[Federal Register Volume 66, Number 191 (Tuesday, October 2, 2001)]
[Proposed Rules]
[Pages 50140-50147]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-24570]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CC Docket No. 96-115; CC Docket No. 96-149; FCC 01-247]


Telecommunications Carriers' Use of Customer Proprietary Network 
Information and Other Customer Information; Implementation of the Non-
Accounting Safeguards of Sections 271 and 272 of the Communications Act 
of 1934, as Amended

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission seeks comment on what methods 
of customer consent would serve the governmental interests at issue and 
afford informed consent in accordance with the First Amendment. The 
Commission also seeks comment on the interplay between section 222 and 
272 of the Act in response to a voluntary remand granted by the United 
States Circuit Court of Appeals for the District of Columbia. The 
Commission seeks to obtain a more complete record on ways in which 
customers can consent to a carrier's use of their CPNI.

DATES: Comments due on or before November 1, 2001 and Reply Comments 
due on or before November 16, 2001.

FOR FURTHER INFORMATION CONTACT: Marcy Greene, Attorney Advisor, Policy 
and Program Planning Division, Common Carrier Division, (202) 418-2410.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second 
Further Notice of Proposed Rulemaking

[[Page 50141]]

(Second Further Notice) in CC Docket Nos. 96-115 and 96-149, FCC 01-
247, adopted August 28, 2001, and released September 7, 2001. The 
complete text of this Second Further Notice of Proposed Rulemaking is 
available for inspection and copying during normal business hours in 
the FCC Reference Information Center, Portals II, 445 12th Street, SW., 
Room CY-A257, Washington, DC 20554. This document may also be purchased 
from the Commission's duplicating contractor, Qualex International, 
Portals II, 445 12th Street, SW, Room CY-B402, Washington, DC 20554, 
telephone 202-863-2893, facsimile 202-863-2898, or via e-mail 
[email protected]. It is also available on the Commission's website at 
http://www.fcc.gov.

Synopsis of the Second Further Notice of Proposed Rulemaking

    1. In this document, the Commission seeks comment on the 
responsibilities of carriers in obtaining consent from customers for 
the use of CPNI and, specifically, on whether we should adopt opt-in or 
opt-out consent under section 222(c)(1). Pending the resolution by the 
Commission of the particular method of consent, the Commission offers 
in this document guidance to parties on how to obtain consent during 
this interim period. If carriers should choose to obtain customer 
approval by means of an opt-out approach, such carriers will need to 
provide customers with notification consistent with Sec. 64.2007(f). 
Moreover, if a carrier has already provided a customer with 
notification premised upon an opt-in mechanism, the carrier, should it 
so choose, may continue to rely upon such notice.
    2. The Commission notes that our current rules do not provide for 
any time period after which a customer's implicit approval of the use 
or sharing of CPNI may be reasonably assumed to have been given to the 
carrier. The Commission will consider that question in the Second 
Further Notice. In the interim, however, we expect that carriers shall 
not use the CPNI based on ``implicit approval'' (through opt-out) until 
customers have been afforded some reasonable period to respond to the 
notification. Pending resolution of the FNPRM, we will use a 30-day 
period from customer receipt of notice as a ``safe harbor,'' but may 
permit some shorter period if supported by an adequate explanation from 
the carrier.

Further Notice of Proposed Rulemaking

    3. In this Second Further Notice, the Commission seeks to obtain a 
more complete record on ways in which customers can consent to a 
carrier's use of their CPNI. Taking into account the Tenth Circuit's 
opinion, the Commission seeks comment on what methods of approval would 
serve the governmental interests at issue, and afford informed consent, 
while also satisfying the constitutional requirement that any 
restrictions on speech be narrowly tailored. Specifically, the 
Commission seeks comment on the interests and policies underlying 
section 222 that are relevant to formulating an approval requirement, 
including an analysis of the privacy interests that are at issue, and 
on the extent to which we should take competitive concerns into 
account. To the extent that competition, in addition to privacy, is a 
legitimate government interest under section 222, the Commission seeks 
comment on the likely difference in competitive harms under opt-in and 
opt-out approvals. The Commission seeks comment on whether it is 
possible for the Commission to implement a flexible opt-in approach 
that does not run afoul of the First Amendment, or whether opt-out 
approval is the only means of addressing the constitutional concerns 
expressed by the 10th Circuit.
    4. At the outset, the Commission also asks parties to comment on 
the scope of the Tenth Circuit's opinion. If the Commission were to 
conclude that the court vacated additional requirements, which it does 
not believe that it did, the Commission asks parties to comment on 
whether it would affect our overall findings regarding ``approval of 
the customer'' in section 222(c)(1). Would the Commission need to re-
examine our interpretation of ``approval'' as it relates to the uses 
for which a carrier may use CPNI without customer approval, including 
to market customer premises equipment and information services, and to 
use CPNI to market to customers who have switched to another carrier?
    5. In the CPNI Order (63 FR 20326, April 24, 1998) the Commission 
addressed specifically the requirement that a carrier obtain ``approval 
of the customer'' for use of CPNI outside the telecommunications 
service from which it was derived. In light of those statutory 
objectives, it further concluded that carriers must obtain express 
written, oral, or electronic approval by a customer to use a customer's 
CPNI beyond the existing service relationship. The Commission rejected 
an opt-out regime, under which a carrier could use CPNI beyond the 
existing service relationship as long as it has made a request to a 
customer for permission to use CPNI in that manner and the customer had 
not expressly objected to such use. Because the Tenth Circuit found 
that the opt-in requirements were not narrowly tailored to promote the 
government's asserted interests in protecting privacy and promoting 
competition, we initiate this proceeding to obtain a more complete 
record on consent mechanisms, and the Commission urges commenters to 
focus upon the concerns articulated by the court. In addition, the 
Commission asks parties to comment on whether there are any other laws 
or regulatory schemes governing matters similar to CPNI that the 
Commission might use as an analog.
    6. The Commission seeks comment on the interests and policies 
underlying section 222 that are relevant to formulating an approval 
requirement to implement section 222(c)(1). In the CPNI Order, the 
Commission articulated two governmental interests: Protection of 
customer privacy and promotion of competition. The court indicated that 
``[w]hile, in the abstract, these may constitute legitimate and 
substantial interests, we have concerns about the proffered 
justifications in the context of this case.'' Commenters should also 
discuss, with as much specificity as possible, how a carrier's use of 
CPNI could erode privacy. The Tenth Circuit recognized that 
``disclosure of CPNI information could prove embarrassing to some,'' 
but beyond that was uncertain about the government's privacy interest. 
The Commission seeks comment on that aspect of the court's analysis and 
ask what other privacy concerns may be implicated by access to CPNI.
    7. The court also said that it ``would prefer to see a more 
empirical explanation and justification for the government's asserted 
interest [in privacy].'' The Commission seeks comments responsive to 
the court's concern. The court was not persuaded that competition was a 
legitimate or substantial state interest underlying section 222. The 
Commission seeks comments that address those reservations, and on the 
extent to which competitive concerns should be taken into account in 
our interpretation of the approval requirements under section 
222(c)(1). The Commission further seeks comment about the potential 
competitive ramifications of construing section 222 without regard to 
competitive issues, and how such a construction might affect the 
competitive goals of the 1996 Act. The Commission seeks comment on the 
likely difference in competitive effects under opt-in and opt-out 
approvals. It requests empirical or other evidence to illustrate the 
competitive advantages, if any, that opt-out approval affords a 
carrier. The Commission asks whether, and to what extent, any such 
competitive advantages may undermine

[[Page 50142]]

the goals of section 222 or, more generally, the goals of the 1996 Act.
    8. The Commission seeks comment on any potential harms that may 
arise from adopting either an opt-out or opt-in approach. The 
Commission inquires to whom a carrier might make CPNI available, and 
seeks comments about the extent to which such dissemination would 
affect customer privacy interests. The Commission asks parties to 
address the relative costs and convenience of CPNI use under both opt-
in and opt-out approaches. Finally, the Commission seeks comment on the 
court's statement that opt-out is a ``substantially less restrictive 
alternative.'' The Commission seeks comment more broadly on what 
methods of approval would serve the governmental interests at issue, 
and afford informed consent, while also satisfying the constitutional 
requirement that any restrictions on speech be narrowly tailored.
    9. The Commission seeks comment on whether adoption of an opt-out 
mechanism is consistent with the rationale for the total service 
approach set forth in the CPNI Order. If the Commission adopts an opt-
out approach such that a carrier need not obtain the customer's 
affirmative approval to market services not already subscribed to by 
the customer, is it necessary or appropriate for us to adopt an 
alternative to the total service approach? In particular, would there 
be an impact on the competitive goals of the Act if adoption of an opt-
out mechanism increased the likelihood of customer approval for the use 
of CPNI to market services not already subscribed to by the customer? 
Alternatively, would adoption of an opt-out mechanism achieve the 
appropriate balance among the interests of privacy, competition, 
equity, and efficiency?
    10. Finally, the Commission notes that in the Wireless 
Communications and Public Safety Act of 1999 (911 Act), Congress 
amended section 222 of the Communications Act by adding provisions 
regarding CPNI. The amendments were enacted as incentives for greater 
deployment of wireless E911 services. The new CPNI provisions are 
intended to encourage that objective by providing separate provisions 
to protect certain wireless location information, and by expressly 
authorizing carriers to release this information to specified third 
parties for specified emergency purposes. The Commission seeks comment 
on what affect, if any, the provisions of section 222(f) have on our 
interpretation of the provisions of section 222(c)(1) and the customer 
approval requirements that are under consideration here.
    11. The Commission also seeks comment on whether modifications 
should be made to the current notification requirements in our rules so 
that they are most effective in ensuring that customers are clearly 
informed of their rights, and on how carriers should manage later 
requests for privacy from the customer. In sum, the Commission seeks 
comment on all of these approval and notification approaches as well as 
any other options for ensuring that customers receive adequate 
notification of their rights under section 222 of the Act.

Interplay of Section 222 and 272

    12. On October 8, 1999, AT&T filed a petition for review of the 
CPNI Order with the U.S. Circuit Court of Appeals for the District of 
Columbia, challenging the Commission's CPNI decisions as they relate to 
the interplay between section 222 and section 272 of the Communications 
Act. On July 25, 2000, the D.C. Circuit granted the Commission's motion 
for remand of the AT&T appeal. The consent mechanism that the 
Commission eventually adopts in response to the Tenth Circuit's Order 
could impact our previous findings regarding the interplay between 
these two sections, and we therefore find it necessary to raise the 
relevant issues here. The Commission's finding in the CPNI Order, which 
we affirmed in the CPNI Reconsideration Order (64 FR 53242, October 1, 
1999), that the term ``information'' in section 272(c)(1) does not 
include CPNI remains intact. Specifically, section 272(c)(1) states 
that a Bell Operating Company (BOC), in its dealing with its section 
272 separate affiliate, ``may not discriminate between the company or 
affiliate and any other entity in the provision or procurement of 
goods, services, facilities, and information, or in the establishment 
of standards * * *'' The Commission found that in the context of the 
entire 1996 Act, it is not readily apparent that the meaning of 
``information'' in section 272 necessarily includes CPNI, and that the 
most reasonable interpretation of the interplay between sections 222 
and 272 is that section 272 ``does not impose any additional CPNI 
requirements on BOCs' sharing of CPNI with their section 272 affiliates 
when they share information with their section 272 affiliates according 
to the requirements of section 222.'' The Commission found this to be 
reasonable because if we deemed ``information'' to include CPNI under 
section 272(c)(1), then the BOCs would be unable to share CPNI with 
their affiliates to the extent contemplated by section 222, but would 
instead be subject to the more affirmative nondiscrimination 
requirements in section 272. Adhering to these requirements would mean 
that BOCs could share CPNI among their section 272 affiliates only 
pursuant to express approval, and CPNI sharing under section 
222(c)(1)(A) (based on implied approval under the total service 
approach) would be precluded.
    13. More specifically, under the terms of section 272, the 
Commission found that the nondiscrimination requirements contained in 
that section would, in the context of an opt-in approach, ``pose a 
potentially insurmountable burden because a BOC soliciting approval to 
share CPNI with its affiliate would have to solicit approval for 
countless other carriers as well, known or unknown.'' Although this was 
only one of several reasons supporting the Commission's interpretation 
of the interplay between sections 222 and 272, it would likely have to 
revisit this conclusion if we adopt an opt-out approach as a final 
rule. Under an opt-out approach, however, a BOC may be free to share 
its local customer's CPNI with its long distance affiliate regardless 
of whether the local customer has chosen the affiliate as his or her 
long distance service provider. The Commission is concerned about the 
possible competitive and customer privacy ramifications of such an 
interpretation, and seeks comment on whether it should revisit its 
interpretation of the interplay between sections 222 and 272 if the 
Commission adopts an opt-out approach. In particular, would the 
Commission have to alter its fundamental conclusion that BOCs may share 
CPNI with their section 272 affiliates pursuant to section 222 without 
regard to the nondiscrimination requirements in section 272?

Initial Regulatory Flexibility Analysis

    14. As required by the Regulatory Flexibility Act (RFA), as 
amended,\1\ the Commission has prepared this present Initial Regulatory 
Flexibility Analysis (IRFA) of the expected significant economic impact 
on small entities by the policies and rules proposed in this Second 
Further Notice of Proposed Rulemaking (Second Further Notice). Written 
public comments are requested on this IRFA. Comments must be identified 
as responses to the IRFA and must be filed by the deadlines for 
comments on the Second Further Notice. The Commission will send a

[[Page 50143]]

copy of the Second Further Notice, including this IRFA, to the Chief 
Counsel for Advocacy of the Small Business Administration. See 5 U.S.C. 
603(a). In addition, the Second Further Notice and IRFA (or summaries 
thereof) will be published in the Federal Register.
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    \1\ 5 U.S.C. 603. The RFA, see 5 U.S.C. 601 et seq., has been 
amended by the Contract With America Advancement Act of 1996, Public 
Law 104-121, 110 Stat. 847 (1996) (CWAAA). Title II of CWAAA is the 
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA).
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a. Need for, and Objectives of, the Proposed Rules

    15. The Commission is issuing the Second Further Notice to seek 
comment on an appropriate method by which carriers must secure their 
customers' consent to use the customer's CPNI. This is necessary to 
respond to the Tenth Circuit's decision vacating the opt-in consent 
method. Under the opt-in method, a carrier was required to notify the 
customer of his or her rights with regard to CPNI and then obtain 
express written, oral or electronic customer approval before the 
carrier may use CPNI to market services to the customer that are 
outside the existing service relationship that the customer has with 
the carrier. The opt-in method is distinguished from the opt-out method 
under which approval to use the customer's CPNI is inferred from the 
customer-carrier relationship unless the customer requests specifically 
that his or her CPNI be restricted.
    16. The Tenth Circuit concluded that although the Commission had 
asserted that the opt-in method would protect consumer privacy and 
promote competition for telecommunications services in accordance with 
the goals of section 222 of the Act,\2\ it did not demonstrate that 
opt-in directly and materially advanced these interests. The court 
concluded that the Commission's determination that an opt-in 
requirement would best protect a consumer's privacy interests was not 
narrowly tailored because the Commission had failed to adequately 
consider an opt-out option. The court stated that an opt-out option 
should have been more fully investigated as it is inherently less 
restrictive of speech. Further, the court ruled the Commission did not 
adequately show that an opt-out strategy would not offer sufficient 
protection of consumer privacy.\3\ In vacating portions of the CPNI 
Order, the court did not require the Commission to find specifically 
that the opt-out option was the correct approach. Instead, it found 
fault with the Commission's ``inadequate consideration of the approval 
mechanism alternatives in light of the First Amendment.'' \4\
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    \2\ 47 U.S.C. 222
    \3\ Id. at 1238-39.
    \4\ Id. at 1240, n. 15 (``The dissent accuses us of `advocating' 
an opt-out approach. We do not `advocate' any specific approach.'').
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    17. Taking into account the Tenth Circuit's concerns, we seek 
comment in the Second Further Notice on several significant issues 
concerning what methods of approval would serve the governmental 
interests at issue under section 222 of the Act, and afford informed 
consent, while also satisfying the constitutional requirement that any 
restrictions on speech be narrowly tailored. We seek comment 
specifically on the extent to which an opt-in or opt-out method of 
customer approval would be consistent with both the court's concerns 
and section 222, and on whether we should make modification to our 
customer notification requirements in Sec. 64.7002 of our rules, 47 CFR 
64.7002, based on the form of approval that we adopt.\5\
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    \5\ See infra paragraphs 14-23.
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    18. We also ask for information on any potential harms to business 
entities, especially smaller business entities within the class of 
companies directly affected by the proposed rule, that may arise from 
adopting either an opt-in or opt-out approach, including the extent to 
which dissemination of CPNI would affect a customer's privacy.\6\ We 
also ask for comment on how we can ensure that the consent approach we 
adopt balances the interests of privacy, competition, equity and 
efficiency.\7\
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    \6\ See infra paragraph 9.
    \7\ See infra paragraph 21.
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    19. In addition, we ask parties to indicate whether or not adoption 
of an opt-out mechanism undermines the total service approach. The 
total service approach is not a consent mechanism like the opt-in or 
opt-out approach, but instead describes the scope of services for which 
a customer grants his or her consent for the carrier to use CPNI. 
Specifically, under the total service approach, the customer's implied 
approval is limited to the parameters of the customer's existing 
service, while the customer must grant the carrier affirmative approval 
in order for the carrier to use the customer's CPNI to market other 
services to the customer. If a carrier need not obtain the customer's 
affirmative approval to market services not already subscribed to by 
the customer, is it necessary or appropriate for us to adopt an 
alternative to the total service approach.\8\
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    \8\ See infra paragraph 21.
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b. Legal Basis

    20. The Second Further Notice is adopted pursuant to sections 1, 
4(i), 222, and 303(r) of the Communications Act of 1934, as amended, 47 
U.S.C. 151, 154(i), 222, and 303(r).

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

    21. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that will be 
affected by our rules.\9\ The RFA generally defines the term ``small 
entity'' as having the same meaning as the terms ``small business,'' 
``small organization,'' and ``small governmental jurisdiction.'' \10\ 
For the purposes of this order, the RFA defines a ``small business'' to 
be the same as a ``small business concern'' under the Small Business 
Act, 15 U.S.C. s 632, unless the Commission has developed one or more 
definitions that are appropriate to its activities.\11\ Under the Small 
Business Act, a ``small business concern'' is one that: (1) Is 
independently owned and operated; (2) is not dominant in its field of 
operation; and (3) meets any additional criteria established by the 
Small Business Administration (SBA).\12\ 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.\13\ We first discuss generally the total number of 
small telephone companies falling within both of those SIC categories. 
Then, we discuss the number of small businesses within the two 
subcategories, and attempt to refine further those estimates to 
correspond with the categories of telephone companies that are commonly 
used under our rules.
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    \9\ 5 U.S.C. 603(b)(3), 604(a)(3).
    \10\ 5 U.S.C. 601(6).
    \11\ 5 U.S.C. 601(3) (incorporating by reference the definition 
of ``small business concern'' in 5 U.S.C. 632).
    \12\ 15 U.S.C. 632.
    \13\ 13 CFR 121.201. The North American Industry Classification 
System (NAICS) has replaced the SIC system for describing types of 
industries. SIC 4812 corresponds to NAICS 513321, 513322, 51333 
(Radiotelephone Communications). SIC 4813 corresponds to NAICS 
51331, 51333, 51334 (Telephone Communications, Except 
Radiotelephone).
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    22. Although affected incumbent local exchange carriers (ILECs) may 
have no more than 1,500 employees, we do not believe that such entities 
should be considered small entities within the meaning of the RFA 
because they either are dominant in their field of operations or are 
not independently owned and operated, and are therefore by definition 
not ``small entities'' or ``small business

[[Page 50144]]

concerns'' under the RFA. Accordingly, our use of the terms ``small 
entities'' and ``small businesses'' does not encompass small ILECs. Out 
of an abundance of caution, however, for regulatory flexibility 
analysis purposes, we will separately consider small ILECs within this 
analysis and use the term ``small ILECs'' to refer to any ILECs that 
arguably might be defined by SBA as ``small business concerns.'' \14\
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    \14\ 13 CFR 121.210 (SIC 4813).
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    23. Total Number of Telephone Companies Affected. The United States 
Bureau of the Census (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.\15\ 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, 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 because they are not 
``independently owned and operated.'' \16\ 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 either small entities or small incumbent LECs that 
may be affected by this order.
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    \15\ United States 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).
    \16\ 15 U.S.C. 632(a)(1).
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    24. Wireline Carriers and Service Providers. The SBA has developed 
a definition of small entities for telephone communications companies 
other than radiotelephone (wireless) companies. The Census Bureau 
reports there were 2,321 such telephone companies in operation for at 
least one year at the end of 1992.\17\ According to the SBA's 
definition, a small business telephone company other than a 
radiotelephone company is one employing fewer than 1,500 persons.\18\ 
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 the SBA's definition. Consequently, we estimate 
that fewer than 2,295 small entity telephone communications companies 
other than radiotelephone companies are small entities or small ILECs 
that may be affected by this order.
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    \17\ 1992 Census, at Firm Size 1-123.
    \18\ 13 CFR 121.201 (SIC 4813/NAICS 51331).
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    25. Local Exchange Carriers. Neither the Commission nor the SBA has 
developed a definition of small providers of local exchange services. 
The closest applicable definition under the SBA's rules is for 
telephone communications companies other than radiotelephone (wireless) 
companies. The most reliable source of information regarding the number 
of LECs nationwide of which we are aware appears to be the data that we 
collect annually in connection with the Telecommunications Relay 
Service (TRS).\19\ According to our most recent data, there are 1,335 
incumbent LECs, 349 competitive LECs, and 87 resellers.\20\ 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 LECs that would 
qualify as small business concerns under the SBA's definition. 
Consequently, we estimate that there are fewer than 1,335 small entity 
incumbent LECs, 349 competitive LECs, and 87 resellers that may be 
affected by the proposals in the Second Further Notice.
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    \19\ 47 CFR 64.601 et seq.; Carrier Locator: Interstate Service 
Providers, FCC Common Carrier Bureau, Industry Analysis Division 
(rel. Oct. 2000) (Carrier Locator).
    \20\ Carrier Locator at Figure 1. The total for competitive LECs 
includes competitive access providers and competitive LECs.
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    26. Interexchange Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
providers of interexchange services (IXCs). The closest applicable 
definition under the SBA's rules is for telephone communications 
companies other than radiotelephone (wireless) companies. The most 
reliable source of information regarding the number of IXCs nationwide 
of which we are aware appears to be the data that we collect annually 
in connection with TRS. According to our most recent data, 204 
companies reported that they were engaged in the provision of 
interexchange services.\21\ 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 IXCs that would qualify as small 
business concerns under the SBA's definition. Consequently, we estimate 
that there are fewer than 204 small entity IXCs that may be affected by 
this order.
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    \21\ Carrier Locator at Figure 1.
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    27. Competitive Access Providers. Neither the Commission nor the 
SBA has developed a definition of small entities specifically 
applicable to providers of competitive access services (CAPs). The 
closest applicable definition under the SBA's rules is for telephone 
communications companies other than radiotelephone (wireless) 
companies. The most reliable source of information regarding the number 
of CAPs nationwide of which we are aware appears to be the data that we 
collect annually in connection with the TRS. According to our most 
recent data, 349 companies reported that they were engaged in the 
provision of either competitive access services or competitive local 
exchange service.\22\ 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 CAPs that would qualify as small business 
concerns under the SBA's definition. Consequently, we estimate that 
there are fewer than 349 small entity CAPs that may be affected by this 
order.
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    \22\ Carrier Locator at Figure 1.
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    28. 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's rules is for telephone communications companies other than 
radiotelephone (wireless) companies. The most reliable source of 
information regarding the number of operator service providers 
nationwide of which we are aware appears to be the data that we collect 
annually in connection with the TRS. According to our most recent data, 
21 companies reported that they were engaged in the provision of 
operator services.\23\ Although it seems certain that some of these 
companies 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 operator

[[Page 50145]]

service providers that would qualify as small business concerns under 
the SBA's definition. Consequently, we estimate that there are fewer 
than 21 small entity operator service providers that may be affected by 
this order.
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    \23\ Carrier Locator at Figure 1.
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    29. 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 the SBA's 
rules is for telephone communications companies other than 
radiotelephone (wireless) companies. The most reliable source of 
information regarding the number of pay telephone operators nationwide 
of which we are aware appears to be the data that we collect annually 
in connection with the TRS. According to our most recent data, 758 
companies reported that they were engaged in the provision of pay 
telephone services.\24\ 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 pay telephone operators that would qualify as 
small business concerns under the SBA's definition. Consequently, we 
estimate that there are fewer than 758 small entity pay telephone 
operators that may be affected by this order.
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    \24\ Carrier Locator at Figure 1.
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    30. Wireless Carriers. The SBA has developed a definition of small 
entities for radiotelephone (wireless) companies. The Census Bureau 
reports that there were 1,176 such companies in operation for at least 
one year at the end of 1992.\25\ According to the SBA's definition, a 
small business radiotelephone company is one employing no more than 
1,500 persons.\26\ The Census Bureau also reported that 1,164 of those 
radiotelephone companies had fewer than 1,000 employees. Thus, 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 the SBA's 
definition. Consequently, we estimate that there are fewer than 1,164 
small entity radiotelephone companies that may be affected by this 
order.
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    \25\ 1992 Census at Firm Size 1-123.
    \26\ 13 CFR Sec. 121.201 (SIC 4812/NAICS 513322).
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    31. Cellular Service and Mobile Service Carriers. Neither the 
Commission nor the SBA has developed a definition of small entities 
specifically applicable to providers of cellular services. The closest 
applicable definition under the SBA's rules is for telephone 
communications companies other than radiotelephone (wireless) 
companies. The most reliable source of information regarding the number 
of cellular service carriers nationwide of which we are aware appears 
to be the data that we collect annually in connection with the TRS. 
According to our most recent data, 806 companies reported that they 
were engaged in the provision of cellular services.\27\ 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 cellular service 
and mobile service carriers that would qualify as small business 
concerns under the SBA's definition. Consequently, we estimate that 
there are fewer than 804 small entity cellular service carriers that 
may be affected by this order.
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    \27\ Carrier Locator at Figure 1. The total for cellular 
carriers includes cellular, Personal Communications Service (PCS) 
and Specialized Mobile Radio (SMR) carriers.
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    32. 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 
entity'' for Blocks C and F as an entity that has average gross 
revenues of less than $40 million in the three previous calendar 
years.\28\ For Block F, an additional classification for ``very small 
business'' was added, and is defined as an entity that, together with 
its affiliates, has average gross revenues of not more than $15 million 
for the preceding three calendar years.\29\ These regulations defining 
``small entity'' in the context of broadband PCS auctions have been 
approved by SBA.\30\ No small businesses within the SBA-approved 
definition bid successfully for licenses in Blocks A and B. There were 
90 winning bidders that qualified as small entities in the Block C 
auctions. A total of 93 small and very small business bidders won 
approximately 40% of the 1,479 licenses for Blocks D, E, and F. Based 
on this information, we estimate that the number of small broadband PCS 
licenses will include the 90 winning C Block bidders and the 93 
qualifying bidders in the D, E, and F blocks, for a total of 183 small 
PCS providers as defined by SBA and the Commissioner's auction rules.
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    \28\ See Amendment of Parts 20 and 24 of the Commission's 
Rules--Broadband PCS Competitive Bidding and the Commercial Mobile 
Radio Service Spectrum Cap, Report and Order, FCC 96-278, WT Docket 
No. 96-59, paras. 57-60 (June 24, 1996), 61 FR 33859 (July 1, 1996); 
see also 47 CFR 24.720(b).
    \29\ Id. at paragraph 60.
    \30\ Implementation of Section 309(j) of the Communications 
Act--Competitive Bidding, PP Docket No. 93-253, Fifth Report and 
Order, 9 FCC Rcd 5532, 5581-84 (1994).
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    33. SMR Licensees. Pursuant to 47 CFR 90.814(b)(1), the Commission 
has defined ``small entity'' in auctions for geographic area 800 MHz 
and 900 MHz SMR licenses as a firm that had average annual gross 
revenues of less than $15 million in the three previous calendar years. 
The definition of a ``small entity'' in the context of 800 and 900 MHz 
SMR has been approved by the SBA. The proposed rules may apply to SMR 
providers in the 800 MHz and 900 MHz bands that either hold geographic 
area licenses or have obtained extended implementation authorizations. 
We do not know how many firms provide 800 MHz or 900 MHz geographic 
area SMR service pursuant to extended implementation authorizations, 
nor how many of these providers have annual revenues of less than $15 
million. Consequently, we estimate, for purposes of this IRFA, that all 
of the extended implementation authorizations may be held by small 
entities, some of which may be affected by the rules proposed in the 
Notice.
    34. The Commission recently held auctions for geographic area 
licenses in the 900 MHz SMR band. There were 60 winning bidders who 
qualified as small entities in the 900 MHz auction. Based on this 
information, we estimate that the number of geographic area SMR 
licensees that may be affected by the decisions and rules proposed in 
the Notice includes these 60 small entities. No auctions have been held 
for 800 MHz geographic area SMR licenses. Therefore, no small entities 
currently hold these licenses. A total of 525 licenses will be awarded 
for the upper 200 channels in the 800 MHz geographic area SMR auction. 
The Commission, however, has not yet determined how many licenses will 
be awarded for the lower 230 channels in the 800 MHz geographic area 
SMR auction. There is no basis, moreover, on which to estimate how many 
small entities will 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

[[Page 50146]]

purposes of this IRFA, that all of the licenses may be awarded to small 
entities, some of which may be affected by the decisions and rules 
proposed in the Notice.
    35. Narrowband PCS. The Commission has auctioned nationwide and 
regional licenses for narrowband PCS. There are 11 nationwide and 30 
regional licensees 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 IRFA, that all of the 
licenses will be awarded to small entities, as that term is defined by 
the SBA.
    36. Toll Resellers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
resellers. The closest applicable definition under the SBA's rules is 
for all telephone communications companies. The most reliable source of 
information regarding the number of toll resellers nationwide of which 
we are aware appears to be the data that we collect annually in 
connection with the TRS. According to our most recent data, 454 
companies reported that they were engaged in the resale of telephone 
toll 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 toll resellers that would qualify as small 
business concerns under the SBA's definition. Consequently, we estimate 
that there are fewer than 454 small entity resellers that may be 
affected by this order.
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    \31\ Carrier Locator at Figure 1.
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d. Description of Projected Reporting, Recordkeeping and Other 
Compliance Requirements

    37. Because we have not made any tentative conclusions or suggested 
proposed rules, we are unable at this time to describe any projected 
reporting, recordkeeping, or other compliance requirements.

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

    38. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.\32\
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    \32\ 5 U.S.C. 603(c).
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    39. As noted above, we do not propose a specific method for how 
carriers should obtain customer consent to use CPNI for marketing 
purposes, rather we seek comment on ways in which carriers can obtain 
their customers' consent and the extent to which an opt-in or opt-out 
approach would satisfy both section 222 and the Tenth Circuit's 
concerns that any restrictions on speech be no more than necessary to 
serve the asserted state interests. Section 222 applies to all 
telecommunications carriers, and therefore, any rules that we adopt 
regarding customer consent will be applicable to all carriers.\33\ 
Accordingly, we cannot exempt small entities from complying with any 
consent rules that we adopt.
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    \33\ CPNI Order, 13 FCC Rcd at 8098-8100, paragraphs 49-50.
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    40. We have, however, taken the limited resources of small entities 
into account in promulgating certain existing CPNI rules,\34\ and 
intend to do so again in addressing the customer consent requirements. 
Specifically, we recognize that an opt-in approach would require small 
entities to have a process in place to obtain express approval from 
their customers to use CPNI. While such a process could place a burden 
on small entities in terms of developing, tracking and maintaining 
customer consent, it would confer a countervailing benefit by 
permitting them to gain approval to use a customer's CPNI for a broad 
range of service offerings with a single request through written, oral 
or electronic means that remains in effect unless or until the customer 
revokes it.\35\ Therefore, we ask parties to comment on whether the 
burden outweighs the benefit under an opt-in scheme.
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    \34\ See CPNI Reconsideration Order, 14 FCC Rcd at 14472-75, 
paragraphs 125-27 (adjusting certain CPNI safeguards to ease the 
costs of compliance for small carriers).
    \35\ See CPNI Reconsideration Order, 14 FCC Rcd at 8142-43, 
8146, 8151, paragraphs 104, 109, 116.
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    41. We also note that the Commission, in response to concerns from 
all carriers about the cost of compliance, has already streamlined the 
``flagging'' and ``audit trail'' requirements that are required to 
protect against unauthorized access to a customer's CPNI.\36\ Small 
entities may continue to take advantage of these streamlined rules even 
if the Commission adopts an opt-in requirement.
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    \36\ CPNI Reconsideration Order, 13 FCC Rcd at 14472-75, 
paragraphs 124-27.
---------------------------------------------------------------------------

    42. Under an opt-out approach, a small entity need not obtain 
express approval, but would only be required to notify its customers of 
their CPNI rights and then process any requests for privacy after such 
notification. This could be less administratively onerous than 
obtaining opt-in approval. However, we seek comment indicating small 
entities' perception of the probable impact of this burden.
    43. We ask small entities to particularly keep in mind these types 
of requirements when they comment in the Second Further Notice on any 
potential harms that may arise from adopting either form of 
consent,\37\ and overall, we ask for comment in response to this IRFA 
on what competitive or economic impact either an opt-in or opt-out 
approach would have on small entities and on whether there is any 
alternative form of consent that we should consider to minimize the 
economic impact on them.
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    \37\ See supra paragraph 19.
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f. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules

    44. None.

Ordering Clauses

    45. Pursuant to sections 1, 4(i), 222 and 303(r) of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 222 and 
303(r), the Clarification Order and Second Further Notice of Proposed 
Rulemaking are adopted.
    46. The Commission's Office of Public Affairs, Reference Operations 
Division, Shall Send a copy of this Clarification Order and Second 
Further Notice of Proposed Rulemaking, including the Initial Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.


[[Page 50147]]


Federal Communications Commission.
William F. Caton,
Deputy Secretary.
[FR Doc. 01-24570 Filed 10-1-01; 8:45 am]
BILLING CODE 6712-01-P