Federal-State Joint Board on Universal Service; Multi-Association Group (MAG) Plan for Regulation of Interstate Services of Non-Price Cap Incumbent Local Exchange Carriers and Interexchange Carriers

AGENCY:

Federal Communications Commission.

ACTION:

Further notice of proposed rulemaking.

SUMMARY:

In this document, the Commission declines, at this time, to adopt the Rural Task Force's proposal to freeze per-line support in rural carrier study areas in which a competitive eligible telecommunications carrier is providing service; however, the Commission recognizes that excessive fund growth may occur during this five-year plan. To develop the record on this issue more fully, the Commission invites interested parties to propose possible alternative measures that may be appropriate to address this issue. The Commission also invites commenters to address the likelihood that such measures may be necessary to prevent excessive fund growth during the five-year period.

DATES:

Comments are due on or before July 30, 2001. Reply comments are due on or before August 28, 2001. Written comments by the public on the proposed information collections discussed in this Further Notice of Proposed Rulemaking are due on or before July 30, 2001. Written comments must be submitted by the Office of Management and Budget (OMB) on the proposed information collections on or before August 28, 2001.

ADDRESSES:

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, 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, SW., Washington, DC 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 jboley@fcc.gov and to Edward C. Springer, OMB Desk Officer, 10236 NEOB, 725 17th Street, NW., Washington, DC 20503, or via the Internet to Edward.Springer@omb.eop.gov.

FOR FURTHER INFORMATION CONTACT:

Genaro Fullano, Paul Garnett, or Greg Guice, Attorney, Common Carrier Bureau, Accounting Policy Division, (202) 418-7400.

SUPPLEMENTARY INFORMATION:

This is a summary of the Commission's Further Notice of Proposed Rulemaking (FNPRM) in CC Docket No. 96-45 released on May 23, 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, SW., Washington, DC 20554. This FNPRM 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 FNPRM 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 FNPRM, as required by the PRA, Public Law 104-13. Public and agency comments on the proposed information collections discussed in this FNPRM are due on or before July 30, 2001. Written comments must be submitted by the Office of Management and Budget (OMB) on the proposed information collections on or before August 28, 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: None.

Title: Proposed Alternatives for the Rural Task Force's Proposal to Freeze High Cost Loop Support Upon Competitive Entry in Rural Carrier Study Areas (FNPRM).

Form No.: None.

Type of Review: Proposed New Collections.

Respondents: Business or other for-profit.

Total Annual Burden: 720.

Cost to Respondents: $0.

Needs and Uses: In addition to information already required by § 54.307 of the Commission's rules, competitive eligible telecommunications carriers serving loops in the service area of a rural incumbent local exchange carrier, as that term is defined by § 54.5 of the Commission's rules, would be required to separately report the number of captured and new loops in the service area disaggregated by cost zone if disaggregation zones have been established within the service area pursuant to § 54.315 of the Commission's rules. The frequency of reporting also may be impacted by conclusions reached in this proceeding. For purposes of this Paperwork Reduction Act analysis, we assume that competitive eligible telecommunications carriers would continue to be required to submit such data on a quarterly basis. Such reporting would be a modification to the current reporting requirement. The goal of this proposal is to ensure that per-line high-cost. The Commission also intends to consider alternatives that do not involve additional reporting requirements.

Synopsis of FNPRM

I. Further Notice of Proposed Rulemaking

A. Background

1. As discussed in greater detail in the companion Order, 66 FR 30080, June 5, 2001, we decline at this time to adopt the Rural Task Force's proposal to freeze high-cost loop support on a per-line basis in rural carrier study areas where a competitive eligible telecommunications carrier initiates service. The purpose of the proposal was to prevent excessive growth in the universal service fund as a result of the entrance of competitive eligible telecommunications carriers in rural carrier study areas over the life of the five-year plan we adopt here. As discussed in the companion Order, support provided to competitive eligible telecommunications carriers is not subject to the overall cap on the high-cost loop fund. During the five-year period, excessive growth in the fund is thus possible if incumbent carriers lose many lines to competitive eligible telecommunications carriers, or if competitive eligible telecommunications carriers add a significant number of lines. The first scenario raises particular fund growth concerns because as an incumbent “loses” lines to a competitive eligible telecommunications carrier, the incumbent must recover its fixed costs from fewer lines, thus increasing its per-line costs. With higher per-line costs, the incumbent would receive greater per-line support, which would also be available to the competitive eligible telecommunications carrier for each of the lines that it serves. Thus, a substantial loss of an incumbent's lines to a competitive eligible telecommunications carrier could result in excessive fund growth.

2. We base our decision not to adopt the Rural Task Force's proposal at this time on several concerns. First, the proposal may be of limited benefit in serving its intended purpose and may, in some instances, contribute to fund growth by freezing support at higher levels than would be warranted in the future. Second, the likelihood of a competitive eligible telecommunications carrier capturing a substantial percentage of lines from the incumbent during the five-year period is speculative. Third, the indexed cap on the high-cost loop fund will operate as a check on excessive fund growth to a certain extent. Fourth, we are concerned that the proposal may have the unintended consequence of discouraging efficient investment in rural infrastructure. Fifth, the proposal may hinder the competitive entry in rural study areas by creating an additional incentive for incumbents to oppose the designation of eligible telecommunications carriers in rural study areas. Finally, we are concerned that the proposal would require complex and administratively burdensome regulations to implement.

B. Issues for Comment

3. Although we decline, at this time, to adopt the Rural Task Force's proposal to freeze per-line support in rural carrier study areas in which a competitive eligible telecommunications carrier is providing service, we recognize that excessive fund growth may occur during this five-year plan. We note that the indexed cap on high-cost loop support would not check this growth fully, because support received by competitive carriers currently is not included within the cap. To develop the record on this issue more fully, we invite interested parties to propose possible alternative measures that may be appropriate to address this issue. We also invite commenters to address the likelihood that such measures may be necessary to prevent excessive fund growth during the five-year period.

4. One possible approach suggested by commenters would be to freeze support only when a competitive carrier serves a specific percentage of the total lines within a study area. Under this approach, the Commission would adopt a threshold percentage of lines lost for triggering the freeze. As discussed, however, a simple threshold requirement would fail to target study areas where the excessive fund growth is most likely to occur, because it could not distinguish captured from new subscriber lines. With regard to any proposal to freeze support, commenters should address whether support should be frozen for the study area, the competitor's service area, or the incumbent's specific disaggregation zone. We also invite commenters to propose other alternatives. Commenters should address the administrative feasibility of any such proposals, and whether they are consistent with the principles of encouraging investment in rural infrastructure and promoting competitive entry.

5. Although we are not convinced of the likelihood of excessive fund growth due to competitive entry in high-cost areas during the life of this five-year plan, we intend to resolve the issues raised in this FNPRM expeditiously after we have developed the record more fully. In the meantime, as discussed, we intend to closely monitor the impact of competitive entry in rural carrier study areas to ensure that excessive fund growth does not occur, consistent with our obligation in section 254 to maintain a specific, predictable, and sufficient universal service fund.

II. Procedural Matters

A. Initial Regulatory Flexibility Analysis

6. 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 FNPRM. Written public comments are requested on this IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines, and should have a separate and distinct heading designating them as responses to the IRFA. The Commission will send a copy of the FNPRM, including this IRFA, to the Chief Counsel for Advocacy of the SBA. In addition, the FNPRM and IRFA (or summaries thereof) will be published in the Federal Register.

1. Need for and Objectives of the Proposed Rules

7. In the Order accompanying this FNPRM, we modify the rural high-cost mechanism. While we declined to adopt the Rural Task Force's proposal to freeze per-line support in rural carrier study areas in which a competitive eligible telecommunications carrier is providing service, we recognized that excessive fund growth may occur during the five-year duration of the interim plan. We noted that the indexed cap on high-cost loop support would not check this growth fully, because support received by competitive carriers is not included within the cap. To develop the record on this issue more fully, we issue this FNPRM and invite interested parties to propose possible alternative measures that may be appropriate to address this issue. We also invite commenters to address the likelihood that such measures may be necessary to prevent excessive fund growth during the five-year period.

8. Although we are not convinced of the likelihood of excessive fund growth due to competitive entry in high-cost areas during the life of this five-year plan, we intend to resolve the issues raised in this FNPRM expeditiously after we have developed the record more fully.

2. Legal Basis

9. The legal basis as proposed for this FNPRM 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).

3. Description and Estimate of Small Entities to Which Rules Will Apply

10. 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 adopted herein. The RFA generally defines the term “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. Under the Small Business Act, a “small business concern” is one that: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) meets any additional criteria established by the Small Business Administration (SBA).

11. We have included small incumbent local exchange carriers in this RFA analysis. As noted, 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.

12. Local Exchange Carriers. Neither the Commission nor the SBA has developed a definition for small providers of local exchange services. The closest applicable definition under the SBA rules is for telephone communications companies other than radiotelephone (wireless) companies. According to the most recent Trends Report data, 1,335 incumbent carriers reported that they were engaged in the provision of local exchange services. We do not have data specifying the number of these carriers that are either dominant in their field of operations, are not independently owned and operated, or have more than 1,500 employees, and thus are unable at this time to estimate with greater precision the number of local exchange carriers that would qualify as small business concerns under the SBA's definition. Of the 1,335 incumbent carriers, 13 entities are price cap carriers that are not subject to these rules. Consequently, we estimate that fewer than 1,322 providers of local exchange service are small entities or small incumbent local exchange carriers that may be affected.

13. Competitive Access Providers. Neither the Commission nor the SBA has developed a definition of small entities specifically applicable to competitive access services providers (CAPs). The closest applicable definition under the SBA rules is for telephone communications companies other than radiotelephone (wireless) companies. According to the most recent Trends Report data, 349 CAPs/competitive local exchange carriers and 60 other local exchange carriers reported that they were engaged in the provision of competitive local exchange services. We do not have data specifying the number of these carriers that are not independently owned and operated, or have more than 1,500 employees, and thus are unable at this time to estimate with greater precision the number of CAPs that would qualify as small business concerns under the SBA's definition. Consequently, we estimate that there are less than 349 small entity CAPs and 60 other local exchange carriers that may be affected.

14. Cellular Licensees. Neither the Commission nor the SBA has developed a definition of small entities applicable to cellular licensees. Therefore, the applicable definition of small entity is the definition under the SBA rules applicable to radiotelephone (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. Therefore, 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. In addition, according to the most recent Telecommunications Industry Revenue data, 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 thus are unable at this time to estimate with greater precision the number of cellular service carriers that would qualify as small business concerns under the SBA's definition. Consequently, we estimate that there are fewer than 808 small cellular service carriers that may be affected.

15. Broadband Personal Communications Service (PCS). The broadband PCS spectrum is divided into six frequency blocks designated A through F, and the Commission has held auctions for each block. The Commission defined “small entity” for Blocks C and F as an entity that has average gross revenues of less than $40 million in the three previous calendar years. For Block F, an additional classification for “very small business” was added and is defined as an entity that, together with 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 percent of the 1,479 licenses for Blocks D, E, and F. 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, for a total of 183 small entity PCS providers as defined by the SBA and the Commission's auction rules.

16. 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.

17. Specialized Mobile Radio (SMR). The Commission awards bidding credits in auctions for geographic area 800 MHz and 900 MHz SMR licenses to firms that had revenues of no more than $15 million in each of the three previous calendar years. In the context of both the 800 MHz and 900 MHz SMR, a definition of “small entity” has been approved by the SBA.

18. These fees apply to SMR providers in the 800 MHz and 900 MHz bands that either hold geographic area licenses or have obtained extended implementation authorizations. 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.

19. 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.

20. Fixed Microwave Services. Microwave services include common carrier, private-operational fixed, and broadcast auxiliary radio services. At present, there are approximately 22,015 common carrier fixed licensees and 61,670 private operational-fixed licensees and broadcast auxiliary radio licensees in the microwave services. The Commission has not yet defined a small business with respect to microwave services. For purposes of this IRFA, we utilize the SBA's definition applicable to radiotelephone companies—i.e., an entity with no more than 1,500 persons. We estimate, for this purpose, that all of the Fixed Microwave licensees (excluding broadcast auxiliary licensees) would qualify as small entities under the SBA definition for radiotelephone companies.

21. 39 GHz Licensees. Neither the Commission nor the SBA has developed a definition of small entities applicable to 39 GHz licensees. Therefore, 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. For purposes of the 39 GHz license auction, the Commission defined “small entity” as an entity that has average gross revenues of less than $40 million in the three previous calendar years, and “very small entity” as an entity that has average gross revenues of not more that $15 million for the preceding three calendar years. The Commission has granted licenses to 29 service providers in the 39 GHz service. We do not have data specifying the number of these carriers that are not independently owned and operated or have more than 1,500 employees, and thus are unable at this time to estimate with greater precision the number of 39 GHz licensees that would qualify as small business concerns under the SBA's definition. Consequently, we estimate that there are no more than 29 39 GHz small business providers that may be affected.

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

22. In the Order accompanying this FNPRM, the Commission revised the reporting frequency of line count data in study areas where competitive entry has occurred. Prior to the Order's adoption, rural carriers were required to submit line count data annually. The Commission determined that the more frequent reporting requirement was necessary to ensure that only one carrier receives support for each line served and to monitor the concerns expressed by the Rural Task Force with regard to the potential impact of competitive entry in rural carrier study areas. The line count data submitted by carriers on a quarterly basis under the Order should be sufficient for the Commission to implement any change it may adopt pursuant to this FNPRM; however, the issues of frequency of reporting and timing of submission may need to be revisited for implementation purposes.

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

23. 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.

24. Here, we have declined at this time to freeze per-line support in rural carriers' study areas in which a competitive eligible telecommunications carrier is providing service. Had we adopted the alternative of the freeze, we would, we believe, have also needed to adopt, e.g., complex and administratively burdensome implementing regulations. By seeking additional comments on this issue, including comment from small entities regarding significant alternatives, we hope to identify alternatives that would include simpler reporting or other compliance requirements. Thus, the FNPRM under consideration herein seeks to determine possible alternative measures that may be appropriate to address the issue of excessive fund growth that may result from competitive entry in rural study areas. We invite comment on how any alternatives proposed would be likely to affect small businesses.

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

25. None.

B. Ex Parte

26. This is a non-restricted FNPRM and comment rulemaking proceeding. Ex parte presentations are permitted, except during the Sunshine Agenda period, provided they are disclosed as provided in the Commission's rules.

C. Comment Filing Procedures

27. Pursuant to §§ 1.415 and 1.419 of the Commission's rules, interested parties may file comments on or before July 30, 2001, and reply comments on or before August 28, 2001. Comments may be filed using the Commission's Electronic Comment Filing System (ECFS) or by filing paper copies.

28. 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 ecfs@fcc.gov, and should include the following words in the body of the message, “get form <your e-mail address>.” A sample form and directions will be sent in reply. Parties should also send three paper copies of their filings to Sheryl Todd, Accounting Policy Division, Common Carrier Bureau, Federal Communications Commission, 445 Twelfth Street, SW., Room 5-B540, Washington, DC 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, SW., Room 5-B540, Washington, DC 20554. In addition, commenters must send diskette copies to the Commission's copy contractor, International Transcription Services, Inc., 1231 20th Street, NW., Washington, DC 20037.

III. Ordering Clauses

29. 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 Further Notice of Proposed Rulemaking in CC Docket No. 96-45 is adopted.

30. The Commission's Consumer Information Bureau, Reference Information Center, shall send a copy of this Further Notice of Proposed Rulemaking in CC Docket No. 96-45, including the Initial Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration.

List of Subjects

47 CFR Part 36

• Jurisdictional separations
• Reporting and recordkeeping requirements
• Telecommunications
• Telephone

47 CFR Part 54

• Reporting and recordkeeping requirements
• Telecommunications
• Telephone