[Federal Register Volume 66, Number 154 (Thursday, August 9, 2001)]
[Rules and Regulations]
[Pages 41801-41804]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-20000]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 63

[CC Docket No. 01-150; FCC 01-205]


Implementation of Further Streamlining Measures for Domestic 
Section 214 Authorizations

AGENCY: Federal Communications Commission.

ACTION: Final rule; interpretation.

-----------------------------------------------------------------------

SUMMARY: This document clarifies that non-dominant carriers are 
required to file applications and obtain Commission approval before 
consummating a transaction involving an acquisition of corporate 
control. Connecting carriers, as defined in the Communications Act of 
1934, as amended (Act), are not subject to section 214 when engaging in 
acquisitions of corporate control.

DATES: Effective August 9, 2001.

FOR FURTHER INFORMATION CONTACT: Aaron N. Goldberger, Attorney-Advisor, 
Policy and Program Planning Division, Common Carrier Bureau, (202) 418-
1591.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Declaratory Ruling, CC Docket No. 01-150, FCC 01-205, adopted July 12, 
2001 and released July 20, 2001. The complete text of this Declaratory 
Ruling is available for inspection and copying during normal business 
hours in the FCC Reference Information Center, Courtyard Level, 445 
12th Street, SW., Washington, DC, and also may be purchased from the 
Commission's copy contractor, International Transcription Services, 
(ITS, Inc.), CY-B400, 445 12th Street, SW., Washington, DC.

Synopsis of Declaratory Ruling

    1. In the Declaratory Ruling, the Commission clarifies its rules 
governing requests for authorization pursuant to section 214 of the Act 
to transfer domestic interstate transmission lines through an 
acquisition of corporate control. Under section 214, applicants must 
obtain Commission authorization before constructing, operating, or 
acquiring domestic interstate transmission lines. The Commission, in 
Sec. 63.01, granted blanket authority to domestic interstate 
communications common carriers to provide domestic interstate services 
and to construct, acquire, and operate domestic transmission lines. The 
blanket authority in Sec. 63.01, however, expressly does not apply to 
acquisitions of corporate control. When an acquisition of corporate 
control is involved, carriers must file a section 214 application with 
the Commission and obtain Commission approval prior to consummating a 
proposed transaction.
    2. The Commission, in the Declaratory Ruling, clarifies that non-
dominant carriers are required to file applications and obtain 
Commission approval before consummating a transaction involving an 
acquisition of corporate control. In particular, there is nothing 
either in the Commission's previous orders or the plain language of 
Sec. 63.01 to support the contention that acquisitions of corporate 
control involving non-dominant carriers are covered under the blanket 
authority of Sec. 63.01. Connecting carriers, as defined in the Act, 
are not subject to section 214 when engaging in acquisitions of 
corporate control.

Initial Regulatory Flexibility Act Analysis

    1. As required by the Regulatory Flexibility Act, 5 U.S.C. 603, the 
Commission has prepared this Initial Regulatory Flexibility Analysis 
(IRFA) of the possible significant economic impact on small entities by 
the policies and rules proposed in this Declaratory Ruling. Written 
public comments are requested on this IRFA. Comments must be identified 
as responses to the IRFA

[[Page 41802]]

and must be filed by the deadlines for comments on the Declaratory 
Ruling provided in section IV(C) of the Declaratory Ruling. The 
Commission will send a copy of this Declaratory Ruling, including this 
IRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration. See 5 U.S.C. 603(a).

Need for, and Objectives of, the Proposed Rules

    2. In the Declaratory Ruling, the Commission clarifies that 
connecting carriers are not required to file section 214 applications 
for acquisitions of corporate control, and that resellers and other 
non-dominant carriers must file applications for acquisitions of 
corporate control.

Legal Basis

    3. The legal basis for any action that may be taken pursuant to the 
Declaratory Ruling is contained in sections 2, 4, 201, 214, 303 and 403 
of the Communications Act of 1934, as amended, 47 U.S.C. 154, 201-202, 
303 and 403, and Secs. 1.1, 1.2, and 1.411 of the Commission's rules, 
47 CFR 1.1 and 1.411.

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

    4. The Regulatory Flexibility Act 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 rulemaking, if adopted. 
See 5 U.S.C. 603(b)(3). The Regulatory Flexibility Act defines the term 
``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' See 5 U.S.C. 601(6). In addition, the term ``small 
business'' has the same meaning as the term ``small business concern'' 
under section 3 of the Small Business Act. See 5 U.S.C. 601(3). 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 SBA. See 15 U.S.C. 632.
    5. The most reliable source of information regarding the total 
numbers of certain common carrier and related providers nationwide, as 
well as the number of commercial wireless entities, appears to be data 
the Commission publishes in its Trends in Telephone Service report. See 
FCC, Common Carrier Bureau, Industry Analysis Division, Trends in 
Telephone Service, Table 19.3 (March 2000). The Commission has 
indicated that there are 4,144 interstate carriers. These carriers 
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 service, providers of telephone exchange 
service, and resellers.
    6. The SBA has defined establishments engaged in providing 
``Radiotelephone Communications'' and ``Telephone Communications, 
Except Radiotelephone'' to be small businesses when they have no more 
than 1,500 employees. See 13 CFR 121.201; Executive Office of the 
President, Office of Management and Budget, Standard Industrial 
Classification Manual (1987). Further, this analysis discusses the 
total estimated number of telephone companies falling within the two 
categories and the number of small businesses in each. This analysis 
also attempts to refine further those estimates to correspond with the 
categories of telephone companies that are commonly used under our 
rules.
    7. The Commission includes small incumbent local exchange carriers 
(LECs) in this present Regulatory Flexibility Act analysis. As noted 
above, a ``small business'' under the Regulatory Flexibility Act 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.'' See 15 
U.S.C 632(a)(1). The SBA's Office of Advocacy contends that, for 
Regulatory Flexibility Act purposes, small incumbent LECs are not 
dominant in their field of operation because any such dominance is not 
``national'' in scope. See Letter from Jere W. Glover, Chief Counsel 
for Advocacy, SBA, to William E. Kennard, Chairman, FCC (May 27, 1999); 
15 U.S.C. 632(a) (Small Business Act); 5 U.S.C. 601(3); 13 CFR 
121.102(b). The Commission, therefore, included small incumbent LECs in 
this Regulatory Flexibility Act analysis, although the Commission 
emphasizes that this Regulatory Flexibility Act action has no effect on 
FCC analyses and determinations in other, non-Regulatory Flexibility 
Act contexts.
    8. Total Number of Telephone Companies Affected. The U.S. Bureau of 
the Census (``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. See U.S. Department of Commerce, Bureau 
of the Census, 1992 Census of Transportation, Communications, and 
Utilities: Establishment and Firm Size, at Firm Size 1-123 (1995) 
(``1992 Census''). This number contains a variety of different 
categories of carriers, including local exchange carriers, 
interexchange carriers, competitive access providers, cellular 
carriers, mobile service carriers, operator service providers, pay 
telephone operators, covered specialized mobile radio providers, and 
resellers. It seems certain that some of these 3,497 telephone service 
firms may not qualify as small entities or small incumbent LECs because 
they are not ``independently owned and operated.'' See 15 U.S.C. 
632(a)(1). 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 is reasonable to conclude that 
fewer than 3,497 telephone service firms are small entity telephone 
service firms or small incumbent LECs that may be affected by the 
proposed rules, herein adopted.
    9. Wireline Carriers and Service Providers. The SBA has developed a 
definition of small entities for telephone communications companies 
except radiotelephone (wireless) companies. The Census Bureau reports 
that there were 2,321 such telephone companies in operation for at 
least one year at the end of 1992. See 1992 Census, at Firm Size 1-123. 
According to the SBA's definition, a small business telephone company 
other than a radiotelephone company is one employing no more than 1,500 
persons. See 13 CFR 121.201, SIC Code 4813; 1997 NAICS 51331. 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. The Commission does not have data 
specifying the number of these carriers that are not independently 
owned and operated, and thus 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 the SBA's 
definition. Consequently, the Commission estimates that fewer than 
2,295 small telephone communications companies other than 
radiotelephone companies are small entities or small incumbent LECs 
that may be affected by the proposed rulemaking. The Commission further 
notes that some of these small entities may be ``connecting carriers,'' 
as defined in section 3(11) of the Act, 47 U.S.C. 153(11), and would 
not be subject to section 214 or Sec. 63.01 when

[[Page 41803]]

engaging in an acquisition of corporate control and thus would not 
require prior Commission approval to consummate a transaction involving 
an acquisition of corporate control.
    10. Local Exchange Carriers. Neither the Commission nor the SBA has 
developed a definition for small providers of local exchange services. 
The closest applicable definition under the SBA rules is for telephone 
communications companies other than radiotelephone (wireless) 
companies. See 13 CFR 121.201, SIC Code 4813. According to the most 
recent Trends in Telephone Service data, 1,348 incumbent carriers 
reported that they were engaged in the provision of local exchange 
services. See FCC, Common Carrier Bureau, Industry Analysis Division, 
Trends in Telephone Service, Table 19.3 (March 2000). The Commission 
does not have data specifying the number of these carriers that are 
either dominant in their field of operations, are not independently 
owned and operated, or have more than 1,500 employees, and thus are 
unable at this time to estimate with greater precision the number of 
LECs that would qualify as small business concerns under the SBA's 
definition. Consequently, the Commission estimates that fewer than 
1,348 providers of local exchange service are small entities or small 
incumbent LECs that may be affected by the proposed rulemaking.
    11. Interexchange Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
providers of interexchange services. The closest applicable definition 
under the SBA rules is for telephone communications companies other 
than radiotelephone (wireless) companies. See 13 CFR 121.201, SIC code 
4813; 1997 NAICS 51331. According to the most recent Trends in 
Telephone Service data, 171 carriers reported that they were engaged in 
the provision of interexchange services. See FCC, Common Carrier 
Bureau, Industry Analysis Division, Trends in Telephone Service, Table 
19.3 (March 2000). The Commission does not have data specifying the 
number of these carriers that are not independently owned and operated 
or have more than 1,500 employees, and thus are unable at this time to 
estimate with greater precision the number of IXCs that would qualify 
as small business concerns under the SBA's definition. Consequently, 
the Commission estimates that there are fewer than 171 small entity 
IXCs that may be affected by the proposed rulemaking.
    12. Competitive Access Providers. Neither the Commission nor the 
SBA has developed a definition of small entities specifically 
applicable to competitive access services providers (CAPs). The closest 
applicable definition under the SBA rules is for telephone 
communications companies other than radiotelephone (wireless) 
companies. See 13 CFR 121.201, SIC code 4813; 1997 NAICS 51331. 
According to the most recent Trends in Telephone Service data, 212 CAP/
competitive LECs carriers and 10 other LECs reported that they were 
engaged in the provision of competitive local exchange services. See 
FCC, Common Carrier Bureau, Industry Analysis Division, Trends in 
Telephone Service, Table 19.3 (March 2000). The Commission does not 
have data specifying the number of these carriers that are not 
independently owned and operated, or have more than 1,500 employees, 
and thus are unable at this time to estimate with greater precision the 
number of CAPs that would qualify as small business concerns under the 
SBA's definition. Consequently, the Commission estimates that there are 
fewer than 212 small entity CAPs and 10 other LECs that may be affected 
by the proposed rulemaking.
    13. Operator Service Providers. Neither the Commission nor the SBA 
has developed a definition of small entities specifically applicable to 
providers of operator services. The closest applicable definition under 
the SBA rules is for telephone communications companies other than 
radiotelephone (wireless) companies. See 13 CFR 121.201, SIC code 4813; 
1997 NAICS 51331. According to the most recent Trends in Telephone 
Service data, 24 carriers reported that they were engaged in the 
provision of operator services. See FCC, Common Carrier Bureau, 
Industry Analysis Division, Trends in Telephone Service, Table 19.3 
(March 2000). The Commission does not have data specifying the number 
of these carriers that are not independently owned and operated or have 
more than 1,500 employees, and thus are unable at this time to estimate 
with greater precision the number of operator service providers that 
would qualify as small business concerns under the SBA's definition. 
Consequently, the Commission estimates that there are fewer than 24 
small entity operator service providers that may be affected by the 
proposed rulemaking.
    14. Pay Telephone Operators. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to pay 
telephone operators. The closest applicable definition under SBA rules 
is for telephone communications companies other than radiotelephone 
(wireless) companies. See 13 CFR 121.201, SIC code 4813; 1997 NAICS 
51331. According to the most recent Trends in Telephone Service data, 
615 carriers reported that they were engaged in the provision of pay 
telephone services. See FCC, Common Carrier Bureau, Industry Analysis 
Division, Trends in Telephone Service, Table 19.3 (March 2000). The 
Commission does not have data specifying the number of these carriers 
that are not independently owned and operated or have more than 1,500 
employees, and thus are unable at this time to estimate with greater 
precision the number of pay telephone operators that would qualify as 
small business concerns under the SBA's definition. Consequently, the 
Commission estimates that there are fewer than 615 small entity pay 
telephone operators that may be affected by the proposed rulemaking.
    15. Resellers (including debit card providers). Neither the 
Commission nor the SBA has developed a definition of small entities 
specifically applicable to resellers. The closest applicable SBA 
definition for a reseller is a telephone communications company other 
than radiotelephone (wireless) companies. See 13 CFR 121.201, SIC code 
4813; 1997 NAICS 51331. According to the most recent Trends in 
Telephone Service data, 388 toll and 54 local entities reported that 
they were engaged in the resale of telephone service. See FCC, Common 
Carrier Bureau, Industry Analysis Division, Trends in Telephone 
Service, Table 19.3 (March 2000). The Commission does not have data 
specifying the number of these carriers that are not independently 
owned and operated or have more than 1,500 employees, and thus are 
unable at this time to estimate with greater precision the number of 
resellers that would qualify as small business concerns under the SBA's 
definition. Consequently, the Commission estimates that there are fewer 
than 388 small toll entity resellers and 54 small local entity 
resellers that may be affected by the proposed rulemaking.
    16. Toll-Free 800 and 800-Like Service Subscribers. Neither the 
Commission nor the SBA has developed a definition of small entities 
specifically applicable to 800 and 800-like service (``toll free'') 
subscribers. The most reliable source of information regarding the 
number of these service subscribers appears to be data the Commission 
collects on the 800, 888, and 877 numbers in use. See FCC, CCB Industry 
Analysis Division,

[[Page 41804]]

FCC Releases Study on Telephone Trends, Tbls. 21.2, 21.3 and 21.4 
(February 19, 1999). According to our most recent data, at the end of 
January 1999, the number of 800 numbers assigned was 7,692,955; the 
number of 888 numbers that had been assigned was 7,706,393; and the 
number of 877 numbers assigned was 1,946,538. The Commission does not 
have data specifying the number of these subscribers that are not 
independently owned and operated or have more than 1,500 employees, and 
thus are unable at this time to estimate with greater precision the 
number of toll free subscribers that would qualify as small business 
concerns under the SBA's definition. Consequently, the Commission 
estimates that there are fewer than 7,692,955 small entity 800 
subscribers, fewer than 7,706,393 small entity 888 subscribers, and 
fewer than 1,946,538 small entity 877 subscribers may be affected by 
the proposed rulemaking.

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

    17. The Regulatory Flexibility Act requires an agency to describe 
any significant alternatives that it has considered in reaching its 
proposed approach, which may include the following four alternatives 
(among others): (1) The establishment of differing compliance or 
reporting requirements or timetables that take into account the 
resources available to small entities; (2) the clarification, 
consolidation, or simplification of compliance and reporting 
requirements under the rule for small entities; (3) the use of 
performance, rather than design standards; and (4) an exemption from 
coverage of the rule, or any part thereof, for small entities. See 5 
U.S.C. 603(c).
    18. In this Declaratory Ruling, the Commission clarifies that 
connecting carriers are not required to file section 214 applications 
for acquisitions of corporate control.
    19. The Commission offers this clarification of an existing rule in 
order to reduce the regulatory burden for connecting carriers, 
including small entities. The Commission believes that by expressly 
articulating that connecting carriers are free from a specific section 
214 filing requirement, the Commission has provided small entities the 
least burdensome of filing requirements, i.e., carriers who were once 
uncertain of their obligations will now find it unnecessary to assume 
the costs of filing section 214 applications for acquisitions of 
corporate control. The Commission notes that any other interpretation 
of section 2(b) of the Act would increase and not decrease compliance 
and reporting requirements for connecting carriers, including small 
entities.
    20. Moreover, in this Declaratory Ruling, the Commission also 
clarifies that resellers and non-dominant carriers are not exempt from 
Sec. 63.01 and must file applications for acquisitions of corporate 
control. As the Commission explains in section II(B), there is nothing 
in either the 1999 Streamlining Order or the plain language of 
Sec. 63.01 to support the contention that acquisitions of corporate 
control involving non-dominant carriers are covered under the blanket 
authority of Sec. 63.01. Therefore, the Commission clarifies that non-
dominant carriers are required to file applications and obtain 
Commission approval before consummating a transaction involving an 
acquisition of corporate control. Any alternative approach would 
violate an existing rule and frustrate the Commission's ability to 
perform its statutory obligation of considering the public interest in 
connection with proposed acquisitions of domestic interstate common 
carriers, including non-dominant carriers.

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

    21. None.

Procedural Matters

    1. Pursuant to the authority contained in sections 2, 4(i)-(j), 
201, 214, and 303(r) of the Communications Act of 1934, as amended, 47 
U.S.C. 152, 154(i)-(j), 201, 214, and 303(r), that the Declaratory 
Ruling in CC Docket No. 01-150 IS ADOPTED.
    2. The Commission's Consumer Information Bureau, Reference 
Information Center, SHALL SEND a copy of the Declaratory Ruling, 
including the Initial Regulatory Flexibility Analysis, to the Chief 
Counsel for Advocacy of the Small Business Administration.
    3. Pursuant to sections 2, 4(i)-(j), 201, 214, and 303(r) of the 
Communications Act of 1934, as amended, 47 U.S.C. 152, 154(i)-(j), 201, 
214, and 303(r), that the Declaratory Ruling in CC Docket No. 01-150 
SHALL BECOME EFFECTIVE August 9, 2001.

List of Subjects in 47 CFR Part 63

    Communications common carriers, Telecommunications, Transfers of 
control, Mergers.

    Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 01-20000 Filed 8-8-01; 8:45 am]
BILLING CODE 6712-01-P