[Federal Register Volume 64, Number 21 (Tuesday, February 2, 1999)]
[Rules and Regulations]
[Pages 4999-5005]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-2407]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CC Docket No. 96-61; FCC 98-347]


Implementation of the Rate Integration Requirement of the 
Communications Act, Petitions for Forbearance

AGENCY: Federal Communications Commission.

ACTION: Final rule; petition for reconsideration.

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SUMMARY: By this Memorandum Opinion and Order (Order), the Commission 
reaffirms its earlier determination that the rate integration 
requirement of the Communications Act apply to interstate, 
interexchange services offered by commercial mobile radio service 
(CMRS) providers, and therefore denied the petitions for 
reconsideration of that determination. The Commission clarified that 
CMRS traffic within a major trading area (MTA)(intra-MTA traffic) is 
not ``interexchange'' traffic and thus not subject to the rate 
integration requirements of section 254(g). The Commission denied the 
petitions seeking forbearance from the application of rate integration 
to CMRS providers. This carries out the intent of Congress that 
providers of interstate, interexchange services offer such services at 
integrated rates.

EFFECTIVE DATE: March 4, 1999.

FOR FURTHER INFORMATION CONTACT: Douglas L. Slotten, Attorney, Common 
Carrier Bureau, Competitive Pricing Division, at (202) 418-1572 or via 
the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Memorandum Opinion and Order in the matter of Implementation of Section 
254(g) of the Communications Act of 1934,as Amended, Petitions for 
Forbearance, CC Docket No. 96-61, adopted December 31, 1998, and 
released December 31, 1998. The complete text of this Order is 
available for inspection and copying during normal business hours in 
the Commission's Reference Center, Room 239, 1919 M Street N.W., 
Washington, DC. The Order is available through the Internet at http://
www.fcc.gov/Bureaus/Common__ Carrier/orders/1998/fcc98347.wp. The 
complete text may be purchased from the Commission's duplicating 
contractor, International Transcription Service, Inc. (ITS, Inc.), at 
1231 20th Street NW., Washington, DC 20036, (202) 857-3800.

SYNOPSIS OF MEMORANDUM OPINION AND ORDER

I. Introduction

    1. We address seven petitions for reconsideration or, in the 
alternative, petitions for forbearance, of the Commission's Rate 
Integration Reconsideration Order, Policy and Rules Concerning the 
Interstate, Interexchange Marketplace, Implementation of Section 254(g) 
of the Communications Act of 1934, as amended, CC Docket No. 96-61, 
First Memorandum Opinion and Order on Reconsideration, 12 FCC Rcd 
11,812 (1997), 62 FR 46447 (September 3, 1997) (Rate Integration 
Reconsideration Order), in which the Commission found that the rate 
integration requirements of section 254(g) of the Communications Act of 
1934, as amended (``Act''), apply to the interstate, interexchange 
services of Commercial Mobile Radio Service (``CMRS'') providers. The 
petitioners request that the Commission reconsider that determination. 
In the alternative, if the Commission finds that section 254(g) applies 
to CMRS providers, the petitioners request that the Commission forbear 
from applying section 254(g) to the interstate, interexchange services 
offered by CMRS providers pursuant to section 10 of the Act.
    2. We also state our intent to issue a Further Notice seeking 
comment on issues relating to airtime and roaming charges associated 
with interstate, interexchange calls for which a separate charge is 
stated; wide-area CMRS calling plans; and the affiliation requirements 
that should be applicable to services subject to the rate integration 
requirement. Pending further rulemaking, we keep in place the Order 
adopted by the Commission on October 2, 1997, in which the Commission 
stayed the application of the requirement that providers of interstate, 
interexchange services integrate rates across affiliates, as well as 
application of rate integration requirements with respect to wide-area 
rate plans offered by CMRS providers. Policy and Rules Concerning the 
Interstate, Interexchange Marketplace, Implementation of Section 254(g) 
of the Communications Act of 1934, as amended, CC Docket No. 96-61, 
Order, 12 FCC Rcd 15,739 (1997) (Rate Integration Stay Order).

II. Petitions for Reconsideration

    3. We decline to reconsider our determination that the rate 
integration requirement of section 254(g) applies to CMRS providers. 
Section 254(g) requires that ``[a] provider of interstate interexchange 
services shall provide its services to subscribers in a state at rates 
no higher than provided to subscribers in any other state.'' The 
language of section 254(g) on its face unambiguously applies to all 
providers of interstate, interexchange services. Thus, section 254 (g) 
applies to the interstate, interexchange services offered by CMRS 
providers. If Congress had intended to exempt CMRS providers, it 
presumably would have done so expressly as it did in other sections of 
the Act. Thus, we reaffirm our earlier determinations that the rate

[[Page 5000]]

integration language of section 254(g) applies to all providers of 
interstate, interexchange services, including CMRS providers. We 
conclude that any reference to the existing rate integration policy by 
Congress or by this Commission merely identified the overarching policy 
under consideration, and was not intended to exempt from application of 
that policy any carrier or class of carriers, as the petitioning 
parties suggest.
    4. Because the language of the statute is unambiguous and plainly 
applies to CMRS providers, we need not examine the legislative history 
of section 254(g). Assuming, arguendo, some ambiguity in the statutory 
language, thus requiring an examination of the legislative history, we 
find nothing in that legislative history that unambiguously indicates 
that CMRS providers are exempted from section 254(g). The language 
referenced by the CMRS providers could readily be read as identifying 
the policy to be applied to all providers of interstate, interexchange 
services as reasonably as it could be read to suggest the codification 
of rate integration as applied to the wireline industry.
    5. Similarly, we reject the argument raised by AirTouch that 
Congress did not intend rate integration to apply to CMRS providers 
because rate integration is unnecessary to achieve the policy goals 
underlying section 254(g). AirTouch states that rate integration is 
designed to enable subscribers in rural and offshore areas to obtain 
some of the benefits of rate decreases created by competitive pressures 
on access charges and long-distance rates in more urban areas, and to 
protect customers in those areas from bearing the full burden of higher 
local exchange costs. AirTouch appears to conflate rate integration 
with rate averaging. Rate averaging, which is also required by section 
254(g), does have the described effect of protecting customers in high 
cost local exchange areas from bearing the full burden of those costs. 
Rate integration, on the other hand, generally focuses on the distance-
sensitive aspects of the rate structures for interexchange services. It 
protects noncontiguous parts of the United States, such as Alaska and 
Hawaii, from being discriminated against because they are not part of 
the contiguous 48 states. AirTouch's focus on exchange cost differences 
is, therefore, misplaced and we disagree with its interpretation of the 
statute.
    6. Although CMRS providers may be characterized as providers of 
exchange and exchange access services, that characterization does not 
preclude a finding that some of a CMRS provider's service offerings are 
interstate, interexchange services. While CMRS providers do not pay 
access charges for originating or terminating local exchange calls, 
CMRS providers do pay access charges when an interexchange call 
originates or terminates on landline facilities. Similarly, that, in 
some instances, CMRS providers are regulated in a manner different from 
other carriers, does not compel a conclusion that the interstate, 
interexchange services of CMRS providers are not subject to the rate 
integration requirements of section 254(g).
    7. We also reject the argument that applying section 254(g) to CMRS 
providers is inconsistent with section 332 of the Act because it 
allegedly undermines the distinct deregulatory paradigm applicable to 
CMRS providers. Bell Atlantic Mobile asserts that the price regulation 
required by section 254(g) is precisely that which the Commission and 
Congress have deemed unnecessary and harmful to the public interest in 
the CMRS context. Section 332(c), however, expressly provides that 
sections 201 and 202 of the Act shall continue to apply to CMRS 
providers. Section 201(b) requires just and reasonable rates and 202(a) 
prohibits rates that are unreasonably discriminatory. These 
requirements necessarily imply some degree of regulatory concern with 
prices; section 332 cannot, therefore, be read to bar every form of 
oversight over CMRS rates. Furthermore, the rate integration policy 
codified in section 254(g) derived from section 202(a) the requirement 
that rates not be unreasonably discriminatory. Finally, we note that 
other provisions of Title II of the Act apply to CMRS providers. For 
example, the interconnection requirements of section 251(a) clearly 
apply to CMRS providers; CMRS providers are as capable as any other 
carrier of invoking the protections of section 253; and, CMRS providers 
are among the providers of interstate services who are required to make 
universal service contributions pursuant to section 254(d). Thus, we 
conclude that the application of section 254(g) to CMRS providers is 
not inconsistent with section 332.
    8. We find unpersuasive the argument that, because we held that 
CMRS rates did not have to be integrated with the rates of affiliated 
long-distance providers, we did not intend rate integration to apply to 
CMRS providers. Rather, that decision addresses the issue of how rate 
integration should be applied to different interstate, interexchange 
services, and was consistent with the long-standing Commission practice 
of applying rate integration on a service-by-service basis. That 
decision does not address the question of whether rate integration 
should apply to CMRS providers at all. Similarly, CMRS providers' 
exemption from the equal access requirements applicable to incumbent 
LECs does not, as some CMRS providers suggest, address whether CMRS 
providers provide interstate, interexchange services and thus whether 
rate integration should apply to CMRS providers.
    9. Several petitioners allege that the Commission gave inadequate 
notice to permit application of section 254(g) to CMRS providers. As we 
stated in the Rate Integration Stay Order, we do not agree that 
inadequate notice was given to hold that the rate integration 
requirements of section 254(g) apply to CMRS providers. The language of 
section 254(g) applies to providers of interexchange telecommunications 
services with no exceptions enumerated. Elsewhere in the Act, as we 
noted above, when Congress wanted to exempt CMRS providers from a 
requirement of the Act, it did so expressly. The words of the statute 
clearly encompass CMRS providers and legally obligate them to integrate 
their interstate, interexchange services. Our rule, implementing 
section 254(g), merely reiterated the precise terms of the statute. 
Further, we note that in Policy and Rules Concerning the Interstate, 
Interexchange Marketplace, Notice of Proposed Rulemaking, CC Docket No. 
96-61, 11 FCC Rcd 7141 (1996), 61 FR 14717 (April 3, 1996), we stated 
that an interexchange call includes all means of connecting two points, 
``wireline or wireless.'' Specific notice of our intent to apply the 
plain language of the statute was not required. We, therefore, find no 
relevant lack of notice regarding the application of rate integration 
requirements to providers of CMRS services.
    10. Our conclusion that adequate notice was given of the 
application of section 254(g) to CMRS providers is not altered by the 
fact that no party commented on the application of rate integration to 
CMRS providers. As noted above, section 254(g), by its own terms, 
applies to providers of interexchange services. CMRS providers, 
therefore, should have been on notice that the rulemaking proceeding 
could affect their interests. Although rate integration had not 
previously been applied to CMRS providers, the CMRS industry had been 
subject to the rate regulation of section 202(a) of the Act and, thus, 
the industry should have been alert to the broad scope of section 
254(g), which has its origins in section 202(a).

[[Page 5001]]

Moreover, section 254(g) was enacted as part of the 1996 Act; 
therefore, the application of that section to the CMRS industry does 
not represent a change in Commission policy requiring more specific 
notice. Finally, we conclude that because we only codified the language 
of section 254(g), we find no issue concerning the adequacy of the 
record to support adoption of the rule.
    11. In any event, we find that the present reconsideration record 
supports the conclusion that section 254(g) applies to CMRS providers. 
We note that we stayed application of the affiliation requirement and 
application of rate integration to wide-area plans, the two cases in 
which we believe we would benefit from a fuller record. We continue to 
believe a fuller record on these two issues would be beneficial and, 
therefore, will seek further comment on those issues to develop a 
better record in a separate proceeding.
    12. AirTouch notes that CMRS carriers are not mentioned in the 
regulatory flexibility analysis assessing the administrative burden of 
regulations on industry, and asserts that this reflects a lack of 
intent that section 254(g) be applied to CMRS providers. While the 
Final Regulatory Flexibility Act analysis in the Rate Integration 
Order, Policy and Rules Concerning the Interstate, Interexchange 
Marketplace, Implementation of Section 254(g) of the Communications Act 
of 1934, as amended, CC Docket No. 96-61, Report and Order, 11 FCC Rcd 
9564 (1996), 61 FR 42558 (August 16, 1996) (Rate Integration Order), 
did not assess the administrative burden of regulations on CMRS 
providers, as AirTouch indicates, the omission does not evidence a lack 
of intent to apply section 254(g) to CMRS providers. We have prepared a 
Supplemental Final Regulatory Flexibility Act analysis to redress our 
inadvertent oversight. No party has claimed that the omission caused 
material harm. Indeed, in the Rate Integration Stay Order, we stayed 
application of the rate integration requirement to wide-area plans and 
across affiliates. Accordingly, those requirements had no impact on 
small entities.
    13. We conclude that treating intra-MTA (major trading area) calls 
as not being subject to rate integration is consistent with the 
definition of ``telephone exchange service.'' The Act defines 
``telephone exchange service'' as ``service within a telephone 
exchange, or within a connected system of telephone exchanges within 
the same exchange area * * * and which is covered by the exchange 
service charge, or * * * comparable service provided through a system 
of switches, transmission equipment, or other facilities (or 
combination thereof) by which a subscriber can originate and terminate 
a telecommunications service.'' 47 U.S.C. 153(47). In Implementation of 
the Local Competition Provisions of the Telecommunications Act of 1996, 
CC Docket No. 96-98, First Report and Order, 11 FCC Rcd 15499, 15998-
16000 (1996), 61 FR 45476 (August 29, 1996) (Local Competition Order), 
Order on Reconsideration, 11 FCC Rcd 13042 (1996), 61 FR 52706 (October 
8, 1998), vacated in part sub nom. Iowa Utils. Bd. v. FCC, 120 F.3d 753 
(8th Cir. 1997), cert. granted sub nom. AT&T Corp. v. Iowa Utils. Bd., 
118 S.Ct. 879 (1998), we concluded that cellular, broadband PCS, and 
covered SMR providers fall within at least the second part of this 
definition because they provide ``comparable service'' to telephone 
exchange service. Our determination was based on the finding that, as a 
general matter, CMRS carriers provide local, two-way switched voice 
service as a principal part of their business. Cellular and PCS 
providers, however, are not LECs, as that term is defined in section 
3(26) of the Act. Treating intra-MTA CMRS calls as local also is 
consistent with our conclusion in the Local Competition Order, 11 FCC 
Rcd 16,014, that MTAs defined the area in which reciprocal compensation 
applies to interconnections between incumbent LECs and CMRS providers. 
Because of the mobility of CMRS customers, the MTA, rather than a 
smaller area, such as the CMRS provider's license area or a wireline 
exchange area, reflects the minimum area in which customers may be 
expected to travel and within which they would expect not to pay toll 
charges. Pursuant to this approach, calls within an MTA that would be 
interstate will not be treated as interexchange.
    14. We provide two further clarifications that follow from the 
finding that traffic that originates and terminates within an MTA does 
not constitute interexchange service. First, we clarify that when a 
customer is roaming, a call within the MTA of the roamed upon CMRS 
provider is not ``interexchange.'' This clarification ensures that 
intra-MTA calls are not ``interexchange'' service, thus triggering rate 
integration, regardless of the location of the customer. Second, we 
clarify that when a CMRS provider performs only an exchange access 
function, and an unaffiliated interexchange carrier transports and 
bills for the call to a destination in a different state outside the 
MTA, that exchange access function is not ``interstate, interexchange'' 
for purposes of section 254(g). We conclude that this clarification is 
necessary to ensure that our treatment here is akin to our treatment of 
incumbent LEC access charges, which are not required to be integrated.
    15. Several CMRS providers seek clarification or reconsideration of 
the application of rate integration to roaming and airtime charges. We 
plan to seek additional comment on these issues in a Further Notice. 
Two additional sets of issues remain: (1) The treatment of wide-area 
calling plans; and, (2) the affiliation requirements applicable to CMRS 
providers for purposes of determining compliance with rate integration. 
We will resolve these issues on the basis of the more complete record 
developed in response to the Further Notice.

III. Petitions for Forbearance

    16. The petitions for forbearance generally request that we forbear 
from applying the rate integration provisions of section 254(g) to 
interstate, interexchange services offered by CMRS providers, if the 
Commission concludes that section 254(g) applies to those services. 
Section 10(a) of the Act sets forth a three-part standard to be applied 
in addressing petitions for forbearance: a carrier may petition the 
Commission for forbearance from any statutory provision or regulation, 
and the Commission shall grant such petition if it determines that: (1) 
Enforcement of the requirement is not necessary to ensure that rates 
are just and reasonable, and are not unjustly and unreasonably 
discriminatory; (2) the regulation is not necessary to protect 
consumers; and (3) forbearance is consistent with the public interest. 
Section 10(b) further provides that the Commission ``shall consider 
whether forbearance from enforcing the regulation will promote 
competitive market conditions, including the extent to which such 
forbearance will enhance competition among providers of 
telecommunications services.'' As fully discussed below, we conclude 
that the petitioners have not met the standard for the grant of 
forbearance and, for this reason, we must deny their petitions.
    17. We conclude that the petitioners have not met their burden with 
respect to the first and second prongs of the forbearance standard. We 
are concerned that, without rate integration, CMRS providers would, 
when consistent with their economic interests, discriminate against the 
offshore points. Our concerns are not eliminated by the CMRS providers' 
claims that CMRS rates are falling, or that PCS rates are

[[Page 5002]]

lower than cellular rates. Similarly, CMRS providers' few cited 
anecdotal instances of the offering of rates that comply with the rate 
integration requirement of section 254(g) do not ensure that such rates 
will be offered by all CMRS providers in the future. Moreover, although 
CMRS providers contend generally that rate integration would interfere 
with competition, resulting in less consumer choice, we find no 
specific persuasive arguments on this record to support those 
contentions.
    18. Specifically, we find that the petitioners have not shown that, 
in the absence of rate integration, CMRS rates will be just and 
reasonable and not unjustly or unreasonably discriminatory. Indeed, we 
conclude that rate integration is necessary to ensure that 
nondiscriminatory charges and practices are offered with respect to 
CMRS services to and from the offshore points. Moreover, as noted by 
Alaska, even if rate integrated service plans are available in all 
parts of the United States, nothing in the record suggests that the 
existence of the rate integration requirement is not a significant 
cause of that condition. We also agree that there is no evidence to 
show that rate integration is not necessary for the protection of 
consumers. Alaska notes, for example, that Bell Atlantic Mobile's 
argument that consumers benefit from its plan offering one long-
distance rate is misplaced because Bell Atlantic Mobile does not offer 
service to subscribers in Alaska and Hawaii. Thus, although the cost to 
a Bell Atlantic Mobile customer calling Alaska or Hawaii might be the 
same as the cost of a call elsewhere in the continental United States, 
that fact does not protect the interests of consumers in Alaska or 
Hawaii because they generally would not be paying the long distance 
charges.
    19. We also agree with Hawaii and Alaska that a broad grant of 
forbearance would not be consistent with the public interest, as 
required by the third prong of the forbearance standard. The public 
interest here, as reflected by the inclusion of CMRS providers in 
section 254(g), is the integration of offshore points into the 
interexchange rate patterns of CMRS services to prevent discrimination 
against those locations. Therefore, in order to satisfy the public 
interest, CMRS providers must explain how the benefits of section 
254(g) can be attained if we forbear from applying the rate integration 
requirement of section 254(g) to the interstate, interexchange services 
of CMRS providers. We conclude that the petitioners have not made the 
required demonstration.
    20. The argument against forbearance is particularly compelling 
with respect to separately-stated long distance charges. Many CMRS 
providers offer service plans that include a toll charge assessed for a 
long-distance call that is separate from the airtime charge. When the 
CMRS provider provides the link to the distant location, either through 
its own facilities or through the resale of a long-distance provider's 
service, and bills separately for that service, we find that the CMRS 
provider is providing an interexchange service. If that call terminates 
in a state different from the state in which the call originates, the 
service is an interstate, interexchange service covered by the rate 
integration requirement of section 254(g).
    21. We conclude that it would not be consistent with just and 
reasonable rates, the protection of consumers, and the public interest 
to forbear from applying the rate integration requirement of section 
254(g) to separately-stated toll charges for interstate, interexchange 
services provided by CMRS providers. For separately stated CMRS toll 
charges, we do not see how the policy considerations regarding rate 
integration differ materially from those in the non-CMRS context. 
Applying rate integration of separately-stated toll charges appears to 
be at the heart of the congressional policy of section 254(g)), which 
was enacted despite the existence of multiple interexchange carriers.
    22. Pursuant to section 10(b), we also have considered whether 
forbearance from enforcing the rate integration requirement of section 
254(g) will promote competitive market conditions. Although CMRS 
providers contend that rate integration would interfere with 
competition, we find no persuasive record evidence to support that 
contention or, conversely, that competitive conditions will be promoted 
in the absence of rate integration. Moreover, we agree that forbearance 
from rate integration cannot be justified on competitive conditions 
alone. Hawaii correctly notes we have previously rejected this 
argument. Prior to the enactment of section 254(g), we already had 
determined that all IXCs were non-dominant in the domestic market and 
had found that most major segments of the interexchange market were 
subject to substantial competition. Nothing suggests that Congress was 
unaware of the state of competition in the interexchange market in 
enacting section 254(g). Indeed, we find that Congress's enactment of 
section 254(g), even after the Commission's determination that major 
segments of the interexchange market were subject to substantial 
competition, establishes the importance Congress placed on a nationwide 
policy of rate integration that was applicable to all providers of 
interstate, interexchange services.
    23. Contrary to the assertions of several CMRS providers, our 
finding in Implementation of Sections 3(n) and 332 of the 
Communications Act, Regulatory Treatment of Mobile Services, Second 
Report and Order, GN Docket No. 93-252, 9 FCC Rcd 1411 (1994), 59 FR 
18493 (April 14, 1994) (CMRS Forbearance Order), that there was 
sufficient competition in the CMRS market to justify forbearance from, 
inter alia, the tariffing requirements of section 203-205, do not 
require forbearance with respect to section 254(g). The CMRS 
Forbearance Order, adopted pursuant to section 332, primarily addressed 
the tariff filing requirement and its competitive implications. The 
rate integration requirement of section 254(g) creates a substantive 
pricing requirement which raises different competitive considerations 
than do tariff requirements. Moreover, section 332(c), by its terms, 
prohibits forbearance from application of section 202(a) to the CMRS 
industry. We note that 254(g) has its origins in section 202(a). 
Accordingly, we find that our forbearance in the tariffing context has 
no relevance to the question of forbearance here.
    24. In sum, we conclude that the petitioners have not demonstrated 
that forbearance from applying the rate integration requirements of 
section 254(g) is consistent with just and reasonable or not unjustly 
or unreasonably discriminatory rates in the CMRS context, the 
protection of consumers, and the public interest. Similarly, we have 
not found that forbearance from enforcing the rate integration 
requirement of section 254(g) would promote competitive market 
conditions. Accordingly, we cannot grant the forbearance requests. In a 
separate proceeding, we will seek further comment on ways in which the 
rate integration requirement of section 254(g) should be applied to 
CMRS offerings. The expanded record evidence about the nature of CMRS 
services and the ownership arrangements within the industry will permit 
us to more fully evaluate rate integration in the CMRS context, develop 
rules specific to CMRS services, or, if appropriate, forbear in some 
instances.
    25. The forbearance petitions generally sought forbearance from the 
application of rate integration to all interstate, interexchange 
services

[[Page 5003]]

offered by CMRS providers. In addition, several CMRS providers argue 
that, if we do not forbear totally from applying rate integration to 
interstate, interexchange offerings of CMRS providers, we should apply 
rate integration only to services for which the long-distance charges 
are separately billed. We conclude that the present record does not 
establish that the forbearance standard of section 10 of the Act has 
been met with respect to this matter. For example, the record does not 
establish that forbearance would be consistent with the public 
interest. In addition, the record does not provide sufficient 
information to determine whether certain types of airtime or roaming 
charges, or some wide-area calling plans, fall within the definition of 
interexchange services to which rate integration would apply; and, how 
different affiliation requirements would affect the CMRS industry. We 
seek comment on these issues in a separate rulemaking proceeding that 
will permit us to develop rules specific to CMRS services. Accordingly, 
we deny the remaining requests of the petitions for forbearance as 
inconsistent with just and reasonable rates or not unjustly or 
reasonably discriminatory rates; the protection of consumers; and the 
public interest.

IV. Ordering Clauses

    26. Accordingly, It is ordered, that the Petitions for 
Reconsideration filed by AirTouch Communications, Cellular 
Telecommunications Industry Association, PrimeCo Personal 
Communications, L.P., Personal Communications Industry Association, 
Telephone and Data Systems, Inc., BellSouth Corporation, and Bell 
Atlantic Mobile, Inc. Are denied to the extent indicated herein.
    27. It is further ordered that the Petitions for Forbearance filed 
by AirTouch Communications, Cellular Telecommunications Industry 
Association, PrimeCo Personal Communications, L.P., Personal 
Communications Industry Association, Telephone and Data Systems, Inc., 
BellSouth Corporation, and Bell Atlantic Mobile, Inc. Are denied.
    28. It is further ordered that the Commission's Office of Public 
Affairs, Reference Operations Division, SHALL SEND a copy of this 
Memorandum Opinion and Order, including the Supplemental Final 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.

List of Subjects in 47 CFR Part 64

    Communications common carriers.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Supplemental Final Regulatory Flexibility Act Analysis

    29. As required by the Regulatory Flexibility Act (RFA), the 
Commission incorporated an Initial Regulatory Flexibility Analysis 
(IRFA) in the Rate Integration and Rate Averaging Notice in this 
docket. The Commission sought written public comment on the proposals 
in the Rate Integration and Rate Averaging Notice, including comment on 
the IRFA. The Commission prepared a Final Regulatory Flexibility 
Analysis (FRFA) of the possible significant economic impact the Rate 
Integration Order might have on small entities. The FRFA did not, 
however, analyze the possible significant economic impact the Rate 
Integration Order might have on CMRS providers that were small 
entities. The Commission has prepared this supplemental FRFA of the 
possible significant economic impact the Rate Integration Order might 
have on CMRS providers that are small entities, in conformance with the 
RFA.

A. Need for and Objectives of Rules

    30. In the 1996 Act, Congress directed the Commission to develop 
rules implementing the provisions of section 254(g) within six months 
of its enactment. The Commission adopted rules implementing the 
provisions of section 254(g) in the Rate Integration Order. The 
objective of these rules is to incorporate the policies of geographic 
rate averaging and rate integration of interexchange services in order 
to ensure that subscribers in rural and high cost areas throughout the 
Nation are able to continue to receive both intrastate and interstate 
interexchange services at rates no higher than those paid by urban 
subscribers.

B. Summary of Significant Issues Raised by the Public Comments to the 
IRFA

    31. The IRFA solicited comment on alternatives to our proposed 
rules that would minimize the impact on small entities consistent with 
the objectives of this proceeding. No comments were submitted directly 
in response to the IRFA. We have, however, kept small entities in mind 
as we considered the more general comments filed in this proceeding, as 
discussed below.

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

    32. 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 which: (1) Is independently owned 
and operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (SBA).
    (a) Cellular Radio Telephone Service
    33. The Commission has not 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 companies. This definition provides that a small entity 
is a radiotelephone company employing no more than 1,500 persons. 
According to the 1992 census, which is the most recent information 
available, only 12 radiotelephone firms out of a total of 1,178 such 
firms which operated during 1992 had 1,000 or more employees. 
Therefore, even if all 12 of these large firms were cellular telephone 
companies, all of the remainder were small businesses under the SBA's 
definition. We assume that, for purposes of our evaluations and 
conclusions in this Supplemental FRFA, all of the current cellular 
licensees are small entities, as that term is defined by the SBA. 
Although there are 1,758 cellular licenses, we do not know the number 
of cellular licensees, since a cellular licensee may own several 
licenses.
    (b) Broadband Personal Communications Service
    34. The broadband PCS spectrum is divided into six frequency blocks 
designated A through F. Pursuant to Sec. 24.720(b) of the Commission's 
Rules, the Commission has defined ``small entity'' for Block C and 
Block F licensees as firms that had average gross revenues of less than 
$40 million in the three previous calendar years. This regulation 
defining ``small entity'' in the context of broadband PCS auctions has 
been approved by the SBA.
    35. The Commission has auctioned broadband PCS licenses in all of 
its spectrum blocks A through F. We do not have sufficient data to 
determine how many small businesses under the Commission's definition 
bid successfully for licenses in Blocks A and B. As of now, there are 
90 non-defaulting winning bidders that qualify as small entities in the 
Block C auction

[[Page 5004]]

and 93 non-defaulting winning bidders that qualify as small entities in 
the D, E, and F Block auctions. Based on this information, we conclude 
that the number of broadband PCS licensees that would be affected by 
the evaluations and conclusions in this Supplemental FRFA includes the 
183 non-defaulting winning bidders that qualify as small entities in 
the C, D, E, and F Block broadband PCS auctions.
    (c) Specialized Mobile Radio
    36. Pursuant to Section 90.814(b)(1) of the Commission's Rules, the 
Commission has defined ``small entity'' for geographic area 800 MHz and 
900 MHz SMR licenses as firms that had average gross revenues of no 
more than $15 million in the three previous calendar years. This 
regulation defining ``small entity'' in the context of 800 MHz and 900 
MHz SMR has been approved by the SBA.
    37. The section 254(g) requirements apply to SMR providers in the 
800 MHz and 900 MHz bands. We do not know how many firms provide 800 
MHz or 900 MHz geographic area SMR service, nor how many of these 
providers have annual revenues no more than $15 million.
    38. The Commission recently held auctions for geographic area 
licenses in the 900 MHz SMR band. There were 60 winning bidders who 
qualified as small entities under the Commission's definition in the 
900 MHz auction. Based on this information, we conclude that the number 
of geographic area SMR licensees affected by section 254(g) includes 
these 60 small entities.
    39. A total of 525 licenses were auctioned for the upper 200 
channels in the 800 MHz geographic area SMR auction. There were 62 
qualifying bidders, of which 52 were small businesses. The Commission 
has not yet determined how many licenses will be awarded for the lower 
230 channels in the 800 MHz geographic area SMR auction. There is no 
basis to estimate, moreover, how many small entities within the SBA's 
definition will win these lower channel licenses. Given the facts that 
nearly all radiotelephone companies have fewer than 1,000 employees and 
that no reliable estimate of the number of prospective 800 MHz SMR 
licensees can be made, we assume, for purposes of our evaluations and 
conclusions in this Supplemental FRFA, that all of the licenses for the 
lower 230 channels will be awarded to small entities, as that term is 
defined by the SBA.
    (d) 220 MHz Service
    The Commission has classified providers of 220 MHz service into 
Phase I and Phase II licensees. There are approximately 2,800 non-
nationwide Phase I licensees and 4 nationwide licensees currently 
authorized to operate in the 220 MHz band. The Commission recently 
conducted the Phase II auction. There were 54 qualified bidders, of 
which 47 were small businesses.
    41. At this time, however, there is no basis upon which to estimate 
definitively the number of phase I 220 MHz service licensees that are 
small businesses. To estimate the number of such entities that are 
small businesses, we apply the definition of a small entity under SBA 
rules applicable to radiotelephone companies. This definition provides 
that a small entity is a radiotelephone company employing no more than 
1,500 persons. According to the 1992 Census, which is the most recent 
information available, only 12 out of a total 1,178 radiotelephone 
firms which operated during 1992 had 1,000 or more employees--and these 
may or may not be small entities, depending on whether they employed 
more or less than 1,500 employees. But 1,166 radiotelephone firms had 
fewer than 1,000 employees and therefore, under the SBA definition, are 
small entities. However, we do not know how many of these 1,166 firms 
are likely to be involved in the phase I 220 MHz service.
    (e) Mobile Satellite Services (MSS)
    42. The Commission has not developed a definition of small entities 
applicable to licensees in the international services. Therefore, the 
applicable definition of small entity is the definition under the SBA 
rules applicable to Communications Services, Not Elsewhere Classified 
(NEC). This definition provides that a small entity is expressed as one 
with $11.0 million or less in annual receipts. According to the Census 
Bureau, there were a total of 848 communications services, NEC in 
operation in 1992, and a total of 775 had annual receipts of less than 
$9.999 million.
    43. Mobile Satellite Services or Mobile Satellite Earth Stations 
are intended to be used while in motion or during halts at unspecified 
points. These stations operate as part of a network that includes a 
fixed hub or stations. The stations that are capable of transmitting 
while a platform is moving are included under Section 20.7(c) of the 
Commission's Rules as mobile services within the meaning of Sections 
3(27) and 332 of the Communications Act. Those MSS services are treated 
as CMRS if they connect to the Public Switched Network (PSN) and also 
satisfy other criteria of Section 332. Facilities provided through a 
transportable platform that cannot move when the communications service 
is offered are excluded from Section 20.7(c).
    44. The MSS networks may provide a variety of land, maritime and 
aeronautical voice and data services. There are eight mobile satellite 
licensees. At this time, we are unable to make a precise estimate of 
the number of small businesses that are mobile satellite earth station 
licensees.
    (f) Paging Service
    45. The Commission has adopted a two-tier definition of small 
businesses in the context of auctioning licenses in the paging service. 
A small business is defined as either: (1) An entity that, together 
with its affiliates and controlling principals, has average gross 
revenues for the three preceding years of not more than $3 million; or 
(2) an entity that, together with affiliates and controlling 
principals, has average gross revenues for the three preceding calendar 
years of not more than $15 million. The SBA has approved this 
definition for paging companies.
    46. The Commission estimates that the total current number of 
paging carriers is approximately 600. In addition, the Commission 
anticipates that a total of 16,630 non-nationwide geographic area 
licenses will be granted or auctioned. The geographic area licenses 
will consist of 2,550 Major Trading Area (MTA) licenses and 14,080 
Economic Area (EA) licenses. In addition to the 47 Rand McNally MTAs, 
the Commission is licensing Alaska as a separate MTA and adding three 
MTAs for the U.S. territories, for a total of 51 MTAs. No auctions of 
paging licenses have been held yet, and there is no basis to determine 
the number of licenses that will be awarded to small entities. Given 
the fact that no reliable estimate of the number of paging licensees 
can be made, we assume, for purposes of this Supplemental FRFA, that 
all of the current licensees and the 16,630 geographic area paging 
licensees either are or will consist of small entities, as that term is 
defined by the SBA.
    (g) Narrowband PCS
    47. The Commission has auctioned nationwide and regional licenses 
for narrowband PCS. The Commission does not have sufficient information 
to determine whether any of these licensees are small businesses within 
the SBA-approved definition. At present, there have been no auctions 
held for the MTA and Basic Trading Area (BTA) narrowband PCS licenses. 
The Commission anticipates a total of 561 MTA licensees and 2,958 BTA 
licensees will be awarded in the auctions. Those auctions, however, 
have

[[Page 5005]]

not yet been scheduled. Given that nearly all radiotelephone companies 
have fewer than 1,500 employees and that no reliable estimate of the 
number of prospective MTA and BTA narrowband licensees can be made, we 
assume, that all of the licensees will be awarded to small entities, as 
that term is defined by the SBA.
    (h) Air-Ground Radiotelephone Service
    48. The Commission has not adopted a definition of small business 
specific to the Air-Ground Radiotelephone Service, which is defined in 
Section 22.99 of the Commission's rules. Accordingly, we will use the 
SBA's definition applicable to radiotelephone companies, i.e., an 
entity employing no more than 1,500 persons. There are approximately 
100 licensees in the Air-Ground Radiotelephone Service, and we estimate 
that almost all of them qualify as small under the SBA definition.

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

    49. In the Rate Integration Order, and the Rate Integration 
Reconsideration Order, we determined that section 254(g) applied to 
interstate, interexchange services offered by CMRS providers. We expect 
that those orders impose no significant new reporting or recordkeeping 
requirements on CMRS providers. Those orders, however, require CMRS 
providers to comply with the rate averaging and rate integration 
requirement of section 254(g) in their service offerings. CMRS 
providers, however, do not file tariffs except on some international 
routes.

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

    50. Section 254(g) reflects a congressional determination that the 
country's higher-cost, lower-volume markets should share in the 
technological advances and increased competition characteristic of the 
nation's telecommunications industry as a whole, and that interexchange 
rates should be provided throughout the nation on a geographically 
averaged and rate-integrated basis. We have decided that the statutory 
objectives of section 254(g) require us to apply our rules to all 
providers of interexchange service, including small ones. We have 
chosen, however, to allow carriers to offer private line service and 
temporary promotions on a de-averaged basis. In so doing, we have 
minimized the impact our rules might otherwise have had, and enable 
carriers to use such devices to enter new markets.
    51. In addition, the Commission considered reducing the burdens on 
small carriers by exempting them from compliance through forbearance. 
However, we do not believe that forbearing at this time would be 
consistent with the Congressional goals that underlie Section 254(g). 
We could also have reduced burdens on small carriers by establishing 
cost-support mechanisms. However, the present record does not justify 
any such cost-support mechanisms. Accordingly, we decline to adopt 
these alternative measures for small carriers.

F. Report to Congress

    52. The Commission will send a copy of this order, including the 
supplemental FRFA, in a report to be sent to Congress pursuant to the 
Small Business Regulatory Enforcement Fairness Act of 1996. A summary 
of this Memorandum Opinion and Order and this Supplemental FRFA will 
also be published in the Federal Register, and will be sent to the 
Chief Counsel for Advocacy of the Small Business Administration.

[FR Doc. 99-2407 Filed 2-1-99; 8:45 am]
BILLING CODE 5712-01-P