[Federal Register Volume 67, Number 42 (Monday, March 4, 2002)]
[Rules and Regulations]
[Pages 9610-9617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-4979]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[CC Docket No. 96-128; FCC 02-22]


Implementation of the Pay Telephone Reclassification and 
Compensation Provisions of the Telecommunications Act of 1996

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Commission reconsidered certain aspects 
of per-payphone compensation pursuant to a remand by the U.S. Court of 
Appeals for the District of Columbia Circuit. To implement the remand, 
the Commission established a new default compensation amount for 
completed access charge and subscriber 800 calls per payphone per 
month, and resolved the issues of compensation for 0+ and inmate calls, 
interest rates, and a number of other related matters.

DATES: Effective January 1, 2003.

FOR FURTHER INFORMATION CONTACT: Lynne Milne, Common Carrier Bureau, 
Competitive Pricing Division, (202) 418-1520.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Fourth 
Order on Reconsideration and Order on Remand (Order) in CC Docket No. 
96-128, adopted January 28, 2002, and released on January 31, 2002. The 
complete text of this Order is available for public inspection Monday 
through Thursday from 8:00 a.m. to 4:30 p.m. and Friday from 8:00 a.m. 
to 11:30 a.m. in the Commission's Consumer Information Bureau, 
Reference Information Center, Room CY-A257, 445 Twelfth Street, SW, 
Washington, DC 20554. The complete text is available also on the 
Commission's Internet site at www.fcc.gov. Alternative formats are 
available to persons with disabilities by contacting Martha Contee at 
(202) 418-0260 or TTY (202) 418-2555. The complete text of the Order 
may be purchased from the Commission's duplicating contractor, Qualex 
International, Room CY-B402, 445 Twelfth Street, SW, Washington, DC 
20554, telephone 202-863-2893, facsimile 202-863-2898, or e-mail at 
[email protected].

Synopsis of Fourth Order on Reconsideration and Order on Remand

    1. After a remand by the U.S. Court of Appeals for the D.C. Circuit 
in Illinois Pub. Telecomm. Ass'n v. FCC, 117 F.3d 555 (D.C. Cir. 1997), 
clarified on reh'g, 123 F.3d 693 (D.C. Cir. 1997), cert. denied sub 
nom. Virginia State Corp. Comm'n v. FCC, 523 U.S. 1046 (1998) 
(hereinafter Illinois), the Commission established in this Order the 
amount of monthly per-payphone compensation for access charge and 
subscriber 800 calls, beginning November 7, 1996. This amount is 
$33.892 per payphone per month. The Commission also calculated the 
amount of monthly per-payphone compensation for 0+ calls during the 
period beginning November 7, 1996 through October 6, 1997 (sometimes 
called the interim period), if the payphone service provider was not 
otherwise compensated. This amount is $4.2747 per payphone per month, 
paid by the interexchange carrier presubscribed during the interim 
period.
    2. In this Order, the Commission determined the rate of per-call 
compensation for inmate calls during the interim period, if the 
payphone service provider was not otherwise compensated. The 
interexchange carrier presubscribed during the interim period pays 
$0.229 per inmate call ``that otherwise would have been compensated.'' 
For example, if the policy or practice of the specific presubscribed 
interexchange carrier was not to pay compensation to a payphone service 
provider for a collect call from an inmate when the called party 
refused to accept charges for that particular call during the interim 
period, then the specific presubscribed interexchange carrier is not 
required now to pay compensation of $0.229 for that

[[Page 9611]]

particular inmate call. In addition, if the presubscribed interexchange 
carrier failed to retain the records of inmate calls originating during 
the interim period for which compensation now must be paid according to 
this Order, then that presubscribed interexchange carrier must file a 
waiver request with the Common Carrier Bureau, pursuant to 47 CFR 1.3, 
specifying the number of inmate calls to be compensated for the interim 
period and the specific basis for its number. The specific payphone 
service provider to be compensated will be allowed thirty (30) days to 
file an objection with the Common Carrier Bureau, specifying an 
alternative number of inmate calls to be compensated for the interim 
period and the specific basis for its number.
    3. For access code calls, subscriber 800 calls, inmate calls or 0+ 
calls, a payphone service provider that is affiliated with a local 
exchange carrier is not eligible to receive payphone compensation prior 
to April 16, 1997 or, in the alternative, the first day following both 
the termination of subsidies and payphone reclassification and 
transfer, whichever date is latest. The payphone compensation for 
access code calls, subscriber 800 calls, inmate calls or 0+ calls 
decided in this Order is a default amount, used in the absence of a 
negotiated amount. The Commission concluded moreover that the duty to 
pay interim compensation should not be limited to carriers with annual 
toll revenue above $100 million, but should include all interexchange 
carriers and local exchange carriers to the extent that local exchange 
carriers receive compensable payphone calls. In addition, the 
Commission excluded resellers from direct payment obligations for 
interim compensation to eliminate some of the non-payment problems 
described in the Second Reconsideration Order, 66 FR 21105 (Apr. 27, 
2001). See also Third Reconsideration Order, 67 FR 3621 (Jan. 25, 
2002).
    4. The Commission in this Order also designated the payphone 
compensation interest rate for the interim period and the period 
beginning October 7, 1997 through April 20, 1999 (sometimes called the 
intermediate period) as the applicable rate for refund obligations set 
by the Internal Revenue Service (IRS) pursuant to section 6621 of the 
Internal Revenue Code, 26 U.S.C. 6621. Based on an IRS Revenue Ruling 
published December 26, 2001, in Appendix C of the Order, the Commission 
provided the interest rates applicable to payphone compensation 
beginning the last quarter of 1996 through March 31, 2002.

    Table of Overpayments Interest Rates From October 1, 1996 Through
                            December 31, 1998
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Oct. 1, 1996-Dec. 31, 1996.......................................     8%
Jan. 1, 1997-Mar. 31, 1997.......................................     8%
Apr. 1, 1997-Jun. 30, 1997.......................................     8%
Jul. 1, 1997-Sep. 30, 1997.......................................     8%
Oct. 1, 1997-Dec. 31, 1997.......................................     8%
Jan. 1, 1998-Mar. 31, 1998.......................................     8%
Apr. 1, 1998-Jun. 30, 1998.......................................     7%
Jul. 1, 1998-Sep. 30, 1998.......................................     7%
Oct. 1, 1998-Dec. 31, 1998.......................................     7%
------------------------------------------------------------------------


 Table of Noncorporate Overpayments Interest Rates From January 1, 1999
                         Through March 31, 2002
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Jan. 1, 1999-Mar. 31, 1999.......................................     7%
Apr. 1, 1999-Jun. 30, 1999.......................................     8%
Jul. 1, 1999-Sep. 30, 1999.......................................     8%
Oct. 1, 1999-Dec. 31, 1999.......................................     8%
Jan. 1, 2000-Mar. 31, 2000.......................................     8%
Apr. 1, 2000-Jun. 30, 2000.......................................     9%
Jul. 1, 2000-Sep. 30, 2000.......................................     9%
Oct. 1, 2000-Dec. 31, 2000.......................................     9%
Jan. 1, 2001-Mar. 31, 2001.......................................     9%
Apr. 1, 2001-Jun. 30, 2001.......................................     8%
Jul. 1, 2001-Sep. 30, 2001.......................................     7%
Oct. 1, 2001-Dec. 31, 2001.......................................     7%
Jan. 1, 2002-Mar. 31, 2002.......................................     6%
------------------------------------------------------------------------


   Table of Corporate Overpayments Interest Rates From January 1, 1999
                         Through March 31, 2002
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Jan. 1, 1999-Mar. 31, 1999.......................................     6%
Apr. 1, 1999-Jun. 30, 1999.......................................     7%
Jul. 1, 1999-Sep. 30, 1999.......................................     7%
Oct. 1, 1999-Dec. 31, 1999.......................................     7%
Jan. 1, 2000-Mar. 31, 2000.......................................     7%
Apr. 1, 2000-Jun. 30, 2000.......................................     8%
Jul. 1, 2000-Sep. 30, 2000.......................................     8%
Oct. 1, 2000-Dec. 31, 2000.......................................     8%
Jan. 1, 2001-Mar. 31, 2001.......................................     8%
Apr. 1, 2001-Jun. 30, 2001.......................................     7%
Jul. 1, 2001-Sep. 30, 2001.......................................     6%
Oct. 1, 2001-Dec. 31, 2001.......................................     6%
Jan. 1, 2002 -Mar. 31, 2002......................................     5%
------------------------------------------------------------------------

    See Revenue Ruling 2001-63, 2001-52 Internal Revenue Bulletin 
(I.R.B.) 606 (Dec. 26, 2001), 2001 WL 1563674 (IRS RRU). For interest 
in subsequent quarters, interested parties must use subsequent IRS 
Revenue Rulings.
    5. In the First Report and Order, 61 FR 52307 (Oct. 7, 1996), the 
Commission used annual toll revenue as a basis for allocation between 
the carriers of the duty to pay a specified amount per payphone per 
month as interim compensation. The court in Illinois rejected this 
allocation methodology and required that the compensation obligation be 
based on payment for the payphone services received by that particular 
carrier. Consequently, the Commission must establish a nexus between 
the allocation methodology and the number of payphone calls routed to a 
specific carrier. The Commission is still considering the numerous 
proposals for various allocation methodologies received in this 
proceeding, CC Docket No. 96-128. Comments filed in this proceeding 
analyzing various proposed allocation methodologies emphasized the lack 
of a nexus between each proposed allocation methodology and the number 
of payphone calls routed to any specific carrier. For this reason, in 
letters dated December 20, 2001, the Common Carrier Bureau requested 
that Qwest, Verizon, BellSouth and SBC submit, no later than January 
22, 2002, the number of call attempts designated by coding digits of 27 
(dumb payphone) or 70 (smart payphone), routed to an interexchange 
carrier point of presence or handled entirely by the Regional Bell 
Operating Company facilities, for 1997, 1998, and fiscal year 2001 
(beginning October 1, 2000 and ending September 30, 2001). Now that the 
record in this proceeding was supplemented, this specific call tracking 
data should allow the Commission to determine an allocation of the per-
payphone compensation obligations. The Commission realized that this 
would effectively defer the determination of compensation owed for the 
interim and intermediate periods until it establishes a reasonable 
allocation methodology. To avoid further delay, however, in 
establishing some of the preconditions for per-payphone compensation, 
and to provide the industry with some guidance as to how the Commission 
intends to proceed, the Commission decided to adopt this Order at this 
time.
    6. The Commission will determine in a subsequent order the issue of 
offsets of interim and intermediate overpayments as contemplated in the 
Third Report and Order, 64 FR 13701 (Mar. 22, 1999), and additional 
issues remanded in Illinois, such as an allocation methodology for per-
payphone compensation, and the valuation of payphone assets transferred 
by local exchange carriers to a separate affiliate or operating 
division. See Remand Public Notice, 62 FR 43686 (Aug. 15, 1997).

Paperwork Reduction Act Analysis

    7. This Order was analyzed with respect to the Paperwork Reduction 
Act of 1995, Public Law 104-13. It contains no new or modified 
information collections subject to Office of Management and Budget 
review.

[[Page 9612]]

Supplemental Final Regulatory Flexibility Act Analysis

    8. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C. 
603, an Initial Regulatory Flexibility Analysis (IRFA) was provided in 
the Notice of Proposed Rulemaking in CC Docket No. 96-128, 61 FR 31481 
(June 20, 1996). The Commission sought written public comment on the 
proposals in the Notice of Proposed Rulemaking, including comment on 
the IRFA. A Final Regulatory Flexibility Analysis (FRFA) was provided 
in the First Report and Order, 61 FR 52307 (Oct. 7, 1996), the First 
Reconsideration Order, 61 FR 65341 (Dec. 12, 1996), the Second Report 
and Order, 62 FR 58659 (Oct. 30, 1997), and the Third Report and Order, 
64 FR 13701 (Mar. 22, 1999).
    9. This present Supplemental FRFA conforms to the RFA, as amended. 
See 5 U.S.C. 604. The RFA, 5 U.S.C. 601 et seq., has been amended by 
the Contract with America Advancement Act of 1996, Public Law No. 104-
121, 110 Stat. 847 (1996) (CWAA). Title II of the CWAA is the Small 
Business Regulatory Enforcement Fairness Act of 1996 (SBREFA).
    10. To the extent that any statement in this Supplemental FRFA is 
perceived as creating ambiguity with respect to Commission rules or 
statements made in the sections of the Order preceding the Supplemental 
FRFA, the rules and statements set forth in those preceding sections 
are controlling.

Need for, and Objectives of, the Rules

    11. In adopting section 276 in 1996, Public Law No. 104-104, 110 
Stat. 56 (1996) (codified at 47 U.S.C. 276), Congress mandated inter 
alia that the Commission ``establish a per call compensation plan to 
ensure that all payphone service providers are fairly compensated for 
each and every completed intrastate and interstate call using their 
payphone. * * *'' In this Order, the Commission redetermined, pursuant 
to the remand by the U.S. Court of Appeals for the District of Columbia 
Circuit in the Illinois decision, certain aspects of the per-payphone 
compensation that interexchange carriers (IXCs) and local exchange 
carriers (LECs) must pay to payphone service providers (PSPs). 
Illinois, 117 F.3d. at 555.

Summary of Significant Issues Raised by Public Comments in Response 
to the FRFA

    12. The Commission received no comments in direct response to the 
FRFA in the Third Report and Order. The Commission believes that the 
rules as adopted in this Order minimize the burdens of the per-payphone 
compensation scheme to the benefit of all parties, including small 
entities. See ``Steps Taken to Minimize Significant Economic Impact on 
Small Entities, and Significant Alternatives Considered,'' infra.

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

    13. The RFA directs agencies to provide a description of, and an 
estimate of, the number of small entities that may be affected by the 
rules adopted herein, where feasible. 5 U.S.C. 604(a)(3). The RFA 
generally defines ``small entity'' as having the same meaning as the 
term ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' 5 U.S.C. 601(6). In addition, the term 
``small business'' has the same meaning as the term ``small business 
concern'' under the Small Business Act, unless the Commission has 
developed one or more definitions that are appropriate to its 
activities. 5 U.S.C. 601(3) (incorporating by reference the definition 
of ``small business concern'' in 5 U.S.C. 632). 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). 5 U.S.C. 632. Pursuant to 5 U.S.C. 
601(3), 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 in the 
Federal Register.''
    14. The Commission included small incumbent 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.'' 5 U.S.C. 
601(3). 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. See Letter 
from Jere W. Glover, Chief Counsel for Advocacy, SBA, to Chairman 
William E. Kennard, 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 5 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). The Commission therefore included 
small incumbent LECs in this RFA analysis, although the Commission 
emphasizes that this RFA action has no effect on the Commission's 
analyses and determinations in other, non-RFA contexts.
    15. Incumbent Local Exchange Carriers. Neither the Commission nor 
the SBA has developed a specific definition of small providers of 
incumbent local exchange services. The closest applicable definition 
under the SBA rules is for Wired Telecommunications Carriers. Under 
that SBA definition, such a business is small if it has 1,500 or fewer 
employees. 13 CFR 121.201, North American Industry Classification 
System (NAICS) code 513310. According to the most recent Telephone 
Trends Report data, 1,335 incumbent LECs reported that they were 
engaged in the provision of local exchange services. FCC, Common 
Carrier Bureau, Industry Analysis Division, Trends in Telephone Service 
(Aug. 2001) (Telephone Trends Report), Table 5.3. Of these 1,335 
carriers, 1,037 reported that they have 1,500 or fewer employees and 
298 reported that, alone or in combination with affiliates, they have 
more than 1,500 employees. Id. The Commission does not have data 
specifying the number of these carriers that are not independently 
owned and operated, and thus is unable at this time to estimate with 
greater precision the number of incumbent LECs that would qualify as 
small business concerns under the SBA's definition. Consequently, the 
Commission estimates that 1,037 or fewer providers of local exchange 
service are small entitles that may be affected by the rules and 
policies adopted herein.
    16. Competitive Local Exchange Carriers. Neither the Commission nor 
the SBA has developed a specific definition for small providers of 
competitive local exchange services. The closest applicable definition 
under the SBA rules is for Wired Telecommunications Carriers. Under 
that SBA definition, such a business is small if it has 1,500 or fewer 
employees. 13 CFR 121.201, NAICS code 513310. According to the 
Commission's most recent Telephone Trends Report data, 349 companies 
reported that they were engaged in the provision of either competitive 
access provider services or competitive local exchange carrier

[[Page 9613]]

services. Telephone Trends Report, Table 5.3. Of these 349 companies, 
297 reported that they have 1,500 or fewer employees and 52 reported 
that, alone or in combination with affiliates, they have more than 
1,500 employees. Id. The Commission does not have data specifying the 
number of these carriers that are either dominant in their field of 
operations or are not independently owned and operated, and thus is 
unable at this time to estimate with greater precision the number of 
competitive local exchange carriers that would qualify as small 
business concerns under the SBA's definition. Consequently, the 
Commission estimates that 297 or fewer providers of competitive local 
exchange service are small entities that may be affected by the rules.
    17. Competitive Access Providers. Neither the Commission nor the 
SBA has developed a definition of small entities specifically 
applicable to competitive access providers (CAPS). The closest 
applicable definition under the SBA rules is for Wired 
Telecommunications Carriers. Under that SBA definition, such a business 
is small if it has 1,500 or fewer employees. 13 CFR 121.201, NAICS code 
513310. According to the Commission's most recent Telephone Trends 
Report data, 349 CAPs or competitive local exchange carriers and 60 
``Other Local Exchange Carriers'' reported that they were engaged in 
the provision of either competitive access provider services or 
competitive local exchange carrier services. Telephone Trends Report, 
Table 5.3. Of these 349 competitive access providers and competitive 
local exchange carriers, 297 reported that they have 1,500 or fewer 
employees and 52 reported that, alone or in combination with 
affiliates, they have more than 1,500 employees. Id. Of the 60 ``Other 
Local Exchange Carriers,'' 56 reported that they have 1,500 or fewer 
employees and 4 reported that, alone or in combination with affiliates, 
they have more than 1,500 employees. Id. The Commission does not have 
data specifying the number of these companies that are not 
independently owned and operated, and thus is unable at this time to 
estimate with greater precision the number of CAPS or ``Other Local 
Exchange Carriers'' that would qualify as small business concerns under 
the SBA's definition. Consequently, the Commission estimates that there 
are 297 or fewer small entity CAPS and 56 or fewer small entity ``Other 
Local Exchange Carriers'' that may be affected by the rules.
    18. Local Resellers. The SBA has developed a definition for small 
businesses within the category of Telecommunications Resellers. Under 
that SBA definition, such a business is small if it has 1,500 or fewer 
employees. 13 CFR 121.201, NAICS code 513330. According to the 
Commission's most recent Telephone Trends Report data, 87 companies 
reported that they were engaged in the provision of local resale 
services. Telephone Trends Report, Table 5.3. Of these 87 companies, 86 
reported that they have 1,500 or fewer employees and one reported that, 
alone or in combination with affiliates, it had more than 1,500 
employees. Id. The Commission does not have data specifying the number 
of these local resellers that are not independently owned and operated, 
and thus is unable at this time to estimate with greater precision the 
number of local resellers that would qualify as small business concerns 
under the SBA's definition. Consequently, the Commission estimates that 
there are 86 or fewer small business local resellers that may be 
affected by the rules.
    19. Toll Resellers. The SBA has developed a definition for small 
businesses within the category of Telecommunications Resellers. Under 
that SBA definition, such a business is small if it has 1,500 or fewer 
employees. 13 CFR 121.201, NAICS code 513330. According to the 
Commission's most recent Telephone Trends Report data, 454 companies 
reported that they were engaged in the provision of toll resale 
services. Telephone Trends Report, Table 5.3. Of these 454 companies, 
423 reported that they have 1,500 or fewer employees and 31 reported 
that, alone or in combination with affiliates, they have more than 
1,500 employees. Id. The Commission does not have data specifying the 
number of these toll resellers that are not independently owned and 
operated, and thus is 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, the 
Commission estimates that there are 423 or fewer toll resellers that 
may be affected by the rules.
    20. Payphone Service Providers. Neither the Commission nor the SBA 
has developed a definition of small entities specifically applicable to 
payphone service providers (PSPs). The closest applicable definition 
under the SBA rules is for Wired Telecommunications Carriers. Under 
that SBA definition, such a business is small if it has 1,500 or fewer 
employees. 13 CFR 121.201, NAICS code 513310. According to the 
Commission's most recent Telephone Trends Report data, 758 PSPs 
reported that they were engaged in the provision of payphone services. 
Telephone Trends Report, Table 5.3. Of these 758 payphone service 
providers, 755 reported that they have 1,500 or fewer employees and 3 
reported that, alone or in combination with affiliates, they have more 
than 1,500 employees. Id. The Commission does not have data specifying 
the number of these PSPs that are not independently owned and operated, 
and thus is unable at this time to estimate with greater precision the 
number of PSPs that would qualify as small business concerns under the 
SBA's definition. Consequently, the Commission estimates that there are 
755 or fewer PSPs that may be affected by the rules.
    21. 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 Wired Telecommunications Carriers. Under 
that SBA definition, such a business is small if it has 1,500 or fewer 
employees. 13 CFR 121.201, NAICS code 513310. According to the most 
recent Telephone Trends Report data, 204 carriers reported that their 
primary telecommunications service activity was the provision of 
interexchange services. Telephone Trends Report, Table 5.3. Of these 
204 carriers, 163 reported that they have 1,500 or fewer employees and 
41 reported that, alone or in combination with affiliates, they have 
more than 1,500 employees. Id. The Commission does not have data 
specifying the number of these carriers that are not independently 
owned and operated, and thus is 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 163 or fewer small entity 
interexchange carriers that may be affected by the rules.
    22. Operator Service Providers. Neither the Commission nor the SBA 
has developed a definition of small entities specifically applicable to 
operator service providers. The closest applicable definition under the 
SBA rules is for Wired Telecommunications Carriers. Under that SBA 
definition, such a business is small if it has 1,500 or fewer 
employees. 13 CFR 121.201, NAICS code 513310. According to the 
Commission's most recent Telephone Trends Report data, 21 companies 
reported that they were engaged in the provision of operator services.

[[Page 9614]]

Telephone Trends Report, Table 5.3. Of these 21 companies, 20 reported 
that they have 1,500 or fewer employees and one reported that, alone or 
in combination with affiliates, it had more than 1,500 employees. Id. 
The Commission does not have data specifying the number of these 
operator service providers that are not independently owned and 
operated, and thus is 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 20 or fewer small entity 
operator service providers that may be affected by the rules.
    23. Prepaid Calling Card Providers. The SBA has developed a 
definition for small businesses within the category of 
Telecommunications Resellers. Under that SBA definition, such a 
business is small if it has 1,500 or fewer employees. 13 CFR 121.201, 
NAICS code 513330. According to the Commission's most recent Telephone 
Trends Report data, 21 companies reported that they were engaged in the 
provision of prepaid calling cards. Telephone Trends Report, Table 5.3. 
Of these 21 companies, 20 reported that they have 1,500 or fewer 
employees and one reported that, alone or in combination with 
affiliates, it had more than 1,500 employees. Id. The Commission does 
not have data specifying the number of these prepaid calling card 
providers that are not independently owned and operated, and thus is 
unable at this time to estimate with greater precision the number of 
prepaid calling card providers that would qualify as small business 
concerns under the SBA's definition. Consequently, the Commission 
estimates that there are 20 or fewer small business prepaid calling 
card providers that may be affected by the rules.
    24. Satellite Service Carriers. The SBA has developed a definition 
for small businesses within the category of Satellite 
Telecommunications. Under that SBA definition, such a business is small 
if it has $11 million or less in average annual receipts. 13 CFR 
121.201, NAICS code 513340. According to the Commission's most recent 
Telephone Trends Report data, 21 carriers reported that they were 
engaged in the provision of satellite services. Telephone Trends 
Report, Table 5.3. Of these 21 carriers, 16 reported that they have 
1,500 or fewer employees and five reported that, alone or in 
combination with affiliates, they have more than 1,500 employees. Id. 
The Commission does not have data specifying the number of these 
carriers that are not independently owned and operated, and thus is 
unable at this time to estimate with greater precision the number of 
satellite service carriers that would qualify as small business 
concerns under the SBA's definition. Consequently, the Commission 
estimates that there are 16 or fewer small business satellite service 
carriers that may be affected by the rules.
    25. Other Toll Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
``Other Toll Carriers.'' This category includes toll carriers that do 
not fall within the categories of interexchange carriers, operator 
service providers, prepaid calling card providers, satellite service 
carriers, or toll resellers. The closest applicable definition under 
the SBA rules is for Wired Telecommunications Carriers. Under that SBA 
definition, such a business is small if it has 1,500 or fewer 
employees. 13 CFR 121.201, NAICS code 513310. According to the 
Commission's most recent Telephone Trends Report data, 17 carriers 
reported that they were engaged in the provision of ``Other Toll 
Services.'' Telephone Trends Report, Table 5.3. Of these 17 carriers, 
15 reported that they have 1,500 or fewer employees and two reported 
that, alone or in combination with affiliates, they have more than 
1,500 employees. Id. The Commission does not have data specifying the 
number of these ``Other Toll Carriers'' that are not independently 
owned and operated, and thus is unable at this time to estimate with 
greater precision the number of ``Other Toll Carriers'' that would 
qualify as small business concerns under the SBA's definition. 
Consequently, the Commission estimates that there are 15 or fewer small 
business ``Other Toll Carriers'' that may be affected by the rules.
    26. Wireless Service Providers. The SBA has developed a definition 
for small businesses within the two separate categories of Paging or 
Cellular and Other Wireless Telecommunications. Under that SBA 
definition, such a business is small if it has 1,500 or fewer 
employees. 13 CFR 121.201, NAICS code 513322. According to the 
Commission's most recent Telephone Trends Report data, 1,495 companies 
reported that they were engaged in the provision of wireless service. 
Telephone Trends Report, Table 5.3. Of these 1,495 companies, 989 
reported that they have 1,500 or fewer employees and 506 reported that, 
alone or in combination with affiliates, they have more than 1,500 
employees. Id. The Commission does not have data specifying the number 
of these carriers that are not independently owned and operated, and 
thus is unable at this time to estimate with greater precision the 
number of wireless service providers that would qualify as small 
business concerns under the SBA's definition. Consequently, the 
Commission estimates that there are 989 or fewer small wireless service 
providers that may be affected by the rules.
    27. Broadband Personal Communications Service. The broadband 
personal communications service (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. See Amendment of 
Parts 20 and 24 of the Commission's Rules--Broadband PCS Competitive 
Bidding and the Commercial Mobile Radio Service Spectrum Cap, WT Docket 
No. 96-59, Report and Order, 61 Fed. Reg. 33859 (July 1, 1996); see 
also 47 CFR 24.720(b). For Block F, an additional classification for 
``very small business'' was added and is defined as an entity that, 
together with affiliates, has average gross revenues of not more than 
$15 million for the preceding three calendar years. See Amendment of 
Parts 20 and 24 of the Commission's Rules--Broadband PCS Competitive 
Bidding and the Commercial Mobile Radio Service Spectrum Cap, WT Docket 
No. 96-59, Report and Order, 61 Fed. Reg. 33859 (July 1, 1996). These 
regulations defining ``small entity'' in the context of broadband PCS 
auctions have been approved by the SBA. See, e.g., 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). 
No small businesses within the SBA-approved definition bid successfully 
for licenses in Blocks A and B. There were 90 winning bidders that 
qualified as small entities in the Block C auctions. A total of 93 
small and very small business bidders won approximately 40 percent of 
the 1,479 licenses for Blocks D, E, and F. FCC News, Broadband PCS, D, 
E and F Block Auction Closes, No. 71744 (rel. Jan. 14, 1997); see also 
Amendment of the Commission's Rules Regarding Installment Payment 
Financing for Personal Communications Services (PCS) Licensees, WT 
Docket No. 97-82, Second Report and Order, 62 FR 55348 (Oct. 24, 1997). 
Based on this

[[Page 9615]]

information, the Commission concludes that the number of small 
broadband PCS licensees will include the 90 winning C Block bidders and 
the 93 qualifying bidders in the D, E, and F Block auctions, for a 
total of 183 small entity PCS providers as defined by the SBA and the 
Commission's auction rules.
    28. 800 MHz and 900 MHz Specialized Mobile Radio Licensees. The 
Commission awards ``small entity'' and ``very small entity'' bidding 
credits in auctions for Specialized Mobile Radio (SMR) geographic area 
licenses in the 800 MHz and 900 MHz bands to firms that had revenues of 
no more than $15 million in each of the three previous calendar years, 
or that had revenues of no more than $3 million in each of the three 
previous calendar years, respectively. 47 CFR 90.814. In the context of 
both the 800 MHz and 900 MHz SMR service, the definitions of ``small 
entity'' and ``very small entity'' have been approved by the SBA. These 
bidding credits apply to SMR providers in the 800 MHz and 900 MHz bands 
that either hold geographic area licenses or have obtained extended 
implementation authorizations. The Commission does not know how many 
firms provide 800 MHz or 900 MHz geographic area SMR service pursuant 
to extended implementation authorizations, nor how many of these 
providers have annual revenues of no more than $15 million. One firm 
has over $15 million in revenues. The Commission assumes, for its 
purposes here, that all of the remaining existing extended 
implementation authorizations are held by small entities, as that term 
is defined by the SBA. The Commission has held auctions for geographic 
area licenses in the 800 MHz and 900 MHz SMR bands. There were 60 
winning bidders that qualified as small and very small entities in the 
900 MHz auctions. Of the 1,020 licenses won in the 900 MHz auction, 
bidders qualifying as small and very small entities won 263 licenses. 
In the 800 MHz SMR auction, 38 of the 524 licenses won were won by 
small and very small entities. Consequently, the Commission estimates 
that there are 301 or fewer small entity SMR licensees in the 800 MHz 
and 900 MHz bands that may be affected by the rules.
    29. Rural Radiotelephone Service. The Commission has not adopted a 
definition of small entity specific to the Rural Radiotelephone 
Service. The service is defined in 47 CFR 22.99. A significant subset 
of the Rural Radiotelephone Service is the Basic Exchange Telephone 
Radio Systems (BETRS). BETRS is defined in 47 CFR 22.757, 22.759. For 
purposes of this Supplemental FRFA, the Commission uses the SBA's 
definition applicable to wireless companies, i.e., an entity employing 
no more than 1,500 persons. 13 CFR 121.201, NAICS codes 513321, 513322. 
There are approximately 1,000 licensees in the Rural Radiotelephone 
Service, and the Commission estimates that almost all of them qualify 
as small entities under the SBA's definition. Consequently, the 
Commission estimates that there are 1,000 or fewer small entity 
licensees in the Rural Radiotelphone Service that may be affected by 
the rules.
    30. Fixed Microwave Services. Microwave services include common 
carrier, private-operational fixed, and broadcast auxiliary radio 
services. For common carrier fixed microwave services (except 
Multipoint Distribution Service), see 47 CFR part 101 (formerly 47 CFR 
part 21). Persons eligible under parts 80 and 90 of the Commission's 
rules can use Private Operational-Fixed Microwave services. See 47 CFR 
parts 80, 90. Stations in this service are called operational-fixed to 
distinguish them from common carrier and public fixed stations. Only 
the licensee may use the operational-fixed station, and only for 
communications related to the licensee's commercial, industrial, or 
safety operations. Auxiliary Microwave Service is governed by 47 CFR 
part 74. The Auxiliary Microwave Service is available to licensees of 
broadcast stations and to broadcast and cable network entities. 
Broadcast auxiliary microwave stations are used for relaying broadcast 
television signals from the studio to the transmitter, or between two 
points, such as, a main studio and an auxiliary studio. The service 
also includes mobile TV pickups, which relay signals from a remote 
location back to the studio.
    31. At present, there are approximately 22,015 common carrier fixed 
licensees and 61,670 private operational-fixed licensees and broadcast 
auxiliary radio licensees in the microwave services. The Commission has 
not defined a small business specifically with respect to microwave 
services. For purposes of this Supplemental FRFA, the Commission 
utilizes the SBA's definition applicable to wireless companies--i.e., 
an entity with no more than 1,500 persons. 13 CFR 121.201, NAICS codes 
513321, 513322. The Commission does not have data specifying the number 
of these licensees that have more than 1,500 employees, and thus is 
unable at this time to estimate with greater precision the number of 
fixed microwave service licensees that would qualify as small business 
concerns under the SBA's definition. Consequently, the Commission 
estimates that there are 22,015 or fewer small common carrier fixed 
microwave licensees and 61,670 or fewer small private operational-fixed 
microwave licensees and small broadcast auxiliary radio licensees in 
the microwave services that may be affected by the rules. The 
Commission notes, however, that the common carrier microwave fixed 
licensee category includes some large entities.
    32. 39 GHz Licensees. The Commission defined ``small entity'' for 
39 GHz licenses as an entity that has average gross revenues of less 
than $40 million in the three previous calendar years. See Amendment of 
the Commission's Rules Regarding the 37.0-38.6 GHz and 38.6-40.0 GHz 
Bands, ET Docket No. 95-183, Report and Order, 63 FR 6079 (Feb. 6, 
1998). An additional classification for ``very small business'' was 
added and is defined as an entity that, together with affiliates, has 
average gross revenues of not more than $15 million for the preceding 
three calendar years. Id. The SBA approved these regulations defining 
``small entity'' in the context of 39 GHz auctions. See Letter to 
Kathleen O'Brien Ham, Chief, Auctions and Industry Analysis Division, 
Wireless Telecommunications Bureau, FCC, from Aida Alvarez, 
Administrator, SBA (Feb. 4, 1998). The auction of the 2,173 39 GHz 
licenses began on April 12, 2000 and closed on May 8, 2000. The 18 
bidders who claimed small business status won 849 licenses. 
Consequently, the Commission estimates that there are 18 or fewer small 
entities that are 39 GHz licensees that may be affected by the rules.

Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    33. As mandated by the court in the Illinois decision, the 
Commission established in this Order a compensation scheme for inmate 
telephone service during the interim period, if the payphone service 
provider (PSP) was not otherwise compensated for its inmate service. In 
a correctional institution, the PSP presubscribes the inmate telephones 
to a specific interexchange carrier (IXC) pursuant to a contract 
between the PSP and the interexchange carrier. If this previously 
existing contract failed to establish a duty to count and track inmate 
calls for compensation purposes, or if the presubscribed IXC failed to 
retain its records of the number of compensable inmate calls 
originating during the interim period for which compensation now must 
be paid according to this Order, the Commission established a

[[Page 9616]]

waiver procedure that provides the maximum amount of flexibility for 
the presubscribed IXC and the PSP, including small IXCs and small PSPs, 
to propose the number of inmate calls to be compensated. According to 
this waiver provision, the IXC presubscribed during the interim period 
must file a waiver request with the Common Carrier Bureau, pursuant to 
47 CFR 1.3, specifying the number of inmate calls to be compensated for 
the interim period and the specific basis for its number. The specific 
PSP to be compensated is allowed thirty (30) days to file an objection 
with the Common Carrier Bureau, specifying an alternative number of 
inmate calls to be compensated for the interim period and the specific 
basis for its number. With this exception for those situations in which 
the number of compensable inmate calls for the interim period is not 
available, this Order imposes no new reporting, recordkeeping or other 
compliance requirements not previously adopted in this or related 
payphone proceedings.

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

    34. To minimize the economic impact and administrative burden for 
both payors and recipients of payphone compensation, including small 
entities, the Commission required the payment of a flat fee of $33.892 
per payphone per month for access code and subscriber 800 calls 
originating from November 7, 1996 through October 6, 1997, for all 
payphones. For the same reason, the Commission also set compensation at 
a flat fee of $33.892 per payphone per month for access code and 
subscriber 800 calls originating from October 7, 1997 through April 20, 
1999, for those payphones for which compensation is or was not paid on 
a per-call basis. The payment of a prescribed flat fee of $4.2747 per 
payphone per month for 0+ calls originating from November 7, 1996 
through October 6, 1997, to PSPs that were not otherwise compensated 
for 0+ calls during the interim period, minimizes the economic impact 
and administrative burden for both IXCs and PSPs, including small 
entities.
    35. Some of both payors and recipients of payphone compensation are 
small entities. Over time, the Commission learned that steps taken to 
minimize the economic impact on payors of payphone compensation that 
are small entities diminish the compensation received by recipients of 
payphone compensation that are small entities. This decrease in 
compensation contradicts one of the mandates of section 276 that PSPs 
should receive compensation for each and every completed call 
originating at one of their payphones. For example, to ease the burden 
of implementing the per-call payphone compensation scheme on midsize 
and small local exchange carriers, the Common Carrier Bureau granted a 
waiver in 1998 to relieve such entities of the economic burden of 
installing flexible automatic number identification (FlexANI) software 
on their switches. If the PSP uses ``smart'' payphones, the payphone 
calls of small PSPs routed through these particular switches lacking 
FlexANI software cannot be counted, tracked, and compensated on a per-
call basis. As a result, compensation must be paid on a per-payphone, 
not per-call, basis. The Bureau limited such payphone compensation to 
16 calls per month, even if a small payphone service provider's 
payphone calls are more than 200 calls per payphone per month at a 
truck stop, for example, instead of 16 payphone calls per month. Bureau 
Per-call Waiver Order, 63 FR 26497 (May 13, 1998). At a rate of $0.229 
per payphone call as calculated in this Order, compensation would be 
limited to $3.664 per payphone per month starting on November 7, 1996 
through April 20, 1999. At the rate of $0.24 per payphone call as 
calculated in the Third Report and Order, compensation would be limited 
to $3.84 per payphone per month after April 20, 1999. Accordingly, the 
Commission found it necessary in this Order to balance the equities 
between these two groups of small entities.
    36. In another example of the Commission's attempt to ease an 
economic impact, in 1996 the Commission exempted LECs and IXCs with 
annual toll revenues of $100 million or less from the economic and 
administrative burdens of paying per-payphone compensation. The U.S. 
Court of Appeals for the District of Columbia Circuit vacated this 
determination as arbitrary and capricious in the Illinois decision, 
partially because it would deprive recipients of payphone compensation 
of approximately $4 million per month, according to the court. 
Illinois, 117 F.3d at 565. After the Illinois decision, the Commission 
was asked again to exempt carriers with annual toll revenues of $100 
million or less from the economic and administrative burdens of paying 
interim compensation. In the alternative, the Commission was asked to 
exempt carriers with monthly toll revenues of $1 million or less from 
the economic and administrative burdens of paying interim compensation. 
In this Order, the Commission followed the mandates of the court in the 
Illinois decision and decided not to exempt carriers based on the 
amount of toll revenue.

Report to Congress

    37. The Commission will send a copy of this Order, including this 
Supplemental FRFA, in a report to Congress pursuant to the 
Congressional Review Act. 5 U.S.C. 801(a)(1)(A). In addition, the 
Commission will send a copy of this Order, including this Supplemental 
FRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration. See 5 U.S.C. 604(b).

Ordering Clauses

    38. Accordingly, pursuant to the authority contained in 47 U.S.C. 
151, 154, 201-205, 215, 218, 219, 220, 226, 276 and 405, It is ordered 
that the policies, rules and requirements set forth herein Are Adopted.
    39. It is further ordered that the Commission's Consumer 
Information Bureau, Reference Information Center, Shall Send a copy of 
this Fourth Order on Reconsideration and Order on Remand, including the 
Supplemental Final Regulatory Flexibility Analysis, to the Chief 
Counsel for Advocacy of the Small Business Administration.

List of Subjects in 47 CFR Part 64

    Communications common carriers,

    Telecommunications, Telephone. Federal Communications 
Commission.
William F. Caton,
Acting Secretary.

Rules Changes

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR part 64 as follows:

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

    1. The authority citation for part 64 is revised to read as 
follows:

    Authority: 47 U.S.C. 154, 47 U.S.C. 225, 47 U.S.C. 251(e)(1), 47 
U.S.C. 276. 151, 154, 201, 202, 205, 218-220, 254, 276, 302, 303, 
and 337 unless otherwise noted. Interpret or apply sections 201, 
218, 225, 226, 227, 229, 332, 48 Stat. 1070, as amended. 47 U.S.C. 
201-204, 208, 225, 226, 227, 229, 332, 501 and 503 unless otherwise 
noted.


    2. Add Sec. 64.1301 to read as follows:


Sec. 64.1301  Per-payphone compensation.

    (a) Interim access code and subscriber 800 calls. In the absence of 
a negotiated

[[Page 9617]]

agreement to pay a different amount of compensation, the amount of 
default compensation to be paid to payphone service providers for 
payphone access code calls and payphone subscriber 800 calls is $33.892 
per payphone per month, for the period starting on November 7, 1996 and 
ending on October 6, 1997, except that a payphone service provider that 
is affiliated with a local exchange carrier is not eligible to receive 
payphone compensation prior to April 16, 1997 or, in the alternative, 
the first day following both the termination of subsidies and payphone 
reclassification and transfer, whichever date is latest.
    (b) Interim 0+ calls. In the absence of a negotiated agreement to 
pay a different amount of compensation, if a payphone service provider 
was not compensated for 0+ calls originating during the period starting 
on November 7, 1996 and ending on October 6, 1997, an interexchange 
carrier to which the payphone was presubscribed during this same time 
period must compensate the payphone service provider in the default 
amount of $4.2747 per payphone per month, except that a payphone 
service provider that is affiliated with a local exchange carrier is 
not eligible to receive payphone compensation prior to April 16, 1997 
or, in the alternative, the first day following both the termination of 
subsidies and payphone reclassification and transfer, whichever date is 
latest.
    (c) Interim inmate calls. In the absence of a negotiated agreement 
to pay a different amount of compensation, if a payphone service 
provider providing inmate service was not compensated for calls 
originating at an inmate telephone during the period starting on 
November 7, 1996 and ending on October 6, 1997, an interexchange 
carrier to which the inmate telephone was presubscribed during this 
same time period must compensate the payphone service provider 
providing inmate service at the default rate of $0.229 per inmate call 
originating during the same time period, except that a payphone service 
provider that is affiliated with a local exchange carrier is not 
eligible to receive payphone compensation prior to April 16, 1997 or, 
in the alternative, the first day following both the termination of 
subsidies and payphone reclassification and transfer, whichever date is 
latest.
    (d) Intermediate access code and subscriber 800 calls. In the 
absence of a negotiated agreement to pay a different amount of 
compensation, the amount of default compensation to be paid to payphone 
service providers for payphone access code calls and payphone 
subscriber 800 calls is $33.892 per payphone per month, for any 
payphone for any month in which compensation was not paid on a per-call 
basis, for the period starting on October 7, 1997 and ending on April 
20, 1999.
    (e) Post-intermediate access code and subscriber 800 calls. In the 
absence of a negotiated agreement to pay a different amount of 
compensation, the amount of default compensation to be paid to payphone 
service providers for payphone access code calls and payphone 
subscriber 800 calls is $33.892 per payphone per month, for any 
payphone for any month in which compensation was not paid on a per-call 
basis, on or after April 21, 1999.

[FR Doc. 02-4979 Filed 3-1-02; 8:45 am]
BILLING CODE 6712-01-P