[Federal Register Volume 73, Number 161 (Tuesday, August 19, 2008)]
[Proposed Rules]
[Pages 48352-48359]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-19178]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 02-6; FCC 08-173]


Schools and Libraries Universal Service Support Mechanism

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In this document, the Commission seeks comment on whether 
certain services should be designated as eligible for funding under the 
schools and libraries universal service support mechanism, also known 
as the E-rate program. The Commission also seeks comment on whether to 
retain interconnected Voice over Internet Protocol (interconnected 
VoIP) as an eligible service for future funding years.

DATES: Comments are due on or before September 18, 2008. Reply comments 
are due on or before October 3, 2008.

ADDRESSES: You may submit comments, identified by CC Docket No. 02-6, 
by any of the following methods:
    <bullet> Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
    <bullet> Federal Communications Commission's Web Site: http://www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
    <bullet> E-mail: <a href="/cdn-cgi/l/email-protection#5c393f3a2f1c3a3f3f723b332a"><span class="__cf_email__" data-cfemail="cca9afaabf8caaafafe2aba3ba">[email protected]</span></a>, and include the following words in 
the body of the message, ``get form.'' A sample form and directions 
will be sent in response. Include the docket number in the subject line 
of the message.

[[Page 48353]]

    <bullet> Mail: Secretary, Federal Communications Commission, 445 
12th Street, SW., Washington, DC 20554.
    <bullet> People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by e-mail: <a href="/cdn-cgi/l/email-protection#cd8b8e8ef8fdf98dabaeaee3aaa2bb"><span class="__cf_email__" data-cfemail="165055552326225670757538717960">[email protected]</span></a> or phone: 202-418-
0530 or TTY 202-418-0432.
    For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: James Bachtell or Cara Voth, Wireline 
Competition Bureau, Telecommunications Access Policy Division, 202-418-
7400 or TTY 202-418-0484.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Notice of Proposed Rulemaking in CC Docket No. 02-6, FCC 08-173, 
adopted July 25, 2008, and released July 31, 2008. The complete text of 
this document is available for inspection and copying during normal 
business hours in the FCC Reference Information Center, Portals II, 445 
12th Street, SW., Room CY-A257, Washington, DC 20554. The document may 
also be purchased from the Commission's duplicating contractor, Best 
Copy and Printing, Inc., 445 12th Street, SW., Room CY-B402, 
Washington, DC 20554, telephone 800-378-3160 or 202-863-2893, facsimile 
202-863-2898, or via e-mail at http://www.bcpiweb.com. It is also 
available on the Commission's Web site at http://www.fcc.gov.

Initial Paperwork Reduction Act of 1995 Analysis

    This document does not contain proposed information collection(s) 
subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-
13. In addition, therefore, it does not contain any new or modified 
``information collection burden for small business concerns with fewer 
than 25 employees,'' pursuant to the Small Business Paperwork Relief 
Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

Synopsis of the Notice of Proposed Rulemaking

Introduction

    1. In this Notice of Proposed Rulemaking (NPRM), we seek comment on 
whether certain services should be designated as eligible for funding 
under the schools and libraries universal service support mechanism, 
also known as the E-rate program. We seek comment on whether, beginning 
in Funding Year 2009, the Eligible Services List (ESL) should include 
filtering software, a broader classification of basic telephone 
service, dark fiber, text messaging, firewall service, anti-virus/anti-
spam software, scheduling services, telephone broadcast messaging, and 
certain wireless Internet access applications. In addition, we seek 
comment on whether to retain interconnected Voice over Internet 
Protocol (interconnected VoIP) as an eligible service for future 
funding years. During the pleading cycles established for the Funding 
Years 2007 and 2008 ESLs, numerous parties commented on the need to 
make these services eligible for E-rate program discounts. We now seek 
comment on whether these services may be supported and whether support 
for these services will encourage access to advanced telecommunications 
and information services for public and non-profit elementary and 
secondary school classrooms and libraries.

Background

    2. Under the E-rate program, eligible schools, libraries, and 
consortia that include eligible schools and libraries may receive 
discounts for eligible telecommunications services, Internet access, 
and internal connections. Section 254 of the Communications Act of 
1934, as amended (the Act), gives the Commission the authority to 
designate ``telecommunications services'' and certain additional 
services eligible for support under the E-rate program. The Commission 
has also determined that it has the authority to designate services 
eligible for schools and libraries support as part of its authority to 
enhance, to the extent technically feasible and economically 
reasonable, access to advanced telecommunications and information 
services for all public and non-profit elementary and secondary school 
classrooms and libraries.
    3. Since the initial implementation of the E-rate program in 1998, 
the Universal Service Administrative Company (USAC) has developed 
various procedures and guidelines, consistent with the Commission's 
rules and requirements, for applicants to ensure that funding is 
provided only for eligible services. The ESL indicates whether specific 
products or services are eligible to receive discounts under the E-rate 
program. The ESL is divided into several categories--telecommunications 
service, Internet access, internal connections, basic maintenance of 
internal connections, and miscellaneous.
    4. On December 23, 2003, the Commission adopted Sec.  54.522 of its 
rules, formalizing the process for updating the ESL for the E-rate 
program. Specifically, Sec.  54.522 requires the Commission to seek 
comment on USAC's proposed ESL and to issue a Public Notice attaching 
the final ESL for the upcoming funding year at least 60 days prior to 
the opening of the funding window for the E-rate program.
    5. Pursuant to the Commission's rules, the Commission released 
Public Notices seeking comment on USAC's proposed ESL for Funding Years 
2007 and 2008. In revising the 2007 and 2008 ESLs, we noted that the 
proceedings were limited to determining what services are eligible 
under the Commission's current rules and were not intended to be a 
vehicle for changing eligibility rules. Therefore, we indicated that 
those comments not addressed in the ESLs may be more appropriately 
filed for the Commission's consideration in the general docket for the 
E-rate program.

Discussion

    6. In this NPRM, we seek comment on a number of issues raised by 
the commenters that may not have been addressed as part of the ESL 
process for Funding Year 2008 or prior years. Specifically, we seek 
comment on whether to include interconnected VoIP service, filtering, 
dark fiber, and other services in the ESL, in future funding years. We 
also seek comment on which rules, if any, would need to be amended to 
effectuate any changes made as a result of this NPRM. For instance, 
Sec. Sec.  54.502 and 54.503 describe services that can be provided by 
telecommunications carriers while Sec.  54.517 describes what services 
can be provided by non-telecommunications carriers. Should we 
reorganize or restructure the rules relating to the eligible services 
and the ESL to better inform applicants of which services are 
supported?

Interconnected VoIP Service

    7. Interconnected VoIP service is defined as a service that: (1) 
Enables real-time, two-way voice communications; (2) requires a 
broadband connection from the user's location; (3) requires Internet 
protocol-compatible customer premises equipment (CPE); and (4) permits 
users generally to receive calls that originate on the public switched 
telephone network and to terminate calls to the public switched 
telephone network.
    8. The Commission has addressed interconnected VoIP services in 
various contexts other than E-rate eligible services in recent years. 
In June 2006, the Commission established universal service obligations 
for providers of

[[Page 48354]]

interconnected VoIP service. The Commission required providers of 
interconnected VoIP services to contribute to the Universal Service 
Fund (USF) on an interim basis in order to sustain the USF, but the 
Commission did not classify interconnected VoIP service as either a 
telecommunications service or an information service. It did, however, 
for purposes of finding permissive authority under section 254(d) of 
the Act, find that interconnected VoIP providers are providers of 
interstate telecommunications. In 2007, the Commission also extended 
local number portability obligations to interconnected VoIP providers 
and extended the disability access requirements that currently apply to 
telecommunications service providers and equipment manufacturers to 
interconnected VoIP providers.
    9. Consistent with these recent Commission actions, interconnected 
VoIP service was included as an eligible service in the 2007 and 2008 
ESLs. The Commission has not yet determined if interconnected VoIP 
services are telecommunications services or information services. 
Consequently, the 2007 and 2008 ESLs listed interconnected VoIP 
services under the ``Miscellaneous'' category.
    10. As established by section 254(c)(3) of the Act, the Commission 
may designate additional services for universal service support. 
Furthermore, the Act also authorizes the Commission to establish 
competitively neutral rules to enhance access to advanced 
telecommunications and information services. We tentatively conclude 
that interconnected VoIP service should be designated as a supported 
service for the E-rate program in future funding years. Because the 
Commission required interconnected VoIP service providers to contribute 
to the USF, the policy of competitive neutrality would support a 
finding that providers of interconnected VoIP services should also be 
able to participate in the universal service E-rate program and, 
consequently, that interconnected VoIP service be included in the ESL. 
We also agree with commenters that the inclusion of interconnected VoIP 
service as an eligible service enhances the options available to 
schools and libraries to effectuate meaningful communications among 
parents, teachers, and school and library administrators.
    11. We tentatively conclude that it is administratively and 
operationally appropriate for interconnected VoIP service requests to 
be processed as a Priority 1 service. We seek comment on this tentative 
conclusion. If interconnected VoIP service is deemed an eligible 
service, we also seek comment on how USAC would implement this 
tentative conclusion. For example, is it appropriate for applicants to 
label interconnected VoIP service as an Internet access service when 
applying for E-rate program funding? If so, should we require 
applicants requesting funding for interconnected VoIP services to 
certify to Children's Internet Protection Act (CIPA) requirements? All 
schools and libraries seeking funding for Internet access or internal 
connections under the E-rate program must have technology that blocks 
or filters Internet access to obscenity, pornography, and material 
deemed harmful to minors under the CIPA. Applicants seeking funding 
only for telecommunications services do not have to comply with CIPA. 
Should we require applicants requesting funding for interconnected VoIP 
services to comply with CIPA if the applicant does not also receive E-
rate funds for Internet access, Internet service, or internal 
connections? As noted earlier, the 2008 ESL identifies interconnected 
VoIP service under the miscellaneous category. As the Commission 
explained in the VoIP 911 Order, customers who purchase interconnected 
VoIP service receive a service that ``enables a customer to do 
everything (or nearly everything) the customer could do using an analog 
telephone.'' We therefore seek comment on whether ``Miscellaneous'' is 
the appropriate category for interconnected VoIP services or if another 
category would be more appropriate. If a commenter believes that 
another category is more appropriate, we ask that the commenter 
identify the appropriate category and explain why such category is more 
appropriate. Finally, we seek comment on the effect, if any, that the 
removal of interconnected VoIP service from the 2009 ESL would have on 
the E-rate program or upon applicants that rely on this service.

Filtering Software

    12. We seek comment on whether stand-alone filtering software 
should be funded under the E-rate program. Filtering software protects 
users from inappropriate content by selectively blocking certain words 
or Internet sites. In 2001, the Commission determined that CIPA 
prohibited the use of E-rate funding for filtering software. Section 
1721(g) of CIPA states that funds from the Elementary and Secondary 
Education Act of 1965 or the Library Services and Technology Act may be 
used to purchase filtering technology necessary to meet the 
requirements of CIPA, but ``[n]o other sources of funds for the 
purchase or acquisition of such measures are authorized by this title, 
or the amendments made by this title.'' The Commission interpreted this 
passage to mean that no sources of funds other than those explicitly 
listed in CIPA, which did not include E-rate program funds, could be 
used for the purchase of filtering software to comply with CIPA.
    13. We seek comment on the Commission's prior interpretation of 
section 1721(g) of CIPA and whether it should be reconsidered. 
Specifically, parties are asked to comment on whether this provision 
explicitly prohibits E-rate program funding from being used for 
filtering software or whether the statute can be interpreted so that 
the Commission is not precluded from funding filtering software through 
the E-rate program. We also seek comment on whether schools and 
libraries have an additional need for subsidized filtering services 
because Congress requires content filtering for the receipt of E-rate 
funding. We further seek comment on whether making filtering eligible 
may help streamline the application review process by reducing the 
administrative effort and costs associated with determining whether a 
school or library is seeking E-rate funding for costs associated with 
stand-alone filtering services. We also seek comment on whether 
classifying stand-alone filtering services as eligible for E-rate 
support would also reduce confusion for applicants.

Basic Telephone Service

    14. We seek comment on whether the definition of ``basic'' 
telephone service should be expanded to include additional services 
under the E-rate program. The Commission requires participating schools 
and libraries to base their requests for discounts on an approved 
technology plan, unless they are seeking discounts on ``basic local, 
cellular, PCS, and/or long distance telephone service and/or voicemail 
only.'' We seek comment on whether the classification of basic 
telephone service should include services such as a Private Branch 
eXchange (PBX), key systems, T1 lines, and interconnected VoIP and 
Primary Rate Interface (PRI) trunk lines connecting a PBX to the Public 
Switched Telephone Network (PSTN), for the purpose of also exempting 
these services from the technology plan requirement. We seek comment on 
whether applicants will continue to sufficiently align their funding 
requests with their service needs if we classify these services as 
``basic'' telephone service for purposes

[[Page 48355]]

of eliminating the technology plan requirement. We seek comment on 
whether it is appropriate to expand the definition to classify certain 
Priority 2 services as ``basic'' telephone service, a Priority 1 
service. Commenters should discuss how any changes to the definition of 
``basic'' telephone service to include certain Priority 2 services 
affect the Commission's determination that facilities located on an 
applicant's premises are presumed to be Priority 2 internal 
connections.

Dark Fiber

    15. We seek comment on whether unlit (dark) fiber should be 
eligible for discounts under the E-rate program. Dark fiber was 
conditionally eligible for E-rate discounts prior to Funding Year 2004. 
In the Schools and Libraries Third Report and Order, FCC 03-323, 
released in 2003, however, the Commission found that dark fiber was not 
eligible for discounts and sought comment on whether dark fiber should 
be funded under the E-rate program. We now incorporate that record into 
this proceeding and ask commenters to refresh the record on whether 
dark fiber should be included as an eligible service. While the 
statutory classification of dark fiber remains an open issue, we note 
that if dark fiber were eligible for E-rate discounts, the service 
could be supported under the Act as an ``additional'' service, rather 
than as a ``telecommunications service.'' As such, we seek comment on 
whether dark fiber should be classified under the miscellaneous 
category or some other category of service. We also seek comment on 
technological or other changes that have occurred since we last sought 
comment on this issue in 2003. Commenters should address whether these 
changes alter the Commission's prior conclusion that only a functioning 
(lit) fiber optic service provided by a telecommunications service 
provider or Internet access provider should be eligible for E-rate 
support.

Other Services

    16. We seek comment on whether several individual services--text 
messaging, firewall, anti-virus/anti-spam software, scheduling services 
and telephone broadcast messaging--should be eligible for the E-rate 
program under section 254(c)(3) of the Act. We seek comment on whether 
funding these services through E-rate will encourage access to advanced 
telecommunications and information services for public and non-profit 
elementary and secondary school classrooms and libraries. We also seek 
comment on how schools and libraries would use these services and 
whether the use would be for ``educational purposes,'' as required by 
our rules. For the services discussed in this section, we seek comment 
on how each service, if it is added to the ESL, should be categorized. 
Specifically, commenters should indicate whether the service should be 
categorized as a telecommunications service, Internet access service, 
and/or listed in the miscellaneous category. Should we require 
applicants requesting funding for the services discussed in this 
section to certify to CIPA requirements? As discussed above, we note 
that all schools and libraries seeking funding for Internet access or 
internal connections under the E-rate program must have technology that 
blocks or filters Internet access to obscenity, pornography, and 
material deemed harmful to minors under the CIPA. Applicants seeking 
funding only for telecommunications services do not have to comply with 
CIPA. Should we require applicants requesting funding for the services 
discussed in this section to comply with CIPA if the applicant does not 
also receive E-rate funds for Internet access, Internet service, or 
internal connections?
    17. Text Messaging. We seek comment on whether text messaging 
should be an eligible service. Text messaging, known as short message 
service or SMS, is a service that allows short messages, typically up 
to 160 characters, to be sent to and from handheld wireless devices. We 
specifically seek comment on the extent to which SMS is functionally 
equivalent to e-mail and paging and how the current eligibility of 
these two messaging services should affect our treatment of text 
messaging as an eligible service. Because text messaging is often 
bundled with other eligible telecommunications services, we seek 
comment on whether including text messaging as an eligible service 
would reduce the burden and administrative costs for applicants, 
service providers and USAC.
    18. Firewall. We seek comment on whether separately priced firewall 
services should be eligible under the E-rate program, as recommended by 
a number of commenters. Firewall service is described as ``a hardware 
and software combination that sits at the boundary between an 
organization's network and the outside world, and protects the network 
against unauthorized access or intrusions.'' In the 2007 ESL, the 
Commission clarified that only basic firewall services that are 
provided as a standard component of a vendor's Internet access service 
are eligible for E-rate program discounts. We seek comment on whether a 
new definition of eligible firewall services should be adopted and 
whether it should include such technology as intrusion prevention 
devices, network access control, firewall traversal, and deep packet 
inspection devices. Commenters should also identify any technologies 
other than these that should be considered for funding. We ask 
commenters to provide a proposed definition and to explain why such 
definition is appropriate.
    19. Anti-Virus/Anti-Spam Software. We seek comment on whether we 
should extend E-rate program eligibility to anti-virus and anti-spam 
software. Currently, only network operating system software and server-
based e-mail and voice mail software are eligible for E-rate funds. 
Software that protects computer components from viruses and spam e-
mails is ineligible for E-rate support. Thus, we seek comment on 
whether the increased prevalence of viruses and spam justifies 
including as an eligible service software that protects equipment at 
schools and libraries from these threats.
    20. Scheduling Services. We seek comment on whether to allow 
scheduling services to be eligible for E-rate support. Scheduling 
software allows schools and libraries more efficiently to use video 
teleconferencing for distance learning by controlling the video linkage 
between the classrooms and the originating video feed, sometimes 
coordinating between hundreds of locations. Scheduling services were 
explicitly made ineligible in Funding Year 2006. Many commenters, 
however, have noted that scheduling software is a necessary component 
of distance learning, which is eligible as a digital transmission 
service in the telecommunications services category. Thus, we seek 
comment on whether video and voice conferencing services, which are 
eligible services, require scheduling software as an essential 
component of the services. We seek comment on how scheduling software 
is similar or different from other telecommunications components that 
are eligible.
    21. Telephone Broadcast Messaging. We seek comment on whether 
telephone broadcast messaging should be eligible for E-rate support. 
Telephone broadcast messaging allows pre-recorded messages to be sent 
over phone lines to individuals concerning school delays or closures, 
reported absences, upcoming activities and events, and emergencies.
    22. Wireless Internet Access Applications. We seek comment on 
whether certain wireless Internet access applications should be 
eligible for E-rate support. Currently, wireless Internet

[[Page 48356]]

access service that is used for an educational purpose is eligible in 
the same manner that wired Internet access is eligible. The Commission 
has determined that, to qualify as an educational purpose under the E-
rate program, an activity must be integral, immediate, and proximate to 
the education of students in the case of schools, or integral, 
immediate, and proximate to the provision of library services to 
library patrons in the case of libraries. Activities that occur on 
library or school property are presumed to be integral, immediate, and 
proximate to the education of students or the provision of library 
services to patrons. Although the Commission has previously found that 
wireless services used on library or classroom property are presumed to 
be eligible, we seek comment on various technologies that are used away 
from the library or school property. Commenters should discuss how 
other wireless Internet access applications are similar or different 
from other currently eligible services which are used off-site for 
educational purposes.

Procedural Matters

    23. Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's 
rules, 47 CFR 1.415, 1.419, interested parties may file comments on or 
before September 18, 2008 and reply comments are due on or before 
October 20, 2008. Comments may be filed using: (1) The Commission's 
Electronic Comment Filing System (ECFS), (2) the Federal Government's 
eRulemaking Portal, or (3) by filing paper copies. See Electronic 
Filing of Documents in Rulemaking Proceedings, 63 FR 24121, May 1, 
1998.
    <bullet> Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/ 
or the Federal eRulemaking Portal: http://www.regulations.gov. Filers 
should follow the instructions provided on the Web site for submitting 
comments.
    <bullet> For ECFS filers, if multiple docket or rulemaking numbers 
appear in the caption of this proceeding, filers must transmit one 
electronic copy of the comments for each docket or rulemaking number 
referenced in the caption. In completing the transmittal screen, filers 
should include their full name, U.S. 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, 
filers should send an e-mail to <a href="/cdn-cgi/l/email-protection#46232520350620252568212930"><span class="__cf_email__" data-cfemail="2144424752614742420f464e57">[email protected]</span></a>, and include the following 
words in the body of the message, ``get form.'' A sample form and 
directions will be sent in response.
    <bullet> Paper Filers: 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 appears in the caption of this proceeding, 
filers must submit two additional copies for each additional docket or 
rulemaking number.
    <bullet> Filings can be sent by hand or messenger delivery, by 
commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail (although we continue to experience delays in 
receiving U.S. Postal Service mail). All filings must be addressed to 
the Commission's Secretary, Office of the Secretary, Federal 
Communications Commission.
    <bullet> The Commission's contractor will receive hand-delivered or 
messenger-delivered paper filings for the Commission's Secretary at 236 
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing 
hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be 
held together with rubber bands or fasteners. Any envelopes must be 
disposed of before entering the building.
    <bullet> Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
    <bullet> U.S. Postal Service first-class, Express, and Priority 
mail must be addressed to 445 12th Street, SW., Washington, DC 20554.
    People with Disabilities: To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an e-mail to <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="71171212444145311712125f161e07">[email protected]</a> or call the 
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (TTY).

Ex Parte Requirements

    24. These matters shall be treated as a ``permit-but-disclose'' 
proceeding in accordance with the Commission's ex parte rules. 47 CFR 
1.1200 through 1.1216. Persons making oral ex parte presentations are 
reminded that memoranda summarizing the presentations must contain 
summaries of the substance of the presentations 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. 
47 CFR 1.1206(b)(2). Other requirements pertaining to oral and written 
presentations are set forth in Sec.  1.1206(b) of the Commission's 
rules. 47 CFR 1.1206(b).

Initial Regulatory Flexibility Analysis

    25. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C. 
603, 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 the NPRM. Written public 
comments are requested on this IRFA. Comments must be identified as 
responses to the IRFA and must be filed on or before September 18, 
2008. The Commission will send a copy of the NPRM, including this IRFA, 
to the Chief Counsel for Advocacy of the Small Business Administration 
(SBA). 5 U.S.C. 603(a).

Need for, and Objectives of, the Proposed Rules

    26. The Commission is required by section 254 of the Act to 
promulgate rules to implement the universal service provisions of 
section 254. On May 8, 1997, the Commission adopted rules to reform its 
system of universal service support mechanisms so that universal 
service is preserved and advanced as markets move toward competition. 
Specifically, under the schools and libraries universal service support 
mechanism, also known as the E-rate program, eligible schools, 
libraries, and consortia that include eligible schools and libraries 
may receive discounts for eligible telecommunications services, 
Internet access, and internal connections. Since the initial 
implementation of the E-rate program, USAC has developed various 
procedures and guidelines, consistent with the Commission's rules and 
requirements, for applicants to ensure that funding is provided only 
for eligible services.
    27. Pursuant to the Commission's rules, the Commission released 
Public Notices seeking comment on USAC's proposed ESL for Funding Years 
2007 and 2008. The ESL indicates whether specific products or services 
may be able to receive discounts under the E-rate program. The final 
2007 and 2008 ESLs and accompanying Public Notices were released on 
October 19, 2006 and October 19, 2007, respectively. In revising the 
2007 and 2008 ESLs, we noted that the proceedings were limited to 
determining what services are eligible under the Commission's current 
rules and were not intended to be a vehicle for changing eligibility 
rules. Therefore, we indicated that those comments not addressed in the 
ESLs may be more appropriately filed for the Commission's consideration 
in the general docket for the E-rate program. In this NPRM, we seek 
comment on the eligibility of

[[Page 48357]]

certain services under the E-rate program raised by the commenters that 
may not have been addressed as part of the 2008 or prior ESLs. 
Specifically, we seek comment on whether to include filtering software, 
an expanded classification of basic telephone service, dark fiber, text 
messaging, firewall service, anti-virus/anti-spam software, scheduling 
services, telephone broadcast messaging, and certain wireless Internet 
access applications in the ESL beginning in Funding Year 2009. We also 
seek comment on whether to retain interconnected Voice over Internet 
Protocol (interconnected VoIP) as an eligible service for future 
funding years.

Legal Basis

    28. The legal basis for this NPRM is contained in sections 1 
through 4, 201 through 205, 254, 303(r), and 403 of the Communications 
Act of 1934, as amended by the Telecommunications Act of 1996, 47 
U.S.C. 151 through 154, 201 through 205, 254, 303(r), and 403, and 
Sec.  1.411 of the Commission's rules, 47 CFR 1.411.

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

    29. 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. 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 SBA. Nationwide, 
there are a total of approximately 22.4 million small businesses, 
according to SBA data. A small organization is generally ``any not-for-
profit enterprise which is independently owned and operated and is not 
dominant in its field.'' Nationwide, as of 2002, there were 
approximately 1.6 million 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.'' Census Bureau data for 2002 
indicate that there were 87,525 local governmental jurisdictions in the 
United States. We estimate that, of this total, 84,377 entities were 
``small governmental jurisdictions.'' Thus, we estimate that most 
governmental jurisdictions are small.
    30. Small entities potentially affected by the proposals herein 
include eligible schools and libraries and the eligible service 
providers offering them discounted services, including 
telecommunications service providers, Internet Service Providers 
(ISPs), and vendors of the services and equipment used for internal 
connections.

Schools and Libraries

    31. Under the E-rate program, which provides universal service 
support for elementary and secondary schools and libraries, an 
elementary school is ``a non-profit institutional day or residential 
school that provides elementary education, as determined under state 
law.'' A secondary school is defined as ``a non-profit institutional 
day or residential school that provides secondary education, as 
determined under state law,'' and not offering education beyond grade 
12. For-profit schools and libraries, and schools and libraries with 
endowments in excess of $50 million are not eligible to receive 
discounts under the program, nor are libraries whose budgets are not 
completely separate from any schools. Certain other statutory 
definitions apply as well. The SBA has defined as small entities 
elementary and secondary schools and libraries having $6.5 million or 
less in annual receipts. In funding year 2005 (July 1, 2005 to June 30, 
2006) approximately 15,050 school districts, 6,547 individual schools, 
3,641 library and library consortiums, and 449 school and library 
consortiums received funding under the E-rate program. Although we are 
unable to estimate with precision the number of these entities that 
would qualify as small entities under SBA's definition, we estimate 
that fewer than 15,050 school districts, 6,547 individual schools, 
3,641 library and library consortiums, and 449 school and library 
consortiums would be affected annually by the rules proposed in this 
NPRM, under current operation of the program.

Telecommunications Service Providers

    32. Incumbent Local Exchange Carriers (LECs). Neither the 
Commission nor the SBA has developed a size standard for small 
incumbent local exchange services. The closest size standard under SBA 
rules is for Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to Commission data, 1,303 incumbent carriers reported that 
they were engaged in the provision of local exchange services. Of these 
1,303 carriers, an estimated 1,020 have 1,500 or fewer employees and 
283 have more than 1,500 employees. Consequently, the Commission 
estimates that most providers of incumbent local exchange service are 
small businesses that may be affected by the rules and policies adopted 
herein.
    33. We have included small incumbent local exchange carriers in 
this RFA analysis. 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 local 
exchange carriers are not dominant in their field of operation because 
any such dominance is not ``national'' in scope. We have therefore 
included small incumbent carriers in this RFA analysis, although we 
emphasize that this RFA action has no effect on the Commission's 
analyses and determinations in other, non-RFA contexts.
    34. 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 wired telecommunications 
carriers. This provides that a wired telecommunications carrier is a 
small entity if it employs no more than 1,500 employees. According to 
the Commission's 2005 Trends Report, 316 companies reported that they 
were engaged in the provision of interexchange services. Of these 316 
IXCs, an estimated 292 have 1,500 or fewer employees and 24 have more 
than 1,500 employees. Consequently, the Commission estimates that most 
providers of interexchange services are small businesses that may be 
affected by the rules and policies adopted herein.
    35. 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 wired 
telecommunications carriers. This provides that a wired 
telecommunications carrier is a small entity if it employs no more than 
1,500 employees. According to the 2005 Trends Report, 769 CAPs and 
competitive local exchange carriers (competitive LECs) reported that 
they were engaged in the provision of

[[Page 48358]]

competitive local exchange services. Of these 769 CAPs and competitive 
LECs, an estimated 676 have 1,500 or fewer employees and 93 have more 
than 1,500 employees. Consequently, the Commission estimates that most 
providers of competitive exchange services are small businesses that 
may be affected by the rules and policies adopted herein.
    36. Cellular and Wireless Providers. Neither the Commission nor the 
SBA has developed a definition of small entities specifically for 
wireless telephony. The closest definition is the SBA definition for 
cellular and other wireless telecommunications. Under this definition, 
a cellular licensee is a small entity if it employs no more than 1,500 
employees. According to the 2005 Trends Report, 437 providers 
classified themselves as providers of wireless telephony, including 
cellular telecommunications, Personal Communications Service, and 
Specialized Mobile Radio (SMR) Telephony Carriers. Of these 437 
wireless telephony providers, an estimated 260 have 1,500 or fewer 
employees and 177 have more than 1,500 employees. Consequently, the 
Commission estimates that more than half of the providers of wireless 
telephony services are small businesses that may be affected by the 
rules and policies adopted herein.
    37. Other Wireless Services. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
wireless services other than wireless telephony. The closest applicable 
definition under the SBA rules is again that of cellular and other 
wireless telecommunications, under which a service provider is a small 
entity if it employs no more than 1,500 employees. According to the 
2005 Trends Report, 33 providers classified themselves as wireless data 
carriers or other mobile service providers. Of these 33 providers, an 
estimated 32 have 1,500 or fewer employees and 1 has more than 1,500 
employees. Consequently, the Commission estimates that most providers 
of wireless services other than wireless telephony are small businesses 
that may be affected by the rules and policies adopted herein.
    38. Private and Common Carrier Paging. In the Paging Third Report 
and Order, we developed a small business size standard for ``small 
businesses'' and ``very small businesses'' for purposes of determining 
their eligibility for special provisions such as bidding credits and 
installment payments. A ``small business'' is an entity that, together 
with its affiliates and controlling principals, has average gross 
revenues not exceeding $15 million for the preceding three years. 
Additionally, a ``very small business'' is an entity that, together 
with its affiliates and controlling principals, has average gross 
revenues that are not more than $3 million for the preceding three 
years. An auction of Metropolitan Economic Area licenses commenced on 
February 24, 2000, and closed on March 2, 2000. Of the 985 licenses 
auctioned, 440 were sold. Fifty-seven companies claiming small business 
status won. At present, there are approximately 24,000 Private-Paging 
site-specific licenses and 74,000 Common Carrier Paging licenses. 
According to Commission data, 408 carriers reported that they were 
engaged in the provision of either paging and messaging services or 
other mobile services. Of those, the Commission estimates that 402 are 
small, under the SBA approved small business size standard.
    39. Internet Service Providers. Under the category of Internet 
service provider, a small business is one having annual receipts of $23 
million or less. According to SBA's most recent data, there are a total 
of 2,829 firms with annual receipts of less than $10 million, and an 
additional 111 firms with annual receipts of $10 million or more. Thus, 
the number of On-line Information Services firms that are small under 
the SBA's $18 million size standard is between 2,829 and 2,940. 
Further, some of these Internet Service Providers (ISPs) might not be 
independently owned and operated. Consequently, we estimate that there 
are fewer than 2,940 small entity ISPs that may be affected by the 
decisions and rules of the present action.

Vendors of Internal Connections

    40. Communications Equipment Manufacturers. The Commission has not 
developed a definition of small entities applicable to the 
manufacturers of internal network connections. The most applicable 
definitions of a small entity are the definitions under the SBA rules 
applicable to manufacturers of ``Radio and Television Broadcasting and 
Wireless Communications Equipment Manufacturing'' and ``Other 
Communications Equipment Manufacturing.'' According to the SBA's 
regulations, manufacturers of these types of communications equipment 
must have 750 or fewer employees in order to qualify as a small 
business. The most recent available Census Bureau data indicates that 
there are 1,187 companies with fewer than 1,000 employees in the United 
States that manufacture radio and television broadcasting and 
communications equipment, and 271 companies with less than 1,000 
employees that manufacture other communications equipment. Some of 
these manufacturers might not be independently owned and operated. 
Consequently, we estimate that there are fewer than 1,458 small entity 
internal connections manufacturers that may be affected by the 
decisions and rules of the present action.
    41. Wireless Communications Equipment Manufacturers. The SBA has 
established a small business size standard for radio and television 
broadcasting and wireless communications equipment manufacturing. Under 
this standard, firms are considered small if they have 750 or fewer 
employees. Census Bureau data for 1997 indicate that, for that year, 
there were a total of 1,215 establishments in this category. Of those, 
there were 1,150 that had employment under 500, and an additional 37 
that had employment of 500 to 999. The percentage of wireless equipment 
manufacturers in this category is approximately 61 percent, so the 
Commission estimates that the number of wireless equipment 
manufacturers with employment under 500 was actually closer to 706, 
with an additional 23 establishments having employment of between 500 
and 999. Given the above, the Commission estimates that the majority of 
wireless communications equipment manufacturers are small businesses.

Description of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    42. The specific proposals under consideration in the NPRM would 
not, if adopted, result in additional recordkeeping requirements for 
small businesses.

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

    43. 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 and 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 part thereof, for small 
entities.

[[Page 48359]]

    44. In this NPRM, we seek comment on a number of issues raised by 
the commenters that may not have been addressed as part of the ESL 
proceedings. Specifically, we seek comment on whether to include 
interconnected VoIP service, filtering software, dark fiber, and other 
services in future funding years. We tentatively conclude that 
interconnected VoIP service should be eligible for discounts under the 
E-rate program. We tentatively conclude that it is administratively and 
operationally appropriate for interconnected VoIP service requests to 
be processed as a Priority 1 service. We seek comment on this tentative 
conclusion. If interconnected VoIP service is deemed an eligible 
service, we also seek comment on how USAC would implement this 
tentative conclusion. We believe that the inclusion of interconnected 
VoIP service will not have an adverse impact on small entities. We 
welcome, however, comments from parties that have opinions different 
from those reached in this analysis.
    45. We also seek comment on whether several individual services--
filtering software, an expanded classification of basic telephone 
service, dark fiber, text messaging, firewall service, anti-virus/anti-
spam software, scheduling services, telephone broadcast messaging, and 
certain wireless Internet access applications--should be eligible for 
E-rate program eligibility. We believe that, if eligible, the benefits 
conferred by making these services eligible will not have an adverse 
impact on small entities. We welcome, however, comments from parties 
that have opinions different from those reached in this analysis.
    46. We believe our proposals and tentative conclusions will have a 
similar impact on both small and large schools and libraries, because 
both small and large schools and libraries will benefit equally from 
the possible addition of eligible services available under the E-rate 
program. Because this NPRM does not propose additional regulation for 
service providers and equipment vendors, these small entities will also 
experience no additional burden. We believe that small schools and 
libraries, as well as small service providers and equipment vendors, 
will benefit if we add more services to the eligible services list 
because it will open up more opportunities for small businesses to 
participate in the E-rate program. Therefore, we do not discuss any 
alternatives to the proposals contained in this NPRM. We invite 
commenters, in responding to the questions posed and tentative 
conclusions in the NPRM, to discuss any economic impact that such 
changes may have on small entities.

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

    47. None.

Ordering Clauses

    48. Accordingly, it is ordered that, pursuant to the authority 
contained in sections 1 through 4, 201 through 205, 254, 303(r), and 
403 of the Communications Act of 1934, as amended by the 
Telecommunications Act of 1996, 47 U.S.C. 151 through 154, 201 through 
205, 254, 303(r), and 403, this Notice of Proposed Rulemaking is 
adopted.
    49. It is further ordered that the Commission's Consumer and 
Governmental Affairs 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.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. E8-19178 Filed 8-18-08; 8:45 am]
BILLING CODE 6712-01-P


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