[Federal Register Volume 64, Number 196 (Tuesday, October 12, 1999)]
[Rules and Regulations]
[Pages 55164-55172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-26594]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CC Docket No. 97-213; FCC 99-229]


Implementation of the Communications Assistance for Law 
Enforcement Act

AGENCY: Federal Communications Commission.

ACTION: Policy statement.

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SUMMARY: This document examines the definition of ``telecommunications 
carrier'' set forth in section 102 of the Communications Assistance to 
Law Enforcement Act (CALEA), which determines which entities and 
services are subject to the assistance capability and other 
requirements of CALEA, and discusses how the definition applies to 
various types of service providers. It also provides guidance regarding 
the factors the Commission will consider in making determinations under 
section 109 of CALEA as to whether compliance with CALEA's assistance 
capability requirements is ``reasonably achievable'' for particular 
carriers, and the showings to be made by entities filing petitions 
under section 109.

FOR FURTHER INFORMATION CONTACT: Thomas Wasilewski, 202-418-1310.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second 
Report and Order (Second R&O) in CC Docket No. 97-213, FCC 99-229, 
adopted August 26, 1999, and released August 31, 1999. The complete 
text of the Second R&O is available on the Commission's Internet site, 
at www.fcc.gov. It is also available for inspection and copying during 
normal business hours in the FCC Reference Information Center, 
Courtyard Level, 445 12th Street, S.W., Washington, DC, and may be 
purchased from the Commission's copy contractor, International 
Transcription Services, Inc., CY-B400, 445 12th Street S.W., 
Washington, DC.

Synopsis of the Report and Order

    1. The Commission adopts a Second Report and Order (Second R&O) in 
CC Docket No. 97-213, regarding implementation of sections 102 and 109 
of the Communications Assistance for Law Enforcement Act, Public Law 
103-414, 108 Stat. 4279 (1994) (CALEA). Although the Notice of Proposed 
Rule Making (NPRM) in this proceeding (which can be found at 62 FR 
63302, Nov. 11, 1997) proposed certain rules, the Second R&O does not 
adopt rules regarding sections 102 and 109.
    2. Section 102 Issues: CALEA does not modify the existing 
surveillance laws. Instead, it requires telecommunications carriers to 
ensure that their facilities are capable of providing the surveillance 
law enforcement is authorized to conduct. The language and legislative 
history of CALEA provide sufficient guidance as to what the term 
``telecommunications carrier'' means, such that it can be applied to 
particular carriers, their offerings and facilities.
    3. Subsections 102(8)(A) and (B) identify what entities are subject 
to CALEA: essentially, common carriers offering telecommunications 
services for sale to the public. Section 103(a) clarifies that the 
assistance capability requirements apply to ``equipment, facilities, or 
services that provide a customer or subscriber with the ability to 
originate, terminate, or direct communications. * * *'' The House 
Report provides further clarification in terms of the functions of 
covered services, stating: ``Thus, a carrier providing a customer with 
a service or facility that allows the customer to obtain access to a 
publicly switched network is responsible for complying with the 
capability requirements'' (H.R. Rep. No. 103-827(I), at 26 (1994).) The 
House Report also describes CALEA's focus in terms of law enforcement 
agencies' traditional surveillance requirements: ``The only entities 
required to comply with the [assistance capability] requirements are 
telecommunications common carriers, the components of the public 
switched network where law enforcement agencies have served most of 
their surveillance orders.'' (Id., at 21.) Further, the legislative 
history contains examples of the types of service providers subject to 
CALEA: ``The definition of `telecommunications carrier' includes such 
service providers as local exchange carriers, interexchange carriers, 
competitive access providers (CAPs), cellular carriers, providers of 
personal communications services (PCS), satellite-based service 
providers, cable operators, and electric and other utilities that 
provide telecommunications services for hire to the public, and any 
other wireline or wireless service for hire to the public.'' (140 Cong. 
Rec. H-10779 (daily ed. October 7, 1994) (statement of Rep. Hyde).)
    4. The legislative history of CALEA makes clear that the 
requirements of CALEA do not necessarily apply to all offerings of a 
carrier. The House Report states: ``[C]arriers are required to comply 
only with respect to services or facilities that provide a customer or 
subscriber with the ability to originate, terminate or direct 
communications.'' (H.R. Rep. No. 103-827(I), at 21.) Thus, an entity is 
a telecommunications carrier subject to CALEA to the extent it offers, 
and with respect to, such services.
    5. CALEA also makes clear that its requirements do not apply to 
certain entities and services. Subsection 102(8)(C) of the definition 
specifically excludes information services, and the legislative history 
makes clear that CALEA does not apply to private network services:

    [T]elecommunications services that support the transport or 
switching of communications for private networks or for the sole 
purpose of interconnecting telecommunications carriers * * * need 
not meet any wiretap standards. PBXs are excluded. So are automated 
teller machine (ATM) networks and other closed networks. Also 
excluded from coverage are all information services, such as 
Internet service providers or services such as Prodigy and America-
On-Line.
    All of these private network systems or information services can 
be wiretapped pursuant to court order, and their owners must 
cooperate when presented with a wiretap order, but these services 
and systems do not have to be designed so as to comply with the 
capability requirements.

    6. CALEA's definitions of ``telecommunications carrier'' and 
``information services'' were not

[[Page 55165]]

modified by the 1996 Act, and the CALEA definitions therefore remain in 
force for purposes of CALEA. The pertinent sections of CALEA are not 
part of the Communications Act. Further, the 1996 Act expressly 
provides that it did not alter existing law by implication, and in the 
1996 Act Congress did not repeal or even address the CALEA definitions. 
Although in virtually all cases the definitions of the two Acts will 
produce the same results, as a matter of law the entities and services 
subject to CALEA must be based on the CALEA definition, independently 
of their classification for the separate purposes of the Communications 
Act.
    7. Common Carriers and Utilities. All entities previously 
classified as ``common carriers'' are considered telecommunications 
carriers for the purposes of CALEA, as are cable operators and electric 
and other utilities to the extent they offer telecommunications 
services for hire to the public. Such entities offer services (some 
subject to CALEA, some not) that use copper-wire, cable, fiber-optic, 
and wireless facilities to provide traditional telephone service, data 
service, Internet access, cable television, and other services. The 
Act's legislative history identifies such entities as subject to CALEA 
to the extent that their service offerings satisfy CALEA's description 
of covered services. Entities are not subject to CALEA, however, with 
respect to services and facilities leased for private networks, 
pursuant to the statute. In addition, cable television is an example of 
a service not covered by CALEA because it is not a 
``telecommunications'' service, even if delivered via the same 
transmission facility as other, covered services.
    8. It is unnecessary to adopt the FBI's recommendation not to use 
the adverb ``indiscriminately'' in clarifying the definition of 
telecommunications carrier. The FBI is concerned that the inclusion of 
this term may allow companies that hold themselves out to serve only 
particular groups to undermine CALEA, intentionally or inadvertently, 
by creating a loophole that would permit criminals to use 
telecommunications providers that do not indiscriminately offer their 
services to the public. However, the courts have long held that a 
common carrier is one that holds itself out to serve the public 
indiscriminately. This does not amount to a threshold test that a 
service provider is a common carrier only if it serves all who seek 
service. Instead, it is simply a restatement of the proposition that 
common carriage status involves offering one's services to the general 
public.
    9. Commercial Mobile Radio Services (CMRS). CMRS providers are 
considered telecommunications carriers for the purposes of CALEA. This 
result is required by section 102(8)(B)(i) of CALEA, which states that 
the definition of ``telecommunications carrier'' includes ``a person or 
entity engaged in providing commercial mobile service (as defined in 
section 332(d) of [the Communications Act]).'' Section 332(d) in turn 
defines the term ``commercial mobile service'' as ``any mobile service 
* * * that is provided for profit and makes interconnected service 
available (A) to the public or (B) to such classes of eligible users as 
to be effectively available to a substantial portion of the public. * * 
*''
    10. Certain commenters claim that some entities normally classified 
as CMRS should not be considered subject to CALEA because they do not 
meet CALEA's definition of telecommunications carrier or are not 
technologically capable of CALEA compliance. Examples cited include 
providers serving niche business markets with limited interconnect 
capability, such as Industrial/Business Radio Services licensees 
offering for-profit interconnected service, local interconnected 
Specialized Mobile Radio (SMR) providers, and for-profit commercial 
interconnected 220 MHz service licensees. To the extent these services 
consist of interconnected service offered to the public, however, they 
meet the definition of CMRS set forth in section 332(d) and the 
entities offering them therefore must be considered telecommunications 
carriers subject to CALEA.
    11. To the extent ``traditional'' SMR service offers 
interconnection, it meets the definition of CMRS and thus is subject to 
CALEA, but otherwise not. Similarly, push-to-talk ``dispatch'' service 
is subject to CALEA to the extent it is offered in conjunction with 
interconnected service, because in such case it is a switched service 
functionally equivalent to a combination of speed dialing and 
conference calling, but otherwise not. Thus, in any given case, the 
services an entity offers would determine its CALEA responsibilities.
    12. The Commission recognizes that in certain cases compliance with 
the CALEA assistance capability requirements may be economically 
burdensome, or even impossible. In these cases, providers are allowed 
to seek extensions under section 107(c) of CALEA, or may seek relief 
under section 109. The Commission is also prepared to reexamine this 
issue once it has gained some experience in applying section 109. 
Exempting entire classes of CMRS services is not warranted, however, 
absent a more complete record on the resultant impact on operators and 
on CALEA objectives.
    13. Private Mobile Radio Services (PMRS). PMRS operators are not 
telecommunications carriers subject to CALEA when they offer PMRS 
services, but the determination of whether a particular mobile service 
offering is private or common carrier depends on the nature of the 
service and to whom it is offered. Although private and common carrier 
services are by definition mutually exclusive, see 47 U.S.C. 332(d)(3), 
a given carrier may offer both. Where a PMRS operator uses its 
facilities to offer interconnected service for profit to the public, or 
a substantial portion of the public, that service qualifies as CMRS, 
and thus is subject to CALEA.
    14. Resellers. Resellers, as telecommunications carriers under the 
terms of section 102, are generally subject to CALEA. However, 
resellers' responsibility under CALEA is limited to their own 
facilities, and they will therefore not be held responsible for the 
CALEA compliance responsibilities of the carrier whose services they 
are reselling with respect to the latter's underlying facilities. 
Further, because their offerings are limited to essentially private 
networks, most PBX providers and many aggregators would fall outside 
the scope of CALEA.
    15. Pay Telephone Providers. Pay telephone providers are excluded 
from the CALEA definition of telecommunications carrier. The CALEA 
legislative history states that ``[t]he only entities required to 
comply with the functional requirements are telecommunications common 
carriers, the components of the public switched network where law 
enforcement agencies have always served most of their surveillance 
orders.'' (H.R. Rep. No. 103-827(I), at 21.) Moreover, pay telephone 
providers do not have the information and the means to effectuate 
lawful electronic surveillance, which is maintained by the carriers who 
provide switched telephone services to pay telephone providers.
    16. Information Services (IS) and Calling Features. Where 
facilities are used solely to provide an information service, whether 
offered by an exclusively-IS provider or by a common carrier that has 
established a dedicated IS system apart from its telecommunications 
system, such facilities are not subject to CALEA. Where facilities are 
used to provide both telecommunications and information services, 
however, such joint-use facilities are subject to CALEA in order

[[Page 55166]]

to ensure the ability to surveil the telecommunications services. 
(Moreover, CALEA is technology neutral, and a carrier's choice of 
technology when offering common carrier services thus does not change 
its obligations under CALEA.) For example, digital subscriber line 
(DSL) services are generally offered as tariffed telecommunications 
services, and therefore subject to CALEA, even though the DSL offering 
often would be used in the provision of information services. On the 
other hand, where an entity uses its own wireless or satellite 
facilities to distribute an information service only, the mere use of 
transmission facilities would not make the offering subject to CALEA as 
a telecommunications service.
    17. Calling features such as call forwarding (and the corresponding 
voice mail feature, call redirection), call waiting, three-way (i.e., 
conference) calling, and speed dialing are considered to be so closely 
related to basic service that they are treated as adjuncts to it. See 
North American Telecommunications Ass'n, 101 FCC 2d 349 (1985), recon. 
denied, 3 FCC Rcd 4385 (1988). They are also like traditional pen 
registers and traps and traces in that they relate to the set-up or 
routing of telecommunications, rather than its content. Moreover, the 
legislative history of CALEA explicitly states that they are covered 
services. Accordingly, these specific calling features will be 
considered covered by CALEA, whether offered over wireline or wireless 
facilities.
    18. Other Issues. It is not necessary at this time either to 
identify by rule additional classes of entities within CALEA's 
definition of telecommunications carrier, pursuant to section 
102(8)(B)(ii), or to exempt in the Commission's rules any classes 
pursuant to section 102(8)(C)(ii). Moreover, codification in the 
Commission's rules of a list of examples would run the risk of being 
considered definitive rather than merely illustrative, and such a list 
is therefore not adopted.
    19. Section 109 Issues: Section 109(b)(1) of CALEA provides that 
any interested person may petition the Commission for a determination 
regarding whether compliance with the assistance capability 
requirements of section 103 of CALEA is ``reasonably achievable'' with 
respect to any equipment, facility, or service installed or deployed 
after January 1, 1995. Section 109(b) provides that, in making 
determinations as to reasonable achievability, ``the Commission shall 
determine whether compliance would impose significant difficulty or 
expense on the carrier or on the users of the carrier's system and 
shall consider the following factors'':
    A. The effect on public safety and national security;
    B. The effect on rates for basic residential telephone service;
    C. The need to protect the privacy and security of communications 
not authorized to be intercepted;
    D. The need to achieve the capability assistance requirements of 
section 103 by cost-effective methods;
    E. The effect on the nature and cost of the equipment, facility, or 
service at issue;
    F. The effect on the operation of the equipment, facility, or 
service at issue;
    G. The policy of the United States to encourage the provision of 
new technologies and services to the public;
    H. The financial resources of the telecommunications carrier;
    I. The effect on competition in the provision of telecommunications 
services;
    J. The extent to which the design and development of the equipment, 
facility, or service was initiated before January 1, 1995;
    K. Such other factors as the Commission determines are appropriate.
    20. Some commenters suggested that certain of these factors should 
be accorded special significance, while others suggested that 
additional factors should be considered. It would be premature at this 
point to assign special weight to any one factor generally, or to adopt 
additional factors. Legislative history indicates that CALEA ``seeks to 
balance three key policies: (1) to preserve a narrowly focused 
capability for law enforcement agencies to carry out properly 
authorized intercepts; (2) to protect privacy in the face of 
increasingly powerful and personally revealing technologies; and (3) to 
avoid impeding the development of new communications services and 
technologies.'' (H.R. Rep. No. 103-827(I), at 13.) In light of the 
overall purpose of CALEA to preserve law enforcement's ability to 
conduct surveillance, the Commission must in all cases consider public 
safety and, where applicable, national security, in its analysis of 
section 109 petitions. At the same time, given the importance Congress 
has placed on the privacy and security of communications that are not 
the targets of court-ordered surveillance, and the need to ensure that 
the development of new technologies and services is not impeded, those 
factors involving privacy and innovation are also likely to be 
important in many cases. However, the technological diversity of 
carrier networks, as well as other carrier characteristics, will, as a 
matter of course, mean that certain factors will be more important to 
the arguments of certain carriers than others, and that not all of the 
factors enumerated in section 109 may be relevant to the analysis of a 
given reasonable achievability petition.
    21. A central concern to many commenters is the issue of how the 
Commission will approach the cost of CALEA compliance when evaluating 
section 109 petitions. As a general principle, in making judgments 
under section 109, the Commission will look only to the additional cost 
incurred in making equipment and facilities CALEA compliant. In many 
instances carriers will become CALEA compliant in the course of general 
network upgrades, and will recover any additional cost of CALEA 
compliance through their normal charges. (If, in particular, law 
enforcement and industry reach agreements regarding switch 
prioritization that enable the Commission to grant extensions of time 
under section 107(c) allowing carriers to make certain equipment CALEA 
compliant as part of the normal upgrade cycle, with resulting low 
compliance costs, the Commission would expect such compliance generally 
to be reasonably achievable. On the other hand, there may be cases in 
which law enforcement opposes any extension of time for making 
particular equipment CALEA compliant, resulting in substantial 
additional costs to a carrier. In those cases, compliance could be 
considered not to be reasonably achievable.) The Commission expects 
that CALEA solutions that would require a carrier to change vendors in 
order to purchase costly new switching equipment, or to replace costly 
existing facilities, would generally not be deemed reasonably 
achievable. Any petitioner who argues that it is unable to comply with 
CALEA for reasons of cost must present quantitative cost information 
that is as detailed, accurate and complete as possible, which the 
Commission will analyze along with any technological problems related 
to the nature of the equipment, facility, or service at issue. Large 
carriers with multiple switch types in networks that cover large or 
diverse areas may present data on a per-switch basis, in order to 
identify compliance problems specific to particular segments of the 
carrier's network.
    22. In order to distinguish the additional costs of CALEA 
compliance from the costs of general network upgrades, costs will be 
considered related to CALEA compliance only if

[[Page 55167]]

carriers can show that they would not have been incurred but for the 
implementation of CALEA. For instance, costs incurred as an incidental 
consequence of CALEA compliance are not directly related to CALEA 
compliance and should be excluded from the carrier's showing. Finally, 
general overhead costs cannot be allocated to CALEA compliance, only 
additional overheads incremental to and resulting from CALEA 
compliance.
    23. Carrier size and geographic location may be significant 
considerations under section 109. However, if law enforcement and the 
telecommunications industry agree on a flexible CALEA deployment 
schedule that results in an extension of the current compliance 
deadline for equipment and facilities in areas that are not high 
priorities for law enforcement, it is not likely that many small rural 
carriers will need relief under section 109.
    24. Implementation of section 109 should seek to minimize any 
adverse effects of CALEA compliance on quality of service and 
subscriber rates. This approach is consistent with the mandate to the 
Commission in section 109(b)(1) to determine ``whether compliance would 
impose significant difficulty or expense on the carrier or the users of 
the carrier's systems . . . .'' Moreover, the same section directs the 
Commission to consider the effect of compliance on rates for ``basic 
residential telephone service,'' reflecting a special Congressional 
concern about rate impacts for that service. (In addition, under 
section 107(b), one of the factors that the Commission is to consider 
in establishing technical requirements or standards is minimizing the 
cost of compliance on residential ratepayers.) However, the arguments 
in this record that CALEA compliance will increase rates, affect 
quality of service, make particular technologies and services 
unprofitable, prevent the introduction of services to the market, or 
price services out of the reach of certain groups of customers, are at 
this point inherently speculative. Any such arguments made in 
individual petitions under section 109 will be given substantial weight 
only to the extent they are made with particularity and are grounded on 
specific quantitative data.
    25. The Commission may consider the financial resources of 
individual telecommunications carriers under section 109(b)(1)(H), and 
industrywide competitive pressures under section 109(b)(1)(I), in 
evaluating section 109 petitions. Requests for relief based on such 
factors must be supported by carrier- or industry-specific facts, 
including quantitative data. Special consideration for a new market 
entrant would not necessarily be tantamount to an unfair subsidy.
    26. Any petitioner who seeks relief under section 109 on the basis 
of the delay in the adoption of assistance capability standards must 
present carrier- or equipment-specific facts demonstrating that such 
delay actually has made CALEA compliance infeasible. Claims alleging a 
lack of CALEA-compliant software and hardware on the market will be 
taken into consideration in the evaluation of section 109 petitions, 
but only if raised with sufficient specificity and supported with a 
particularized showing. Law enforcement need not demonstrate that 
equipment or facilities have been used for criminal activity in cases 
where reasonable achievability petitions are filed before CALEA-
compliant hardware or software is available. With respect to the FBI's 
delay in issuing capacity requirements, there has now been ample time 
for industry to evaluate these requirements, and the Commission does 
not expect to grant section 109 petitions on the basis of the timing of 
the issuance of the requirements.
    27. Pursuant to section 109(b)(1)(J), the extent to which the 
design and development of equipment was initiated before January 1, 
1995, will be considered to the extent appropriate in the Commission's 
examination of section 109 petitions. In commenting on section 
109(b)(1)(J), certain parties argue as well that the definition of 
``installed or deployed'' adopted by the FBI as part of its cost 
recovery rules is excessively narrow in restricting its application to 
equipment, facilities, and services ``operable and available for use'' 
by a carrier's customers by January 1, 1995. (The FBI's final cost 
recovery rules are set forth at 28 CFR 100.9-100.21. The FBI's 
definition in its rules of ``installed or deployed'' is found at 28 CFR 
100.10.) Under section 109(e) of CALEA, the Attorney General is vested 
with the responsibility for establishing cost control regulations 
governing the Federal Government's payment of costs associated with 
bringing equipment installed or deployed on or before January 1, 1995, 
into compliance with CALEA. The Commission is assigned only a 
consultatory role with respect to such cost control regulations. 47 
U.S.C. 1008(e)(2).
    Thus, it is not within the Commission's authority to adopt rules 
defining ``installed or deployed.''
    28. Equipment manufacturers and their associations are interested 
parties to this proceeding, and therefore will be allowed to file 
section 109 petitions. The filing of a section 109 petition will not 
automatically toll the CALEA compliance deadline; such tolling would be 
tantamount to an automatic extension of the deadline, which may not be 
appropriate in all cases.
    29. In light of industry's significant role in developing the 
assistance capability standards of CALEA, section 109 is to be reserved 
for the examination of specific carrier compliance problems, and is not 
to be used as a vehicle for rearguing the standards that have been 
established for compliance with section 103.
    30. Some carriers may file petitions under section 107(c) for 
extensions of time to comply with CALEA, which the Commission may grant 
if it ``determines that compliance with the assistance capability 
requirements under section 103 is not reasonably achievable through 
application of technology available within the compliance period.'' To 
the extent the Commission finds it appropriate to grant extensions of 
time under section 107(c), it may be necessary to provide relief under 
section 109 only in unusual cases.
    31. Procedural matters. This action is taken pursuant to sections 
1, 2, 4(i), 201(a), 229, 301, 303 and 332(c) of the Communications Act 
of 1934, 47 U.S.C. 151, 152, 154(i), 201(a), 229, 301, 303, 
332(c)(1)(B).
    32. Ordering clauses. Accordingly, IT IS ORDERED that the 
Regulatory Flexibility Analysis, as required by Section 604 of the 
Regulatory Flexibility Act and as set forth below, is adopted.
    33. It is Further Ordered that the Commission's Office of Public 
Affairs, Reference Operations Division, SHALL SEND a copy of this 
SECOND REPORT AND ORDER, including the Final Regulatory Flexibility 
Analysis, to the Chief Counsel for Advocacy of the Small Business 
Administration.

Final Regulatory Flexibility Analysis

    34. As required by the Regulatory Flexibility Act (RFA),\1\ an 
Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the 
Notice of Proposed Rulemaking in this proceeding.\2\ The Commission 
sought written public comment on the proposals in the NPRM, including 
the IRFA. This Final Regulatory Flexibility Analysis (FRFA) conforms to 
the RFA.\3\
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    \1\ See 5 U.S.C. 603. The RFA, 5 U.S.C. 601 et seq., has been 
amended by the Contract with America Advancement Act, Public Law 
104-121, 110 Stat. 847 (1996) (CWAAA). Title II of the CWAAA is the 
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA).
    \2\ 62 FR 63302, Nov. 11, 1997, 13 FCC Rcd 3149, 3184-94 (1997) 
(NPRM).
    \3\ See 5 U.S.C. 604.

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[[Page 55168]]

    35. Need for and Purpose of this Action. In the Second R&O, the 
Commission, in compliance with 47 U.S.C. 229, promulgates policies 
implementing the Communications Assistance for Law Enforcement Act.\4\ 
In enacting CALEA, Congress sought to ``make clear a telecommunications 
carrier's duty to cooperate in the interception of communications for 
law enforcement purposes * * *'' \5\ The Second R&O addresses in 
particular certain issues relevant to sections 102 and 109 of CALEA: 
(1) the definition of ``telecommunications carrier'' set forth in 
section 102, which determines which entities and services are subject 
to the assistance capability and other requirements of CALEA; and (2) 
the factors the Commission will consider in making determinations under 
section 109 of the Act as to whether compliance with CALEA is 
reasonably achievable for particular carriers.
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    \4\ Public Law 103-414, 108 Stat. 4279 (1994) (codified as 
amended in sections of 18 U.S.C. and 47 U.S.C.).
    \5\ CALEA, supra, at preamble.
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    36. The policies adopted in the Second R&O implement Congress's 
goal of ensuring that telecommunications carriers support the lawful 
electronic surveillance needs of law enforcement agencies as 
telecommunications technologies evolve. These policies promote the 
three key policies Congress sought to balance in enacting CALEA: ``(1) 
to preserve a narrowly focused capability for law enforcement agencies 
to carry out properly authorized intercepts; (2) to protect privacy in 
the face of increasingly powerful and personally revealing 
technologies; and (3) to avoid impeding the development of new 
communications services and technologies.'' \6\
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    \6\ H.R. Rep. 103-827(I), at 16 (1994).
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    37. Summary of the Issues Raised by Public Comments Made in 
Response to the IRFA. In the NPRM, the Commission asked for comments 
that specifically addressed issues raised in the IRFA.\7\ The IRFA 
focused on proposed reporting, recordkeeping and other compliance 
requirements relating primarily to sections 105 and 107 of CALEA. These 
matters lie outside the immediate scope of the Second R&O, which is 
limited to clarifying what entities, services, and facilities are 
subject to CALEA (pursuant to section 102) and examining the factors 
the Commission will consider when determining if compliance with 
CALEA's assistance capability requirements is reasonably achievable 
(pursuant to section 109). No party filed comments directly responding 
to the IRFA that addressed issues dealt with in the Second R&O. Many 
parties, however, submitted comments on the Commission's proposals 
affecting small businesses set forth in the NPRM. These included 
requests that we exempt certain categories of telecommunications 
carriers from the assistance capability requirements, based on their 
limited operations or the burden of implementing the facility changes 
necessary to meet the requirements, and that in considering whether 
compliance is reasonably achievable, we attach special significance to 
the economic impact on ``smaller carrier[s].'' We summarize our action 
on these comments below.
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    \7\ NPRM at pars. 54-76.
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    38. Description and Estimate of the Number of Small Entities to 
Which the Actions Taken May Apply. The RFA directs agencies to provide 
a description of and, where feasible, an estimate of the number of 
small entities that may be affected by the action taken.\8\ The RFA 
generally defines the term ``small entity'' as having the same meaning 
as the terms ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' \9\ In addition, the term ``small 
business'' has the same meaning as the term ``mall business concern'' 
under the Small Business Act.\10\ A small business concern is one that: 
(1) is independently owned and operated; (2) is not dominant in its 
field of operation; and (3) satisfies any additional criteria 
established by the Small Business Administration (SBA).\11\ A small 
organization is generally ``any not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.'' 
\12\ Nationwide, as of 1992, there were approximately 275,801 small 
organizations.\13\ And finally, ``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.'' \14\ As of 1992, there were approximately 85,006 
such jurisdictions in the United States.\15\ This number includes 
38,978 counties, cities, and towns; of these, 37,566, or 96 percent, 
have populations of fewer than 50,000.\16\ The United States Bureau of 
the Census (Census Bureau) estimates that this ratio is approximately 
accurate for all governmental entities. Thus, of the 85,006 
governmental entities, we estimate that 81,600 (91 percent) are small 
entities. Below, we further describe and estimate the number of small 
business concerns that may be affected by the actions taken in this 
Second Report and Order.
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    \8\ 5 U.S.C. 603(b)(3).
    \9\ 5 U.S.C. 601(6).
    \10\ 10 U.S.C. 601(3) (incorporating by reference the definition 
of ``small business concern'' in 15 U.S. 632). Pursuant to the RFA, 
the statutory definition of a small business applies ``unless an 
agency, after consultation with the Office of Advocacy of the Small 
Business Administration and after opportunity for public comment, 
establishes one or more definitions of such term which are 
appropriate to the activities of the agency and publishes such 
definition(s) in the Federal Register.'' 5 U.S.C. 601(3).
    \11\ Small Business Act, 15 U.S.C. 632.
    \12\ 5 U.S.C. 601(4).
    \13\ 1992 Economic Census, Bureau of the Census, U.S. Dept. of 
Commerce, Table 6 (special tabulation of data under contract to 
Office of Advocacy of the U.S. Small Administration).
    \14\ 5 U.S.C. 601(5).
    \15\ 1992 Census of Governments, Bureau of the Census, U.S. 
Dept. of Commerce.
    \16\ Id.
---------------------------------------------------------------------------

    39. As noted, 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 SBA.\17\ The SBA has defined a small 
business for Standard Industrial Classification (SIC) categories 4812 
(Radiotelephone Communications) and 4813 (Telephone Communications, 
Except Radiotelephone) to be small entities when they have no more than 
1,500 employees.\18\ We first discuss the number of small 
telecommunications entities falling within these SIC categories, then 
attempt to refine further those estimates to correspond with the 
categories of telecommunications companies that are commonly used under 
our rules.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 632. See, e.g., Brown Transport Truckload, Inc. 
v. Southern Wipers, Inc., 176 B.R. 82 (N.D. Ga. 1994).
    \18\ 13 CFR 121.201.
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    40. Total Number of Telecommunications Entities Affected. The 
Census Bureau reports that, at the end of 1992, there were 3,497 firms 
engaged in providing telephone services, as defined therein, for at 
least one year.\19\ This number contains a variety of different 
categories of entities, including local exchange carriers, 
interexchange carriers, competitive access providers, cellular 
carriers, mobile service carriers, operator service providers, pay 
telephone operators, PCS providers, covered SMR providers, and 
resellers. It seems certain that some of those 3,497 telephone service 
firms may not qualify as small entities or small incumbent LECs because 
they are not ``independently owned and

[[Page 55169]]

operated.'' \20\ For example, a PCS provider that is affiliated with an 
interexchange carrier having more than 1,500 employees would not meet 
the definition of a small business. It seems reasonable to conclude, 
therefore, that fewer than 3,497 telephone service firms are small 
entity telephone service firms or small incumbent LECs that may be 
affected by the actions taken in the Second R&O.
---------------------------------------------------------------------------

    \19\ 1992 Census of Transportation, Communications, and 
Utilities: Establishment and Firm Size, Bureau of the Census, U.S. 
Dept. of Commerce, at Firm Size 1-123 (1995) (1992 Census).
    \20\ 15 U.S.C. 632(a)(1).
---------------------------------------------------------------------------

    41. The most reliable source of current information regarding the 
total numbers of common carrier and related providers nationwide, 
including the numbers of commercial wireless entities, appears to be 
data the Commission publishes annually in its ``Carrier Locator'' 
report, derived from filings made in connection with the 
Telecommunications Relay Service (TRS).\21\ According to data in the 
most recent report, there are 3,604 interstate carriers.\22\ These 
include, inter alia, local exchange carriers, wireline carriers and 
service providers, interexchange carriers, competitive access 
providers, operator service providers, pay telephone operators, 
providers of telephone toll service, providers of telephone exchange 
service, and resellers.
---------------------------------------------------------------------------

    \21\ Carrier Locator: Interstate Service Providers, Fig. 1 (Jan. 
1999) (Carrier Locator). See also 47 CFR 64.601-608.
    \22\ Carrier Locator at Fig. 1.
---------------------------------------------------------------------------

    42. We have included small incumbent local exchange carriers (LECs) 
in this RFA analysis. As noted above, a ``small business'' under the 
RFA is one that, inter alia, meets the pertinent small business size 
standard (e.g., a telephone communications business having 1,500 or 
fewer employees), and ``is not dominant in its field of operation.'' 
\23\ The SBA's Office of Advocacy contends that, for RFA purposes, 
small incumbent LECs are not dominant in their field of operation 
because any such dominance is not ``national'' in scope.\24\ We have 
therefore included small incumbent LECs in this RFA analysis, although 
we emphasize that this RFA action has no effect on FCC analyses and 
determinations in other, non-RFA contexts.
---------------------------------------------------------------------------

    \23\ 5 U.S.C. 601 (3).
    \24\ Letter from Jere W. Glover, Chief Counsel for Advocacy, 
SBA, to William E. Kennard, Chairman, FCC (May 27, 1999). The Small 
Business Act contains a definition of ``small business concern,'' 
which the RFA incorporates into its own definition of ``small 
business.'' See 15 U.S.C. 632(a) (Small Business Act); 5 U.S.C. 
601(3) (RFA). SBA regulations interpret ``small business concern'' 
to include the concept of dominance on a national basis. 13 CFR 
121.102(b). Since 1996, out of an abundance of caution, the 
Commission has included small incumbent LECs in its regulatory 
flexibility analyses. Implementation of the Local Competition 
Provisions of the Telecommunications Act of 1996, CC Docket, 96-98, 
First Report and Order, 61 FR 45475, Aug. 29, 1996, 11 FCC Rcd 
15499, 16144-45 (1996).
---------------------------------------------------------------------------

    43. Wireline Carriers and Service Providers (SIC 4813). The Census 
Bureau reports that there were 2,321 telephone communications companies 
other than radiotelephone companies in operation for at least one year 
at the end of 1992.\25\ All but 26 of the 2,321 non-radiotelephone 
companies listed by the Census Bureau were reported to have fewer than 
1,000 employees. Thus, even if all 26 of those companies had more than 
1,500 employees, there would still be 2,295 non-radiotelephone 
companies that might qualify as small entities or small incumbent LECs. 
Although it seems certain that some of these carriers are not 
independently owned and operated, we are unable at this time to 
estimate with greater precision the number of wireline carriers and 
service providers that would qualify as small business concerns under 
SBA's definition. Consequently, we estimate that there are fewer than 
2,295 small entity telephone communications companies other than 
radiotelephone companies that may be affected by the actions taken in 
the Second R&O.
---------------------------------------------------------------------------

    \25\ 1992 Census, supra, at Firm Size 1-123.
---------------------------------------------------------------------------

    44. Local Exchange Carriers, Interexchange Carriers, Competitive 
Access Providers, and Resellers. Neither the Commission nor SBA has 
developed a definition of small LECs, interexchange carriers (IXCs), 
competitive access providers (CAPs), or resellers. The closest 
applicable definition for these carrier-types under SBA rules is for 
telephone communications companies other than radiotelephone (wireless) 
companies.\26\ The most reliable source of information regarding the 
number of these carriers nationwide of which we are aware appears to be 
the data that we collect annually in connection with the TRS.\27\ 
According to our most recent data, there are 1,410 LECs, 151 IXCs, 129 
CAPs, and 351 resellers.\28\ Although it seems certain that some of 
these carriers are not independently owned and operated, or have more 
than 1,500 employees, we are unable at this time to estimate with 
greater precision the number of these carriers that would qualify as 
small business concerns under SBA's definition. Consequently, we 
estimate that there are fewer than 1,410 small entity LECs or small 
incumbent LECs, 151 IXCs, 129 CAPs, and 351 resellers that may be 
affected by the actions taken in the Second R&O.
---------------------------------------------------------------------------

    \26\ 13 CFR 121.210, SIC Code 4813.
    \27\ See 47 CFR 64.601 et seq.; Carrier Locator at Fig. 1.
    \28\ Carrier Locator at Fig. 1. The total for resellers includes 
both toll resellers and local resellers. The TRS category for CAPs 
also includes competitive local exchange carriers (CLECs) (total of 
129 for both).
---------------------------------------------------------------------------

    45. Wireless Carriers (SIC 4812). The Census Bureau reports that 
there were 1,176 radiotelephone (wireless) companies in operation for 
at least one year at the end of 1992, of which 1,164 had fewer than 
1,000 employees.\29\ Even if all of the remaining 12 companies had more 
than 1,500 employees, there would still be 1,164 radiotelephone 
companies that might qualify as small entities if they are 
independently owned are operated. Although it seems certain that some 
of these carriers are not independently owned and operated, we are 
unable at this time to estimate with greater precision the number of 
radiotelephone carriers and service providers that would qualify as 
small business concerns under SBA's definition. Consequently, we 
estimate that there are fewer than 1,164 small entity radiotelephone 
companies that may be affected by the actions taken in the Second R&O.
---------------------------------------------------------------------------

    \29\ 1992 Census, supra, at Firm Size 1-123.
---------------------------------------------------------------------------

    46. Cellular, PCS, SMR and Other Mobile Service Providers. In an 
effort to further refine our calculation of the number of 
radiotelephone companies that may be affected by the actions taken in 
the Second R&O, we consider the data that we collect annually in 
connection with the TRS for the subcategories Wireless Telephony (which 
includes PCS, Cellular, and SMR) and Other Mobile Service Providers. 
Neither the Commission nor the SBA has developed a definition of small 
entities specifically applicable to these broad subcategories, so we 
will utilize the closest applicable definition under SBA rules, which 
is for radiotelephone communications companies.\30\ According to our 
most recent TRS data, 732 companies reported that they are engaged in 
the provision of Wireless Telephony services and 23 companies reported 
that they are engaged in the provision of Other Mobile Services.\31\ 
Although it seems certain that some of these carriers are not 
independently owned and operated, or have more than 1,500 employees, we 
are unable at this time to estimate with greater precision the number 
of Wireless Telephony Providers and Other Mobile Service Providers, 
except as described below, that would qualify as small business

[[Page 55170]]

concerns under SBA's definition. Consequently, we estimate that there 
are fewer than 732 small entity Wireless Telephony Providers and fewer 
than 23 small entity Other Mobile Service Providers that might be 
affected by the actions taken in the Second R&O.
---------------------------------------------------------------------------

    \30\ Id. To the extent that the Commission has adopted 
definitions for small entities in connection with the auction of 
particular wireless licenses, we discuss those definitions below.
    \31\ Carrier Locator at Fig. 1.
---------------------------------------------------------------------------

    47. Broadband PCS Licensees. 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 
business'' for Blocks C and F as an entity that has average gross 
revenues of not more than $40 million in the three previous calendar 
years.\32\ These regulations defining ``small business'' in the context 
of broadband PCS auctions have been approved by SBA.\33\ No small 
businesses within the SBA-approved definition bid successfully for 
licenses in Blocks A and B. There have been 237 winning bidders that 
qualified as small entities in the four auctions that have been held 
for licenses in Blocks C, D, E and F, all of which may be affected by 
the actions taken in the Second R&O.
---------------------------------------------------------------------------

    \32\ 47 CFR 24.720(b)(1).
    \33\ Implementation of Section 309(j) of the Communications 
Act--Competitive Bidding, PP Docket No. 93-253, Fifth Report and 
Order, 59 FR 37566, July 22, 1994, 9 FCC Rcd 5532, 5581-84 (1994).
---------------------------------------------------------------------------

    48. SMR Licensees. The Commission has defined ``small business'' in 
auctions for geographic area SMR licenses as a firm that had average 
annual gross revenues of not more than $15 million in the three 
previous calendar years, and the SBA has approved this definition.\34\ 
The actions taken in the Second R&O may apply to SMR providers that 
either acquired geographic area licenses through auction or held 
licenses before the auctions. We do not have data reflecting the total 
number of firms holding pre-auction licenses, nor how many of these 
providers have annual revenues of less than $15 million. Consequently, 
for purposes of this FRFA, we estimate that all of the pre-auction SMR 
authorizations may be held by small entities, some of which may be 
affected by the actions taken in the Second R&O.
---------------------------------------------------------------------------

    \34\ 47 CFR 90.1814(b)(1) and 90.912(b)(1). See Amendment of 
Parts 2 and 90 of the Commission's Rules to Provide for the Use of 
200 Channels Outside the Designated Filing Areas in the 896-901 MHz 
and the 935-940 MHz Bands Allotted to the Specialized Mobile Radio 
Pool, PR Docket No. 89-583, Second Order on Reconsideration and 
Seventh Report and Order, 60 FR 48913,, Sept. 21, 1995, 11 FCC Rcd 
2639, 2693-702 (1995); Amendment of Part 90 of the Commission's 
Rules to Facilitate Future Development of SMR Systems in the 800 MHz 
Frequency Band, PR Docket No. 93-144, First Report and Order, Eighth 
Report and Order, and Second Further Notice of Proposed Rulemaking, 
61 FR 6212, Feb. 16, 1996, 11 FCC Rcd 1463 (1995).
---------------------------------------------------------------------------

    49. The Commission has held two auctions for geographic area SMR 
licenses. Sixty winning bidders in the 900 MHz auction qualified as 
small entities, and 38 in the 800 MHz auction. Based on this 
information, we estimate that the number of geographic area SMR 
licensees that may be affected by the actions taken in the Second R&O 
includes these 98 small entities. An additional 230 channels in the 
lower portion of the 800 MHz SMR band will be made available in a 
future auction. However, the Commission has not yet determined how many 
licenses will be offered, and thus at this time there is no basis on 
which to estimate how many small entities may win these licenses. Given 
that nearly all radiotelephone companies have fewer than 1,000 
employees and that no reliable estimate of the number of prospective 
800 MHz licensees can be made, we estimate, for purposes of this FRFA, 
that all of the licenses may be awarded to small entities, some of 
which may be affected by the actions taken in the Second R&O.
    50. 220 MHz Radio Service. The 220 MHz service has both Phase I and 
Phase II licenses. There are approximately 1,515 Phase I non-nationwide 
licensees and four nationwide licensees currently authorized to operate 
in the 220 MHz band. The Commission has not developed a definition of 
small entities specifically applicable to such incumbent 220 MHz Phase 
I licensees. To estimate the number of such licensees that are small 
businesses, we apply the definition under the SBA rules applicable to 
radiotelephone communications companies.35 According to the 
Census Bureau, only 12 radiotelephone firms out of a total of 1,176 
such firms which operated during 1992 had 1,000 or more 
employees.36 Therefore, if this general ratio continues to 
1999 in the context of Phase I 220 MHz licensees, we estimate that 
nearly all such licensees are small businesses under the SBA's 
definition.
---------------------------------------------------------------------------

    \35\ See supra par. 40.
    \36\ 1992 Census, supra, UC92-S-1, Subject Series, Establishment 
and Firm Size, Table 5, Employment Size of Firms; 1992, SIC code 
4812 (issued May 1995).
---------------------------------------------------------------------------

    51. The Phase II 220 MHz service is a new service, and is subject 
to spectrum auctions. In the 220 MHz Third Report and Order we adopted 
criteria for defining small businesses for purposes of determining 
their eligibility for special provisions such as bidding credits.\37\ 
We have defined a small business as an entity that has average gross 
revenues not exceeding $15 million for the preceding three years.\38\ 
The Commission has held two auctions for Phase II 220 MHz licenses, and 
in them 53 entities that qualified as small or very small entities were 
winning bidders.
---------------------------------------------------------------------------

    \37\ 220 MHz Third Report and Order, PR Docket No. 89-552, 62 FR 
16004, Apr. 3, 1997, 12 FCC Rcd 10943, 11068-70, pars. 291-295 
(1997). The SBA has approved these definitions. See Letter from A. 
Alvarez, Administrator, SBA, to D. Phythyon, Chief, Wireless 
Telecommunications Bureau, FCC (Jan. 6, 1988).
    \38\ 47 CFR 90.1021(b) See also 220 MHz Third Report and Order, 
supra, 12 FCC Rcd at 11068-69, par. 291.
---------------------------------------------------------------------------

    52. Paging. The Wireless Telecommunications Bureau has announced a 
series of auctions of paging licenses, offering a total of 16,630 non-
nationwide geographic area licenses.\39\ The first auction will 
commence on February 24, 2000, and will consist of 2,499 licenses.\40\ 
For purposes of these auctions, a small business is defined as 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.\41\ Given 
the fact that nearly all radiotelephone companies had fewer than 1,000 
employees, and that no reasonable estimate of the number of prospective 
paging licensees could be made, the Commission has assumed, for 
purposes of the evaluations and conclusions in the FRFA, that all the 
auctioned 16,630 geographic area licenses would be awarded to small 
entities.\42\
---------------------------------------------------------------------------

    \39\ See Future Development of Paging Systems, Second Report and 
Order and Further Notice of Proposed Rulemaking, WT Docket 96-18, 62 
FR 11616, Mar. 12 1997, 12 FCC Rcd 2732, 2863 (1997).
    \40\ Public Notice, ``Auction of 929 and 91 MHz Paging Service 
Spectrum,'' Report No. AUC-99-26-B, DA No. 99-1591, 64 FR 48623, 
September 7, 1999 (Wireless Telecom. Bur. Aug. 12 1999).
    \41\ See Letter from A. Alvarez, Administrator, SBA, to A.J. 
Zoslov, Chief, Auctions Division, Wireless Telecommunications 
Bureau, FCC (Dec. 2, 1998).
    \42\ See Future Development of Paging Systems, Second Report and 
Order and Further Notice of Proposed Rulemaking, WT Docket 96-18, 62 
FR 11615, March 12, 1997, 12 FCC Rcd 2732, 2863-64 (1997).
---------------------------------------------------------------------------

    53. In addition, our Third CMRS Competition Report estimated that 
as of January 1998, there were more than 600 paging companies in the 
United States.\43\  The Third CMRS Competition Report also indicated 
that at least ten of the top twelve publicly held paging companies had 
average gross revenues in excess of $15 million for the three

[[Page 55171]]

years preceding 1998.\44\ Data obtained from publicly available company 
documents and SEC filings indicate that this is also true for the three 
years preceding 1999.
---------------------------------------------------------------------------

    \43\ Implementation of Section 6002(b) of the Omnibus Budget 
Reconciliation Act of 1993, Annual Report and Analysis of 
Competitive Market Conditions With Respect to Commercial Mobile 
Services, Third Report, FCC 98-9, 63 FR 11612, March 10, 1998, at 40 
(June 11, 1998) (Third CMRS Competition Report).
    \44\ See Third CMRS Competition Report, App. C at 5.
---------------------------------------------------------------------------

    54. Narrowband PCS. The Commission has auctioned 11 nationwide and 
30 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 for radiotelephone 
companies. At present, there have been no auctions held for the major 
trading area (MTA) and basic trading area (BTA) narrowband PCS 
licenses. The Commission anticipates a total of 561 MTA licenses and 
2,958 BTA licenses will be awarded by auction. Such auctions have not 
yet been scheduled, however. Given that nearly all radiotelephone 
companies have no more than 1,500 employees and that no reliable 
estimate of the number of prospective MTA and BTA narrowband licensees 
can be made, we assume, for purposes of this FRFA, that all of the 
licenses will be awarded to small entities, as that term is defined by 
the SBA.
    55. Rural Radiotelephone Service. The Commission has not adopted a 
definition of small entity specific to the Rural Radiotelephone 
Service.\45\ A significant subset of the Rural Radiotelephone Service 
consists of Basic Exchange Telephone Radio Systems (BETRS).\46\ We will 
use the SBA's definition applicable to radiotelephone companies, i.e., 
an entity employing no more than 1,500 persons.\47\ 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.
---------------------------------------------------------------------------

    \45\ The service is defined in 47 CFR 22.99.
    \46\ BETRS are defined in 47 CFR 22.757, 22.759.
    \47\ See supra par. 40.
---------------------------------------------------------------------------

    56. Air-Ground Radiotelephone Service. The Commission has not 
adopted a definition of small entity specific to the Air-Ground 
Radiotelephone Service.\48\ Accordingly, we will use the SBA's 
definition applicable to radiotelephone companies, i.e., an entity 
employing no more than 1,500 persons.\49\ There are approximately 100 
licensees in the Air-Ground Radiotelephone Service, and we estimate 
that almost all of them qualify as small entities under the SBA 
definition.
---------------------------------------------------------------------------

    \48\ The service is defined in 47 CFR 22.99.
    \49\ 13 CFR 121.201, SIC Code 4812.
---------------------------------------------------------------------------

    57. Offshore Radiotelephone Service. This service operates on 
several UHF television broadcast channels that are not used for TV 
broadcasting in the coastal area of the states bordering the Gulf of 
Mexico.\50\ At present, there are approximately 55 licensees in this 
service. We are unable at this time to estimate the number of licensees 
that would qualify as small entities under the SBA's definition for 
radiotelephone communications.
---------------------------------------------------------------------------

    \50\ This service is governed by Subpart I or Part 22 of the 
Commission's Ruled. See 47 CFR 22.1001-.1037.
---------------------------------------------------------------------------

    58. Wireless Communications Services (WCS). This service can be 
used for fixed, mobile, radio location and digital audio broadcasting 
satellite uses. The Commission defined ``small business'' for the WCS 
auction as an entity with average gross revenues that are not more than 
$40 million for each of the three preceding years, and a ``very small 
business'' as an entity with average gross revenues that are not more 
than $15 million for each of the three preceding years. The Commission 
auctioned geographic area licenses in the WCS service. In the auction, 
there were seven winning bidders that qualified as very small business 
entities, and one that qualified as a small business entity. We 
conclude that the number of geographic area WCS licensees that may be 
affected by the actions taken in the Second R&O includes these eight 
entities.
    59. Cable Services or Systems. The SBA has developed a definition 
of small entities for cable and other pay television services, which 
includes all such companies generating $11 million or less in revenue 
annually.\51\ This definition includes cable systems operators, closed 
circuit television services, direct broadcast satellite services, 
multipoint distribution systems, satellite master antenna systems and 
subscription television services. According to the Census Bureau data 
from 1992, there were 1,788 total cable and other pay television 
services and 1,423 had less than $11 million in revenue.\52\
---------------------------------------------------------------------------

    \51\ 13 CFR 121.201, SIC 4841.
    \52\ 1992 Economic Census Industry and Enterprise Receipts Size 
Report, Table 2D, SIC code 4841 (U.S. Bureau of Census data under 
contract to the Office of Advocacy of the U.S. Small Business 
Administration).
---------------------------------------------------------------------------

    60. The Commission has developed its own definition of a small 
cable system operator for the purposes of rate regulation. Under the 
Commission's rules, a ``small cable company'' is one serving fewer than 
400,000 subscribers nationwide.\53\ Based on our most recent 
information, we estimate that there were 1,439 cable operators that 
qualified as small cable system operators at the end of 1995.\54\ Since 
then, some of those companies may have grown to serve over 400,000 
subscribers, and others may have been involved in transactions that 
caused them to be combined with other cable operators. Consequently, we 
estimate that there are fewer than 1,439 small entity cable system 
operators.
---------------------------------------------------------------------------

    \53\ 47 CFR 76.901(e). The Commission developed this definition 
based on its determination that a small cable operator is one with 
annual revenues of $100 million or less. Implementation of Sections 
of the 1992 Cable Act: Regulation, Sixth Report and Order and 
Eleventh Order on Reconsideration, 60 FR 10534, February 27, 1995, 
10 FCC Rcd 7393 (1995).
    \54\ Paul Kagan Associates, Inc., ``Cable TV Investor,'' Feb. 
29, 1996 (based on figures for December 30, 1995).
---------------------------------------------------------------------------

    61. The Communications Act also contains a definition of a small 
cable system operator, which is ``a cable operator that, directly or 
through an affiliate, serves in the aggregate fewer than 1 percent of 
all subscribers in the United States and is not affiliated with any 
entity or entities whose gross annual revenues in the aggregate exceed 
$250,000,000.\55\ The Commission has determined that there are 
66,000,000 subscribers in the United States. Therefore, we found that 
an operator serving fewer than 660,000 subscribers shall be deemed a 
small operator, if its annual revenues, when combined with the total 
annual revenues of all of its affiliates, do not exceed $250 million in 
the aggregate.\56\ Based on available data, we find that the number of 
cable operators serving 660,000 subscribers or less totals 1,450.\57\ 
We do not request nor do we collect information concerning whether 
cable system operators are affiliated with entities whose gross annual 
revenues exceed $250,000,000,\58\ and thus are unable at this time to 
estimate with greater precision the number of cable system operators 
that would qualify as small cable operators under the definition in the 
Communications Act. It should be further noted that recent industry 
estimates project that there will be a total of 66,000,000 subscribers.
---------------------------------------------------------------------------

    \55\ 47 U.S.C. 543 (m)(2).
    \56\ 47 U.S.C. 76.1403(b).
    \57\ Paul Kagan Associates, Inc., ``Feb. 29, 1996 (based on 
figures for Dec. 30, 1995).
    \58\ We do receive such information on a case-by-case basis only 
if a cable operator appeals a local franchise authority's finding 
that the operator does not qualify as a small cable operator 
pursuant to section 76.1403(b) of the Commission's rules. See 47 CFR 
76.1403(d).
---------------------------------------------------------------------------

    62. Description of Projected Reporting, Recordkeeping and Other 
Compliance Requirements. In the

[[Page 55172]]

Second R&O we affirm our proposals in the NPRM to clarify what 
entities, services, and facilities are subject to CALEA.\59\ In 
addition, we provide guidance regarding the factors the Commission will 
consider when determining under section 109 of CALEA if compliance with 
the assistance capability requirements of the Act is reasonably 
achievable, as well as the showings that entities filing petitions 
under section 109 will be expected to make.\60\ These actions impose no 
reporting, recordkeeping or other compliance requirements beyond those 
imposed by CALEA itself.
---------------------------------------------------------------------------

    \59\ Second Report and Order, pars. 6-28.
    \60\ Id. pars. 29-45.
---------------------------------------------------------------------------

    63. Steps Taken to Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered. We have largely 
adopted the tentative conclusions of the NPRM as to what entities are 
and are not subject to the assistance capability requirements. Although 
section 102(8)(B)(ii) of CALEA gives us the discretion, we have decided 
not to exempt any categories in our rules. We have resolved the concern 
mentioned most frequently in the comments' regarding the dispatch 
service of ``traditional'' SMR operators--by finding such operations to 
be outside CALEA's definition of ``telecommunications carrier'' insofar 
as the service is not interconnected with the public switched network. 
We have considered AMTA's argument that CMRS providers serving niche 
business markets with limited interconnect capability are not 
technologically capable of CALEA compliance, but we have found that to 
the extent their services meet the definition of CMRS set forth in 
section 332(d) of the Communications Act, such entities must be 
considered subject to CALEA. In response to those commenters who argue 
that a private mobile radio service (PMRS) operator cannot be subject 
to CALEA for any reason, we have found that where a PMRS operator uses 
its facilities to offer a service that qualifies as CMRS, that service 
is subject to CALEA.
    64. We recognize that compliance with the assistance capability 
requirements may be economically burdensome for some entities. CALEA 
provides two mechanisms through which carriers may seek relief: they 
may petition the Commission for an extension of the compliance date 
under section 107(c), and they may petition the Commission for a 
determination that compliance is not reasonably achievable under 
section 109(b). We believe these mechanisms provide the best approach 
to avoiding undue burdens on small entities, without undercutting the 
objectives of CALEA.\61\ We are also prepared to reexamine whether any 
categories of service providers should be exempted, once we have gained 
some experience in applying section 109.
---------------------------------------------------------------------------

    \61\ See id., pars. 36-45.
---------------------------------------------------------------------------

    65. We have decided that in determining whether compliance with the 
assistance capability requirements is reasonably achievable, we will 
not at this time accord special significance to any particular factor 
enumerated in section 109 and we will not adopt any additional factors. 
As we note in the Second R&O, ``the technological diversity of carrier 
networks, as well as other carrier characteristics, will, as a matter 
of course, mean that certain factors will be more important to the 
arguments of certain carriers than others, and not all of the factors 
enumerated in section 109 may be relevant to the analysis of a given 
reasonable achievability petition.'' \62\ We recognize, however, that 
carrier size may be a significant consideration in particular cases, 
and we reject AT&T's assertion that special consideration for a new 
market entrant could be tantamount to an unfair subsidy.
---------------------------------------------------------------------------

    \62\ Id., par. 37.
---------------------------------------------------------------------------

    66. Report to Congress. The Commission shall send a copy of the 
Second R&O, including this FRFA, in a report to Congress pursuant to 
the Small Business Regulatory Enforcement Fairness Act of 1996.\63\ In 
addition, the Commission shall send a copy of the Second R&O, including 
this FRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration. A copy of the Second R&O and FRFA (or summaries 
thereof) will also be published in the Federal Register.
---------------------------------------------------------------------------

    \63\ See 5 U.S.D. 801 (a)(1)(A).

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 99-26594 Filed 10-8-99; 8:45 am]
BILLING CODE 6712-01-P