on the basis of 
a flat-fee charge, such as a per-line charge. Additionally, we seek 
comment on limiting the manner in which carriers recover their 
contribution costs from their customers. If carriers choose to recover 
universal service contributions from their customers through line 
items, we propose to require carriers to do so through a uniform 
universal service line item that corresponds to the contribution 
assessment on the carrier.
    3. We believe that we may need to revisit the concepts underlying 
the existing contribution system, in light of current market trends, to 
ensure that providers of interstate telecommunications services 
continue to ``contribute, on an equitable and nondiscriminatory basis, 
to the specific, predictable, and sufficient mechanisms established by 
the Commission to preserve and advance universal service.'' Since the 
Commission's initial implementation of section 254 of the Act in 1997, 
we have seen many significant developments in the interstate 
telecommunications marketplace. We have witnessed the entry of new 
providers into the long distance market, including Regional Bell 
Operating Companies (RBOCs) that have received approval under section 
271 of the Act to provide interstate telecommunications. We also are 
seeing certain wireline interexchange carriers suffer declining 
revenues in light of growing competition. Growth in the wireless 
telecommunications sector, as well as the advent of Internet Protocol 
(IP) telephony, has changed the dynamics of the interstate 
telecommunications market. Furthermore, many carriers are bundling 
services together in creative ways, such as offering flat-rate packages 
that include both interstate and intrastate telecommunications and non-
telecommunications products and services.
    4. Changes to the universal service contribution methodology may be 
necessary to simplify and streamline the contribution process for 
carriers. For example, although not mandated by the Commission, many 
carriers choose to recover most, if not all, of their universal service 
contributions through line items on their customers' bills. Even though 
the Commission sets a uniform contribution factor for universal 
service, carriers may decide to boost this factor in order to account 
for ``uncollectible'' revenue and other variables. We believe that this 
process may require carriers to engage in complex calculations in order 
to fully recover their contribution costs through a line item on 
customer bills.
    5. We also have concerns about the extent to which the universal 
service line item fee varies from one carrier to the next, even though 
the contribution factor set by the Commission is uniform across 
carriers. For example, in the fourth quarter 2000, the Commission 
established a contribution factor of 5.6688 percent. The major 
interexchange carriers, however, imposed line-item fees on residential 
and business customers ranging from approximately 5.9 percent to 8.6 
percent. For the second quarter of 2001, after the Commission 
established a contribution factor of 6.8823%, one interexchange carrier 
raised its residential line item to 12%. This discrepancy between the 
contribution factor and the amount carriers charge consumers is 
inexplicable to the casual observer. Moreover, it appears that some 
carriers have chosen to recover universal service contributions through 
a line item on only certain classes of customers. Some carriers may be 
recovering universal service contributions from pre-subscribed 
customers through line items that are well in excess of the 
contribution factor, while recovering, through service rates, an 
unidentified amount of such costs from other customers of services such 
as pre-paid calling cards or dial-around service. The end result may be 
that certain customer classes are bearing a disproportionate share of 
the carrier's cost of universal service contributions, which could, in 
some circumstances, be inconsistent with the Commission's directive 
that contributors not shift more than an equitable share of their 
contributions to any customer or group of customers.
    6. The Commission has an obligation to ensure that the universal 
service contribution system remains consistent with the statute, is 
reflective of current market trends, is simple for carriers to 
administer, and does not shift more than an equitable share of carrier 
contributions to any class of customers. We therefore conclude that we 
should revisit the issue of how contributions to the universal service 
fund are assessed on carriers and how carriers may recover such 
contribution costs from consumers. In this NPRM, we seek comment on how 
to streamline the assessment and recovery of universal service 
contributions, especially in light of recent developments in the 
telecommunications marketplace, while maintaining a universal service 
fund that is consistent with the requirements of the Act. We welcome 
input from all segments of the industry, consumer groups, state 
commissions, and the members of the Federal-State Joint Board on 
Universal Service (Joint Board).

II. Procedural Issues

A. Ex Parte

    7. This is a non-restricted notice and comment rulemaking 
proceeding. Ex parte presentations are permitted,

[[Page 28721]]

except during the Sunshine Agenda period, provided they are disclosed 
as provided in the Commission's rules.

B. Initial Paperwork Reduction Act of 1995 Analysis

    8. This NPRM contains either a proposed or modified information 
collection. As part of a continuing effort to reduce paperwork burdens, 
we invite the general public and the Office of Management and Budget 
(OMB) to take this opportunity to comment on the information 
collections contained in this NPRM, as required by the Paperwork 
Reduction Act of 1995, Public Law 104-13. Public and agency comments 
are due at the same time as other comments on this NPRM; OMB comments 
are due July 23, 2001. Comments should address: (a) Whether the 
proposed collection of information is necessary for the proper 
performance of the functions of the Commission, including whether the 
information shall have practical utility; (b) the accuracy of the 
Commission's burden estimates; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burden of the collection of information on the 
respondents, including the use of automated collection techniques or 
other forms of information technology.

C. Initial Regulatory Flexibility Act Analysis

    9. As required by the Regulatory Flexibility Act (RFA), the 
Commission has prepared this Initial Regulatory Flexibility Analysis 
(IRFA) of the possible significant economic impact on small entities by 
the policies and rules proposed in this Notice of Proposed Rulemaking. 
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. The Commission will send a copy of 
the NPRM, including this IRFA, to the Chief Counsel for Advocacy of the 
Small Business Administration. In addition, the NPRM and IRFA (or 
summaries thereof) will be published in the Federal Register.
1. Need for and Objectives of the Proposed Rules
    10. The Commission seeks comment in this NPRM as a part of its 
implementation of the Act's mandate that ``[e]very telecommunications 
carrier that provides interstate telecommunications services shall 
contribute, on an equitable and nondiscriminatory basis, to the 
specific, predictable, and sufficient mechanisms established by the 
Commission to preserve and advance universal service.'' Specifically, 
we seek comment on how to streamline and reform both the manner in 
which the Commission assesses carrier contributions to the universal 
service fund and the manner in which carriers may recover those costs 
from their customers. We seek comment on whether and how to revise the 
universal service contribution methodology. We seek comment on specific 
proposals to require carriers to contribute based on a percentage of 
collected revenues, or to contribute on the basis of a flat-fee charge, 
such as a per-line charge. Additionally, we seek comment on limiting 
the manner in which carriers recover contribution costs from end users. 
If carriers choose to recover universal service contributions from 
their end users through line items, we propose to require carriers to 
do so through a uniform universal service line item that corresponds to 
the contribution assessment on the carrier.
2. Legal Basis
    11. The legal basis as proposed for this NPRM is contained in 
sections 4(i), 4(j), 201-205, 254, and 403 of the Communications Act of 
1934, as amended by the Telecommunications Act of 1996, 47 U.S.C. 4(i), 
4(j), 201-205, 254, 403.
3. Description and Estimate of the Number of Small Entities to Which 
Rules Will Apply
    12. The Commission's contributor reporting requirements apply to a 
wide range of entities, including all telecommunications carriers and 
other providers of interstate telecommunications services that offer 
telecommunications services for a fee. Thus, we expect that the rules 
adopted in this proceeding could have a significant economic impact on 
a substantial number of small entities. Of the estimated 5,000 filers 
of the Telecommunications Reporting Worksheet, FCC Form 499, we do not 
know how many are small entities, but we offer a detailed estimate of 
the number of small entities within each of several major carrier-type 
categories.
    13. To estimate the number of small entities that could be affected 
by these proposed rules, we first consider the statutory definition of 
``small entity'' under the RFA. The RFA generally defines the term 
``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A small business concern is one that: (1) Is independently owned 
and operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (SBA). A small organization is generally ``any not-for-
profit enterprise which is independently owned and operated and is not 
dominant in its field.''
    14. 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. We first discuss 
the number of small telephone companies falling within these SIC 
categories, then attempt to refine further those estimates to 
correspond with the categories of telecommunications companies that are 
commonly used under our rules.
    15. A ``small business'' under the RFA is one that, inter alia, 
meets the pertinent small business size standard (e.g., a telephone 
communications business having 1,500 or fewer employees), and ``is not 
dominant in its field of operation.'' The SBA's Office of Advocacy 
contends that, for RFA purposes, small incumbent LECs are not dominant 
in their field of operation because any such dominance is not 
``national'' in scope. 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.
    16. The most reliable source of information regarding the total 
numbers of common carrier and related providers nationwide, including 
the numbers of commercial wireless entities, appears to be data the 
Commission publishes annually in its Trends in Telephone Service 
report. According to data in the most recent report, there are 4,822 
interstate carriers. These carriers include, inter alia, incumbent 
local exchange carriers, competitive local exchange carriers, 
competitive access providers, interexchange carriers, other wireline 
carriers and service providers (including shared-tenant service 
providers and private carriers), operator service providers, pay 
telephone operators, providers of telephone toll service, wireless 
carriers and services providers, and resellers.
    17. 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

[[Page 28722]]

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, 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.'' 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 rules adopted in this Order.
    18. Wireline Carriers and Service Providers. SBA has developed a 
definition of small entities for telephone communications companies 
other than radiotelephone companies. The Census Bureau reports that, 
there were 2,321 such telephone companies in operation for at least one 
year at the end of 1992. According to 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 incumbent LECs. Although it seems certain that some of these 
carriers are not independently owned and operated, we are unable at 
this time to estimate with greater precision the number of wireline 
carriers and service providers that would qualify as small business 
concerns under SBA's definition. Consequently, we estimate that there 
are fewer than 2,295 small entity telephone communications companies 
other than radiotelephone companies that may be affected by the 
decisions and rules adopted in this Order.
    19. Local Exchange Carriers, Interexchange Carriers, Competitive 
Access Providers, Operator Service Providers, Payphone Providers, and 
Resellers. Neither the Commission nor SBA has developed a definition 
particular to small local exchange carriers (LECs), interexchange 
carriers (IXCs), competitive access providers (CAPs), operator service 
providers (OSPs), payphone providers or resellers. The closest 
applicable definition for these carrier-types under SBA rules is for 
telephone communications companies other than radiotelephone (wireless) 
companies. The most reliable source of information regarding the number 
of these carriers nationwide of which we are aware appears to be the 
data that we collect annually on the Form 499-A. According to our most 
recent data, there are 1,335 incumbent LECs, 349 CAPs, 204 IXCs, 21 
OSPs, 758 payphone providers and 541 resellers. Although it seems 
certain that some of these carriers are not independently owned and 
operated, or have more than 1,500 employees, we are unable at this time 
to estimate with greater precision the number of these carriers that 
would qualify as small business concerns under SBA's definition. 
Consequently, we estimate that there are fewer than 1,335 incumbent 
LECs, 349 CAPs, 204 IXCs, 21 OSPs, 758 payphone providers, and 541 
resellers that may be affected by the decisions and rules adopted in 
this Order.
    20. Cellular Licensees. Neither the Commission nor the SBA has 
developed a definition of small entities applicable to cellular 
licensees. The applicable definition of small entity is the definition 
under the SBA rules applicable to radiotelephone (wireless) companies. 
This provides that a small entity is a radiotelephone company employing 
no more than 1,500 persons. According to the Bureau of the Census, only 
twelve radiotelephone firms from a total of 1,178 such firms which 
operated during 1992 had 1,000 or more employees. Even if all twelve of 
these firms were cellular telephone companies, nearly all cellular 
carriers were small businesses under the SBA's definition. In addition, 
we note that there are 1,758 cellular licenses; however, a cellular 
licensee may own several licenses. According to the most recent Trends 
Report, 806 carriers reported that they were engaged in the provision 
of either cellular service or Personal Communications Service (PCS) 
services, which are placed together in the data. We do not have data 
specifying the number of these carriers that are not independently 
owned and operated or have more than 1,500 employees, and are unable at 
this time to estimate with greater precision the number of cellular 
service carriers that would qualify as small business concerns under 
the SBA's definition. We estimate that there are fewer than 806 small 
cellular service carriers that may be affected by the proposed rules, 
if adopted.
    21. 220 MHz Radio Service--Phase I Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. Phase I licensing was conducted 
by lotteries in 1992 and 1993. There are approximately 1,515 such non-
nationwide licensees and four nationwide licensees currently authorized 
to operate in the 220 MHz band. The Commission has not developed a 
definition of small entities specifically applicable to such incumbent 
220 MHz Phase I licensees. To estimate the number of such licensees 
that are small businesses, we apply the definition under the SBA rules 
applicable to Radiotelephone Communications companies. This definition 
provides that a small entity is a radiotelephone company employing no 
more than 1,500 persons. According to the Bureau of the Census, only 12 
radiotelephone firms out of a total of 1,178 such firms which operated 
during 1992 had 1,000 or more employees. If this general ratio 
continues in the context of Phase I 220 MHz licensees, we estimate that 
nearly all such licensees are small businesses under the SBA's 
definition.
    22. 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 16004, April 3, 1997, we adopted 
criteria for defining small and very small businesses for purposes of 
determining their eligibility for special provisions such as bidding 
credits and installment payments. We have defined a small business as 
an entity that, together with its affiliates and controlling 
principals, has average gross revenues not exceeding $15 million for 
the preceding three years. A very small business is defined as an 
entity that, together with its affiliates and controlling principals, 
has average gross revenues that are not more than $3 million for the 
preceding three years. The SBA has approved these definitions. An 
auction of Phase II licenses commenced on September 15, 1998, and 
closed on October 22, 1998. Two auctions of Phase II licenses have been 
conducted. In the first auction, nine hundred and eight (908) licenses 
were auctioned in 3 different-sized geographic areas: three nationwide 
licenses, 30 Regional Economic Area Group Licenses, and 875 Economic 
Area (EA) Licenses. Of the 908 licenses auctioned, 693 were sold. 
Companies claiming small business status won: One of the Nationwide 
licenses, 67% of the Regional licenses, and 54% of the EA licenses. The 
second auction included 225 licenses: 216 EA licenses and 9 EAG

[[Page 28723]]

licenses. Fourteen companies claiming small business status won 158 
licenses.
    23. Private and Common Carrier Paging. In the Paging Third Report 
and Order, we adopted criteria for defining small businesses and very 
small businesses for purposes of determining their eligibility for 
special provisions such as bidding credits and installment payments. 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 Metropolitan Economic Area 
(MEA) licenses commenced on February 24, 2000, and closed on March 2, 
2000. Of the 985 licenses auctioned, 440 were sold. Fifty-seven 
companies claiming small business status won. At present, there are 
approximately 24,000 Private-Paging site-specific licenses and 74,000 
Common Carrier Paging licenses. According to the most recent Trends 
Report, 427 carriers reported that they were engaged in the provision 
of paging and messaging 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 therefore are unable at this 
time to estimate with greater precision the number of paging carriers 
that would qualify as small business concerns under the SBA's 
definition. Consequently, we estimate that there are fewer than 427 
small paging carriers that may be affected by the decisions and rules 
adopted in this Order. We estimate that the majority of private and 
common carrier paging providers would qualify as small entities under 
the SBA definition.
    24. Broadband Personal Communications Service (PCS). The broadband 
PCS spectrum is divided into six frequency designated A through F, and 
the Commission has held auctions for each block. The Commission defined 
``small entity'' for Blocks C and F as an entity that has average gross 
revenues of less than $40 million in the three previous calendar years. 
For Block F, an additional classification for ``very small business'' 
was added and is defined as an entity that, together with their 
affiliates, has average gross revenues of not more than $15 million for 
the preceding three calendar years. 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 Block C auctions. A 
total of 93 small and very small business bidders won approximately 40% 
of the 1,479 licenses for Blocks D, E, and F. On March 23, 1999, the 
Commission re-auctioned 347 C, D, E, and F Block licenses; there were 
48 small business winning bidders. Based on this information, we 
conclude that the number of small broadband PCS licensees will include 
the 90 winning C Block bidders and the 93 qualifying bidders in the D, 
E, and F blocks, plus the 48 winning bidders in the re-auction, for a 
total of 231 small entity PCS providers as defined by the SBA and the 
Commission's auction rules. On January 26, 2001, the Commission 
completed the auction of 422 C and F Broadband PCS licenses in Auction 
No. 35. Of the 35 winning bidders in this auction, 29 qualified as 
small or very small businesses.
    25. Narrowband PCS. To date, two auctions of narrowband PCs 
licenses have been conducted. Through these auctions, the Commission 
has awarded a total of 41 licenses, out of which 11 were obtained by 
small businesses. For purposes of the two auctions that have already 
been held, small businesses were defined as entities with average gross 
revenues for the prior three calendar years of $40 million or less. To 
ensure meaningful participation of small business entities in the 
auctions, the Commission adopted a two-tiered definition of small 
businesses in the Narrowband PCS Second Report and Order, 65 FR 35875, 
June 6, 2000. A small business is an entity that, together with 
affiliates and controlling interests, has average gross revenues for 
the three preceding years of not more than $40 million. A very small 
business is an entity that, together with affiliates and controlling 
interests, has average gross revenues for the three preceding years of 
not more than $15 million. These definitions have been approved by the 
SBA. In the future, the Commission will auction 459 licenses to serve 
MTAs and 408 response channel licenses. There is also one megahertz of 
narrowband PCS spectrum that has been held in reserve and that the 
Commission has not yet decided to release for licensing. The Commission 
cannot predict accurately the number of licenses that will be awarded 
to small entities in future auctions. However, four of the 16 winning 
bidders in the two previous narrowband PCS auctions were small 
businesses, as that term was defined under the Commission's Rules. The 
Commission assumes, for purposes of this IRFA, that a large portion of 
the remaining narrowband PCS licenses will be awarded to small 
entities. The Commission also assumes that at least some small 
businesses will acquire narrowband PCS licenses by means of the 
Commission's partitioning and disaggregation rules.
    26. 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 as small entities under the SBA's 
definition.
    27. Air-Ground Radiotelephone Service. The Commission has not 
adopted a definition of small entity specific to the Air-Ground 
Radiotelephone Service. 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.
    28. Specialized Mobile Radio (SMR). Pursuant to 47 CFR 
90.814(b)(1), the Commission has defined ``small business'' for 
purposes of auctioning 900 MHz SMR licenses, 800 MHz SMR licenses for 
the upper 200 channels, and 800 MHz SMR licenses for the lower 230 
channels on the 800 MHz band, as a firm that has had average annual 
gross revenues of $15 million or less in the three preceding calendar 
years. The SBA has approved this small business size standard for the 
800 MHz and 900 MHz auctions. Sixty winning bidders for geographic area 
licenses in the 900 MHz SMR band qualified as small business under the 
$15 million size standard. The auction of the 525 800 MHz SMR 
geographic area licenses for the upper 200 channels began on October 
28, 1997, and was completed on December 8, 1997. Ten winning bidders 
for geographic area licenses for the upper 200 channels in the 800 MHz 
SMR band qualified as small businesses under the $15 million size 
standard. An auction of 800 MHz SMR geographic area licenses for the 
General Category channels began on August 16, 2000 and

[[Page 28724]]

was completed on September 1, 2000. Of the 1,050 licenses offered in 
that auction, 1,030 licenses were sold. Eleven winning bidders for 
licenses for the General Category channels in the 800 MHz SMR band 
qualified as small business under the $15 million size standard. In an 
auction completed on December 5, 2000, a total of 2,800 EA licenses in 
the lower 80 channels of the 800 MHz SMR service were sold. Of the 22 
winning bidders, 19 claimed small business status. In addition, there 
are numerous incumbent site-by-site SMR licenses on the 800 and 900 MHz 
band.
    29. We do not know how many firms provide 800 MHz or 900 MHz 
geographic area SMR service pursuant to extended implementation 
authorizations, nor how many of these providers have annual revenues of 
no more than $15 million. One firm has over $15 million in revenues. We 
assume, for purposes of this FRFA, that all of the remaining existing 
extended implementation authorizations are held by small entities, as 
that term is defined by the SBA.
    30. For geographic area licenses in the 900 MHz SMR band, there are 
60 who qualified as small entities. For the 800 MHz SMR's, 38 are small 
or very small entities.
4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    31. Any decisions on rule changes adopted in this proceeding 
potentially could modify the reporting and recordkeeping requirements 
of telecommunications service providers regulated under the 
Communications Act. As discussed previously, we potentially could 
require telecommunications service providers to file additional and/or 
different monthly or quarterly reports. In addition, we seek comment on 
whether to modify or eliminate the interim safe harbor for wireless 
telecommunications carriers. We also seek comment on whether to 
eliminate the de minimis exemption from universal service contribution 
requirements. Any such reporting requirements potentially could require 
the use of professional skills, including legal and accounting 
expertise. Without more data, we cannot accurately estimate the cost of 
compliance with a carrier surcharge by small telecommunications service 
providers. In this NPRM, we therefore seek comment on the frequency 
with which carriers subject to a carrier surcharge should submit 
reports to USAC, the types of burdens carriers will face in 
periodically submitting reports to USAC, and whether the costs of such 
reporting are outweighed by the potential benefits of a carrier 
surcharge. Entities, especially small businesses, are encouraged to 
quantify the costs and benefits of carrier surcharge reporting 
requirement proposals.
5. Steps Taken to Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    32. 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.
    33. As discussed previously, this NPRM seeks comment on how to 
streamline and reform both the manner in which the Commission assesses 
carrier contributions to the universal service fund and the manner in 
which carriers may recover those costs from their customers. We seek 
comment on whether and how to revise the universal service contribution 
methodology. We seek comment on specific proposals to require carriers 
to contribute based on a percentage of collected revenues, or to 
contribute on the basis of a flat-fee charge, such as a per-line 
charge. Additionally, we seek comment on limiting the manner in which 
carriers recover contribution costs from end users. If carriers choose 
to recover universal service contributions from their end users through 
line items, we propose to require carriers to do so through a uniform 
universal service line item that corresponds to the contribution 
assessment on the carrier. The NPRM also seeks comment on any other 
mechanisms for the assessment and recovery of universal service 
contributions.
    34. Wherever possible, the NPRM proposes general rules, or 
alternative rules to reduce the administrative burden and cost of 
compliance for small telecommunications service providers. As 
discussed, under the current universal service contribution rules 
interstate telecommunications service providers whose annual universal 
service contribution is expected to be less than $10,000 are not 
required to contribute to the universal service mechanisms. In this 
NPRM, we seek comment on the impact of the proposed contribution 
assessment methodologies on the current de minimis exemption to the 
universal service contribution requirement. We specifically seek 
comment on whether to retain, modify, or eliminate the de minimis 
exemption. We also more generally seek comment from small businesses on 
the costs and benefits of reporting requirements associated with the 
various proposed universal service assessment methodologies. Finally, 
the NPRM seeks comment on measures to avoid significant economic impact 
on small business entities, as defined by section 601(3) of the 
Regulatory Flexibility Act.
6. Federal Rules that May Duplicate, Overlap, or Conflict with the 
Proposed Rules
    35. None.

D. Comment Filing Procedures

    36. Pursuant to sections 1.415 and 1.419 of the Commission's rules, 
47 CFR 1.415, 1.419, interested parties may file comments June 25, 
2001, and reply comments July 9, 2001. Comments may be filed using the 
Commission's Electronic Comment Filing System (ECFS) or by filing paper 
copies.
    37. 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. If 
multiple docket or rulemaking numbers appear in the caption of this 
proceeding, however, commenters must transmit one electronic copy of 
the comments to each docket or rulemaking number referenced in the 
caption. In completing the transmittal screen, commenters should 
include their full name, Postal Service mailing address, and the 
applicable docket or rulemaking number. 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#3451575247745257571a535b42"><span class="__cf_email__" data-cfemail="1e7b7d786d5e787d7d30797168">[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.
    38. Parties who choose to file by paper must file an original and 
four copies of each filing. If more than one docket or rulemaking 
number appear in the caption of this proceeding, commenters must submit 
two additional copies for each additional docket or rulemaking number. 
All filings must be sent to the Commission's Secretary, Magalie Roman 
Salas, Office of the Secretary, Federal Communications Commission, 445 
12th Street, S.W., Washington, D.C. 20554.

[[Page 28725]]

    39. Parties who choose to file by paper should also submit their 
comments on diskette. These diskettes should be submitted to: Sheryl 
Todd, Accounting Policy Division, 445 12th Street, S.W., Washington, 
D.C. 20554. Such a submission should be on a 3.5-inch diskette 
formatted in an IBM compatible format using 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. 96-45, 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, N.W., Washington, D.C. 20037.
    40. Written comments by the public on the proposed and/or modified 
information collections are due on or before June 25, 2001. Written 
comments must be submitted by the Office of Management and Budget (OMB) 
on the proposed and/or modified information collections on or before 
July 23, 2001.

III. Ordering Clauses

    41. Pursuant to the authority contained in sections 4(i), 4(j), 
201-205, 254, and 403 of the Communications Act of 1934, as amended, 
this Notice of Proposed Rulemaking is adopted.
    42. The Commission's Consumer Information Bureau, Reference 
Information Center, shall send a copy of this Notice of Proposed 
Rulemaking, including the Initial Regulatory Flexibility Analysis, to 
the Chief Counsel for Advocacy of the Small Business Administration.

List of Subjects 47 CFR Part 54

    Reporting and recordkeeping requirements, Telecommunications, 
Telephone.

Federal Communications Commission.
William F. Caton,
Deputy Secretary.
[FR Doc. 01-13114 Filed 5-23-01; 8:45 am]
BILLING CODE 6712-01-P


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