[Federal Register Volume 67, Number 250 (Monday, December 30, 2002)]
[Proposed Rules]
[Pages 79543-79549]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32926]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket Nos. 96-45, 98-171, 90-571, 92-237, 99-200, 95-116, 98-170; 
FCC 02-329]


Federal-State Joint Board on Universal Service

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission seeks comment on specific 
aspects of three connection-based proposals to further refine the 
record in its proceeding to revisit its universal service contribution 
methodology.

DATES: Comments are due on or before January 29, 2003. Reply comments 
are due on or before February 28, 2003. Written comments by the public 
on the proposed information collections are due on or before January 
14, 2003. Written comments must be submitted by the Office of 
Management and Budget (OMB) on the proposed information collections on 
or before February 28, 2003.

ADDRESSES: All filings must be sent to the Commission's Secretary, 
Marlene Dortch, Office of the Secretary, Federal Communications 
Commission, 445 12th Street, SW., Washington, DC 20554. See 
SUPPLEMENTARY INFORMATION for filing instructions.

FOR FURTHER INFORMATION CONTACT: Diane Law Hsu, Acting Deputy Chief, 
Wireline Competition Bureau, Telecommunications Access Policy Division, 
(202) 418-7400.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second 
Further Notice of Proposed Rulemaking (Second Further NPRM) in CC 
Docket Nos. 96-45, 98-171, 90-571, 92-237, 99-200, 95-116, 98-170; FCC 
02-329 released on December 13, 2002. The full text of this document is 
available for public inspection during regular business hours in the 
FCC Reference Center, Room CY-A257, 445 12th Street, SW., Washington, 
DC 20554. This Second Further NPRM contains proposed information 
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA). It 
has been submitted to the Office of Management and Budget (OMB) for 
review under the PRA. OMB, the general public, and other Federal 
agencies are invited to comment on the proposed information collections 
contained in this proceeding.

Paperwork Reduction Act

    The Second Further NPRM contains a proposed information collection. 
The Commission, as part of its continuing effort to reduce paperwork 
burdens, invites the general public and OMB to comment on the 
information collection(s) contained in this Second Further NPRM, as 
required by the PRA, Pub. L. 104-13. Public and agency comments on the 
proposed information collections are due on or before January 14, 2003. 
Written comments must be submitted by the Office of Management

[[Page 79544]]

and Budget (OMB) on the proposed and/or modified information 
collections on or before February 28, 2003. Comments should address: 
(a) Whether the proposed collection of information is necessary for the 
proper performance of the functions of the Commission, including 
whether the information shall have practical utility; (b) the accuracy 
of the Commission's burden estimates; (c) ways to enhance the quality, 
utility, and clarity of the information collected; and (d) ways to 
minimize the burden of the collection of information on the 
respondents, including the use of automated collection techniques or 
other forms of information technology.
    OMB Control Number: 3060-1009.
    Title: Telecommunications Reporting Worksheet, CC Docket No. 96-45.
    Form No.: FCC Form 499 (499-A, 499-Q, 499-M).
    Type of Review: Proposed Revised Collection.
    Respondents: Business or other for-profit; Not for Profit 
Institutions.

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                                                                  Number of      Est. time  per   Total  annual
                            Title                                respondents        response          burden
----------------------------------------------------------------------------------------------------------------
1. Connections Based Methodology.............................           5,500         11.5 \1\          427,936
Total Annual Burden..........................................  ...............  ...............         427,936
Cost to Respondents..........................................              $0
--------------------------------------------------------------
2. Splitting Connection-Based Methodology....................           5,500         11.5 \2\          867,472
Total Annual Burden..........................................  ...............  ...............         867,472
Cost to Respondents..........................................              $0
--------------------------------------------------------------
3. Telephone Number-Based Assessments........................           5,500         11.5 \3\          461,290
Total Annual Burden..........................................  ...............  ...............         461,290
Cost to Respondents..........................................  ...............  ...............              $0
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\1\ 11.5 hrs for 5,500 respondents for the annual filing. 13.3 hrs for 2,285 respondents for each monthly
  filing, if adopted.
\2\ 11.5 hrs for 5,500 respondents for the annual filing. 28.1 hrs for 2,385 respondents for each monthly
  filing, if adopted.
\3\ 11.5 hrs for 5,500 respondents for the annual filing. 10.7 hrs for 3,100 respondents for each monthly
  filing, if adopted.

    Needs and Uses: The Commission has issued a Second Further Notice 
of Proposed Rulemaking which seeks comment on whether to return a 
revenue-based system and specific aspects of three connection-based 
proposals in the record. First, the Commission seeks comment on a 
contribution methodology that would impose a minimum contribution 
obligation on all interstate telecommunications carriers, and a flat 
charge for each end-user connection, depending on the nature or 
capacity of the connection. Next, the Commission seeks comment on a 
proposal to assess all connections based purely on capacity. Finally, 
the Commission seeks comment on a proposal to assess providers of 
switched connections based on their working telephone numbers. The 
Commission is also seeking comment on whether to use a modified FCC 
Form 499-M, the Telecommunications Reporting Worksheet (OMB 3060-1009), 
to serve as the appropriate means for the collection of contribution 
information. The Universal Service Company (Administrator) would use 
information filed on connections and capacity or revenues to determine 
the universal service contribution factor. Section 254 of the Act 
requires carriers providing interstate telecommunications services to 
contribute to universal service. Currently, respondents file their end-
user telecommunications revenues on a quarterly basis in FCC Form 499-
Q, and on an annual basis in FCC Form 499-A.

Synopsis of Second Further Notice of Proposed Rulemaking

I. Introduction

    1. In the Second Further NPRM, we seek to further refine the record 
in the contribution methodology proceeding. Although the interim 
measures we adopt in the companion Order will improve the current 
contribution methodology, they do not address our concerns regarding 
the long-term viability of any revenue-based system. In the First 
Further NPRM, 67 FR 1125, March 13, 2002, we observed that interstate 
telecommunications revenues are becoming increasingly difficult to 
identify as customers migrate to bundled packages of interstate and 
intrastate telecommunications and non-telecommunications products and 
services. This has increased opportunities to mischaracterize revenues 
that should be counted for contribution purposes. Such 
mischaracterization may result in decreases in the assessable revenue 
base. Increased competition also is placing downward pressure on 
interstate rates and revenues, which also contributes to the decline in 
the contribution base. For example, traditional long-distance providers 
increasingly are entering local markets at the same time that 
competitive and incumbent local exchange carriers are increasingly 
providing long-distance services. Customers also are migrating to 
mobile wireless and Internet-based services. As we recently noted, 
these changes have led to fluctuations in the contribution base and 
rising contribution obligations.
    2. The Commission initiated this proceeding to consider 
alternatives or modifications to a revenue-based system. An analysis of 
the record reveals interest in a connection-based methodology that 
would assess carriers based on their provision of connectivity to 
interstate networks, regardless of how many minutes of use or revenues 
are derived from a connection. A substantial number of parties across 
various industry segments now support adoption of a connection-based 
assessment methodology. In addition, four out of five state members of 
the Federal-State Joint Board on Universal Service (Joint Board) 
recommend adoption of a connection-based system for calculating 
universal service contributions, while the fifth member proposes 
assessing contributions on a combination of connections, capacity, and 
terminating minutes of use.
    3. Although many parties agree that a connection-based contribution 
methodology will best ensure the long-term viability of the 
Commission's universal service mechanisms as the telecommunications 
marketplace continues to evolve, they differ on how best to implement 
such a mechanism. Key areas of disagreement include whether to make the 
provider of the end-user connection (most often the local exchange 
carrier) solely

[[Page 79545]]

responsible for contributions or whether that responsibility should be 
shared between the access (e.g., local exchange carrier) and transport 
(e.g., interexchange carrier) providers. Commenters also disagree on 
how best to calculate assessments for higher-capacity connections. 
Moreover, parties have expressed concern that they cannot estimate 
assessments for multi-line business connections without access to more 
reliable data on the number and capacity of non-switched (e.g., special 
access or private line) connections. We conclude that it is appropriate 
to further study long-term reforms of the contribution methodology.

II. Overview

    4. In this Second Further NPRM, we seek to further refine the 
record in this proceeding. We are hopeful that we will adopt additional 
modifications to our contribution methodology to ensure the continued 
viability of universal service as the marketplace continues to develop.
    5. First, we ask commenters to discuss whether the changes to the 
revenue-based methodology adopted herein are sufficient to ensure the 
long-term viability of universal service as the telecommunications 
marketplace evolves. Should any additional modifications to the 
revenue-based system be made? For example, we seek comment on whether 
bundling of local and long distance services raises any unique problems 
for wireline carriers in identifying interstate telecommunications 
revenues and how such problems should be addressed.
    6. In addition, although we have increased the mobile wireless safe 
harbor to 28.5 percent, we note that some commenters assert that, using 
certain methodologies, mobile wireless carriers are capable of 
determining their actual interstate end-user telecommunications 
revenues. If a revenue-based system is retained, we seek comment on 
whether we should abolish the safe harbor for mobile wireless carriers 
and, if so, how such carriers should determine their actual interstate 
end-user telecommunications revenues. We specifically seek comment on 
whether minutes of use is an appropriate proxy for determining 
interstate revenues for mobile wireless providers. We also request 
comment on whether the originating cell site and the terminating area 
code or NPA of a call reasonably approximates the jurisdictional nature 
of traffic for reporting purposes. In addition, we seek comment on 
whether it would be appropriate to include both outgoing and incoming 
calls in mobile wireless provider traffic studies and whether and how 
to include roaming and international minutes in such studies. We seek 
comment on burdens presented by proposed methodologies to determine 
interstate revenues and particularly invite comment from smaller mobile 
wireless providers on whether they face unique difficulties in 
identifying interstate telecommunications revenues. We also ask 
commenters to discuss whether other CMRS carriers, such as paging and 
analog SMR carriers, are able to determine their actual interstate end-
user telecommunications revenues and whether those safe harbors should 
also be abolished. We seek comment on how eliminating the safe harbors 
would affect wireless carriers whose contributions to universal service 
are de minimis.
    7. Although the actions taken today will improve the operation of 
our revenue-based methodology in the near term, we remain concerned 
that any contribution system based on interstate telecommunications 
revenues will be dependent on the ability of contributors to 
distinguish between interstate and intrastate telecommunications and 
non-telecommunications revenues. Several commenters have argued that a 
connection-based mechanism may be the best alternative to ensure the 
long-term viability of the Commission's universal service mechanisms as 
the telecommunications marketplace continues to evolve. We, therefore, 
seek additional comment on three specific connection-based proposals.
    8. In the First Further NPRM, we sought comment on a specific 
proposal to base contributions on the number and capacity of 
connections a contributor provides to interstate networks, rather than 
revenues. Since that time, a number of parties across various industry 
segments, as well as four out of five state members of the Joint Board, 
have supported adoption of a connection-based assessment methodology 
and have proposed their own variations of connection-based proposals. 
Proponents of a connection-based methodology argue that such a system 
would provide a sufficient and predictable funding source for universal 
service in a telecommunications marketplace increasingly characterized 
by new and innovative bundles of intrastate and interstate 
telecommunications and non-telecommunications products and services, 
and increased competition between wireline and wireless technology 
platforms. These commenters point out that the number of connections 
historically has been more stable than end-user interstate 
telecommunications revenues. Commenters also point out that connection-
based assessments would eliminate the need for contributors to 
distinguish between interstate and intrastate revenues, or revenues 
from telecommunications and non-telecommunications services, as is 
required under the current methodology. These commenters therefore 
argue that connection-based assessments would better accommodate new 
services and technologies as they develop. Such a framework also may be 
more economically efficient than the current revenue-based methodology, 
because connection-based assessments are less likely to create 
inefficient incentives for end users to curtail their usage of 
interstate telecommunications networks.
    9. The proponents of certain connection-based proposals argue that 
their proposals would be consistent with the requirement of section 
254(d) that every telecommunications carrier that provides interstate 
telecommunications services contribute to the Commission's universal 
service mechanisms on an equitable and nondiscriminatory basis. 
However, several other parties have expressed concerns that such 
proposals in the record would be inconsistent with this statutory 
mandate. We specifically take note of arguments that specific 
connection-based proposals in the record may be inconsistent with 
section 254(d)'s requirement that every provider of interstate 
telecommunications service contribute on an equitable basis.
    10. We conclude it is appropriate to further develop the record on 
aspects of certain proposals to assess universal service contributions 
on the number and capacity of connections. We also conclude it is 
appropriate to continue refining our analysis of the potential impacts 
on contributors, and, ultimately, consumers, of the various proposals. 
In this Second Further NPRM, we seek comment on specific measures the 
Commission could take to ensure that a connection-based contribution 
methodology would be consistent with the Act. First, we seek comment on 
a contribution methodology that would impose a minimum contribution 
obligation on all interstate telecommunications carriers, and a flat 
charge for each end-user connection, depending on the nature or 
capacity of the connection. Next, we seek comment on a proposal to 
assess all connections based purely on capacity (without regard to 
distinctions between residential/single-line business and multi-line 
business connections),

[[Page 79546]]

and share contribution obligations for each switched end-user 
connection between access and transport providers. Finally, we seek 
comment on a proposal to assess providers of switched connections based 
on their number of working telephone numbers.
    11. We invite commenters to discuss potential advantages and 
disadvantages of each approach, and whether each satisfies the 
requirements of section 254 that ``[e]very telecommunications carrier 
that provides interstate telecommunications services * * * contribute, 
on an equitable and nondiscriminatory basis, to the specific, 
predictable, and sufficient [universal service support] mechanisms.'' 
We urge commenters to submit data and analysis on assessment levels 
under each approach. We further request comment on the relative 
contribution obligations of different industry segments under each 
approach. We ask commenters to address the potential impacts of the 
different methodologies on consumers, both generally and also on 
residential consumers that place no long-distance calls. What would be 
the impact of each of the proposals on the average residential customer 
and on residential customers generally? Would the typical residential 
customer pay more, less, or approximately the same amount of pass-
through charges to different carriers than they do today?
    12. Commenters should also describe and estimate the costs 
associated with the implementation of each proposal, including the cost 
of any necessary billing system changes. We also invite comment on the 
reporting obligations associated with each of the proposals discussed 
below and ask that commenters quantify, to the extent possible, the 
burdens associated with each proposal and compare the relative burdens. 
We seek comment on whether it would be appropriate to require 
contributors to report their number and capacity of end-user 
connections and/or numbers on a monthly basis, or whether less frequent 
reporting would be adequate. We particularly invite comment on the 
potential administrative burdens associated with each of these 
proposals from entities that are ``small business concerns'' under the 
Small Business Act. We also seek comment on whether to continue basing 
contributions to the Telecommunications Relay Service, Numbering 
Administration, Local Number Portability and wireline regulatory fees 
programs on annual revenue data, or whether contributions to these 
mechanisms also should be based on connections and/or numbers.

III. Procedural Matters

A. Initial Regulatory Flexibility Act Analysis
    13. As required by the Regulatory Flexibility Act (RFA), the 
Commission has prepared this Initial Regulatory Flexibility Analysis 
(IRFA) on the possible significant economic impact on small entities of 
policies and rules proposed in this Second Further Notice of Proposed 
Rulemaking. 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 NPRM provided 
below.
1. Need for and Objectives of the Proposed Rules
    14. The assessment and recovery of universal service contributions 
are governed by the statutory framework established by Congress in the 
Act. Section 254(b) instructs the Commission to establish universal 
service support mechanisms with the goal of ensuring the delivery of 
affordable telecommunications services to all Americans, including 
consumers in high-cost areas, low-income consumers, eligible schools 
and libraries, and rural health care providers. Section 254(d) of the 
Act states that ``[e]very telecommunications carrier that provides 
interstate telecommunications services shall contribute, on an 
equitable and nondiscriminatory basis, to the specific, predictable, 
and sufficient mechanisms established by the Commission to preserve and 
advance universal service.''
    15. Consistent with section 254 of the Act and as noted in the 
companion Order, we take interim measures to maintain the viability of 
universal service in the near term--a fundamental goal of this 
Commission--while we consider further long-term reforms. As discussed 
in further detail in the companion Order, although the interim measures 
we adopt today will improve the current contribution methodology, they 
do not address our concerns regarding the long-term viability of any 
revenue-based system. We therefore conclude that it is appropriate to 
further study long-term reforms of the contribution methodology.
    16. Therefore, in this Second Further NPRM, we seek comment on 
specific aspects of three connection-based proposals in the record. 
First, we ask for comment on a proposed contribution methodology that 
would impose a minimum contribution obligation on all interstate 
telecommunications carriers and flat charge for each end-user 
connection depending on the nature or capacity of the connection. Next, 
we seek comment on a proposal to assess all connections based purely on 
capacity. Under this proposal, contribution obligations for each 
switched end-user connection would be shared between access and 
transport providers. Finally, we seek comment on a proposal to assess 
providers of switched connections based on their working telephone 
numbers.
2. Legal Basis
    17. The legal basis as proposed for this Second Further NPRM is 
contained in sections 4(i), 4(j), 201-205, 254, and 403 of the 
Communications Act of 1934, as amended.
3. Description and Estimate of the Number of Small Entities To Which 
the Proposed Rules Will Apply
    18. The RFA directs agencies to provide a description of, and, 
where feasible, an estimate of the number of small entities that may be 
affected by the proposals herein. The RFA generally defines the term 
``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' A small organization is generally ``any not-for-profit 
enterprise which is independently owned and operated and is not 
dominant in its field.'' Nationwide, as of 1992, there were 
approximately 275,801 small organizations. ``Small governmental 
jurisdiction'' generally means ``governments of cities, counties, 
towns, townships, villages, school districts, or special districts, 
with a population of less than 50,000.'' As of 1992, there were 
approximately 85,006 governmental entities, total, in the United 
States. This number includes 38,978 cities, counties, and towns; of 
these, 37,566, or 96%, have populations of fewer than 50,000. The 
Census Bureau estimates that this ratio is approximately accurate for 
all governmental entities. Thus, of the 85,006 governmental entities, 
we estimate that 81,600 (96%) are small entities. 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. 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).
    19. We have included small incumbent local exchange carriers in

[[Page 79547]]

this present 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.'' 
The SBA's Office of Advocacy contends that, for RFA purposes, small 
incumbent local exchange carriers are not dominant in their field of 
operation because any such dominance is not ``national'' in scope. We 
have therefore included small incumbent local exchange carriers in this 
RFA analysis, although we emphasize that this RFA action has no effect 
on Commission analyses and determinations in other, non-RFA contexts.
    20. Wireline Carriers and Service Providers (Wired 
Telecommunications Carriers). The SBA has developed a small business 
size standard for Wired Telecommunications Carriers, which consists of 
all such companies having 1500 or fewer employees. According to Census 
Bureau data for 1997, there were 2,225 firms in this category, total, 
that operated for the entire year. Of this total, 2,201 firms had 
employment of 999 or fewer employees, and an additional 24 firms had 
employment of 1,000 employees or more. Thus, under this size standard, 
the great majority of firms can be considered small.
    21. Local Exchange Carriers, Interexchange Carriers, Competitive 
Access Providers, Operator Service Providers, Payphone Providers, and 
Resellers. Neither the Commission nor SBA has developed a definition 
particular to small local exchange carriers (LECs), interexchange 
carriers (IXCs), competitive access providers (CAPs), operator service 
providers (OSPs), payphone providers or resellers. The closest 
applicable definition for these carrier-types under SBA rules is for 
Wired Telecommunications Carriers. Under that SBA definition, such a 
business is small if it has 1,500 or fewer employees. According to our 
most recent data, there are 1,329 incumbent LECs, 532 CAPs, 229 IXCs, 
22 OSPs, 936 payphone providers and 710 resellers. Of these, an 
estimated 1,024 incumbent LECs, 411 CAPs, 181 IXCs, 20 OSPs, 933 
payphone providers, and 669 resellers reported that they have 1,500 or 
fewer employees; 305 incumbent LECs, 121 CAPs, 48 IXCs, 2 OSPs, 3 
payphone providers, and 41 resellers reported that, alone or in 
combination with affiliates, they have more than 1,500 employees. We do 
not have data specifying the number of these carriers that are not 
independently owned and operated, and therefore we are unable to 
estimate with greater precision the number of these carriers that would 
qualify as small business concerns under SBA's definition. 
Consequently, most incumbent LECs, IXCs, CAPs, OSPs, payphone providers 
and resellers are small entities that may be affected by the proposed 
rules discussed in this Order.
    22. Wireless Service Providers. The SBA has size standards for 
wireless small businesses within the two separate Economic Census 
categories of Paging and of Cellular and Other Wireless 
Telecommunications. For both of those categories, the SBA considers a 
business to be small if it has 1,500 or fewer employees. According to 
the most recent Trends in Telephone Report data, 1,761 companies 
reported that they were engaged in the provision of wireless service. 
Of these 1,761 companies, an estimated 1,175 reported that they have 
1,500 or fewer employees and 586 reported that, alone or in combination 
with affiliates, they have more than 1,500 employees. Consequently, we 
estimate that most wireless service providers are small entities that 
may be affected by the proposed rules discussed herein.
    23. Broadband Personal Communications Service (PCS). The broadband 
PCS spectrum is divided into six frequency 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 $40 million or less in the three previous calendar years. 
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. These standards defining ``small 
entity'' in the context of broadband PCS auctions have been approved by 
the SBA. 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. On March 23, 
1999, the Commission re-auctioned 347 C, D, E, and F Block licenses; 
there were 48 small business winning bidders. On January 26, 2001, the 
Commission completed the auction of 422 C and F Broadband PCS licenses 
in Auction No. 35. Of the 35 winning bidders in this auction, 29 
qualified as ``small'' or ``very small businesses.'' Based on this 
information, we conclude that the number of small broadband PCS 
licensees will include the 90 winning C Block bidders, the 93 
qualifying bidders in the D, E, and F blocks, the 48 winning bidders in 
the 1999 re-auction, and the 29 winning bidders in the 2001 re-auction, 
for a total of 260 small entity broadband PCS providers, as defined by 
the SBA small business size standards and the Commission's auction 
rules. Consequently, we estimate that 260 broadband PCS providers are 
small entities that may be affected by the proposed rules discussed 
herein.
    24. Narrowband PCS. To date, two auctions of narrowband PCs 
licenses have been conducted. Through these auctions, the Commission 
has awarded a total of 41 licenses, out of which 11 were obtained by 
small businesses. For purposes of the two auctions that have already 
been held, small businesses were defined as entities with average gross 
revenues for the prior three calendar years of $40 million or less. To 
ensure meaningful participation of small business entities in the 
auctions, the Commission adopted a two-tiered definition of small 
businesses in the Narrowband PCS Second Report and Order, 65 FR 35843, 
June 6, 2000. A small business is an entity that, together with 
affiliates and controlling interests, has average gross revenues for 
the three preceding years of not more than $40 million. A very small 
business is an entity that, together with affiliates and controlling 
interests, has average gross revenues for the three preceding years of 
not more than $15 million. These definitions have been approved by the 
SBA. In the future, the Commission will auction 459 licenses to serve 
MTAs and 408 response channel licenses. There is also one megahertz of 
narrowband PCS spectrum that has been held in reserve and that the 
Commission has not yet decided to release for licensing. The Commission 
cannot predict accurately the number of licenses that will be awarded 
to small entities in future auctions. However, four of the 16 winning 
bidders in the two previous narrowband PCS auctions were small 
businesses, as that term was defined under the Commission's Rules. The 
Commission assumes, for purposes of this FRFA, that a large portion of 
the remaining narrowband PCS licenses will be awarded to small 
entities. The Commission also assumes that at least some small 
businesses will acquire narrowband PCS licenses by means of the 
Commission's partitioning and disaggregation rules.
    25. Specialized Mobile Radio (SMR). The Commission awards ``small 
entity'' and ``very small entity'' bidding credits in auctions for 
Specialized Mobile Radio (SMR) geographic area licenses in

[[Page 79548]]

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. 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. 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 
no more than $15 million. One firm has over $15 million in revenues. We 
assume, for our 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, we estimate that 
there are 301 or fewer small entity SMR licensees in the 800 MHz and 
900 MHz bands that may be affected by the proposed rules discussed 
herein.
    26. Rural Radiotelephone Service. The Commission has not adopted a 
definition of small entity specific to the Rural Radiotelephone 
Service. A significant subset of the Rural Radiotelephone Service is 
the Basic Exchange Telephone Radio Systems (BETRS). For purposes of 
this FRFA, we will use the SBA's size standard applicable to wireless 
service providers, supra--an entity employing no more than 1,500 
persons. 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 size standard. 
Consequently, we estimate that there are 1,000 or fewer small entity 
licensees in the Rural Radiotelphone Service that may be affected by 
the proposed rules discussed herein.
    27. Air-Ground Radiotelephone Service. The Commission has not 
adopted a definition of small entity specific to the Air-Ground 
Radiotelephone Service. For purposes of this FRFA, we will use the 
SBA's size standard applicable to wireless service providers, supra--an 
entity employing no more than 1,500 persons. There are approximately 
100 licensees in the Air-Ground Radiotelephone Service, and we estimate 
that almost all of them qualify as small under the SBA definition.
4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    28. Should the Commission decide that fundamental reform of the 
existing contribution methodology is needed, the associated rule 
changes potentially could modify the reporting and recordkeeping 
requirements of telecommunications service providers regulated under 
the Communications Act. Under a connection-based mechanism, we 
potentially could require telecommunications service providers to file 
additional and/or different monthly or quarterly reports. Any such 
reporting requirements potentially could require the use of 
professional skills, including legal and accounting expertise. Without 
more data, we cannot accurately estimate the cost of compliance by 
small telecommunications service providers. In this IFRA, we therefore 
seek comment on the frequency with which carriers should submit reports 
to USAC, the types of burdens carriers will face in periodically 
submitting reports to USAC, and whether the costs of such reporting are 
outweighed by the potential benefits of the possible reforms. Entities, 
especially small businesses and small entities, more generally, are 
encouraged to quantify the costs and benefits of the reporting 
requirement proposals.
5. Steps Taken to Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    29. 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.
    30. The Second Further NPRM seeks comment on a number of 
connection-based alternatives to modify the existing contribution 
methodology system. Although the proponents of specific connection-
based proposals argue that they would be consistent with the 
requirements of section 254(d) of the Act that every telecommunications 
carrier that provides interstate telecommunications services contribute 
to the Commission's universal service mechanisms on a equitable and 
nondiscriminatory basis, several other parties have expressed concerns 
that the connection-based proposals in the record would be inconsistent 
with the statutory mandate. We specifically take note of those 
commenters that argue that the connection-based proposals in the record 
would result in inequitable contributions.
    31. We therefore believe it is appropriate to further develop the 
record on aspects of certain proposals to assess universal service 
contributions at least in part on the number and capacity of 
connections. We also believe it is appropriate to continue refining our 
analysis of the potential impacts on consumers and contributors, 
including small entities, of adopting such a methodology. In this 
Second Further NPRM, we seek comment on specific measures the 
Commission could take to ensure that a connection-based contribution 
methodology would be consistent with these statutory mandates. The 
Commission will also consider additional significant alternatives 
developed in the record.
    32. Wherever possible, the Second Further NPRM seeks comment on how 
to reduce the administrative burden and cost of compliance for small 
telecommunications service providers. For example, we seek comment on 
the operation of a de minimis exemption under the various connections-
based proposals. We also seek comment on the appropriate frequency and 
content of reporting under a connection-based methodology. We 
specifically seek comment from contributors that are small entities 
under the Small Business Act.
6. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules
    33. None.
B. Initial Paperwork Reduction Act of 1995 Analysis
    34. The Second Further NPRM contains a proposed information 
collection. As part of a continuing effort to reduce paperwork burdens, 
we invite the general public and the Office of

[[Page 79549]]

Management and Budget (OMB) to take this opportunity to comment on the 
information collections contained in this Second Further NPRM, as 
required by the Paperwork Reduction Act of 1995, Pub. L. 104-13. Public 
and agency comments are due January 14, 2003; OMB comments are due 
February 28, 2003. Comments should address: (a) Whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the Commission, including whether the information 
shall have practical utility; (b) the accuracy of the Commission's 
burden estimates; (c) ways to enhance the quality, utility, and clarity 
of the information collected; and (d) ways to minimize the burden of 
the collection of information on the respondents, including the use of 
automated collection techniques or other forms of information 
technology.
C. Comment Filing Procedures
    35. Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's 
rules, interested parties may file comments January 29, 2003. Reply 
comments are due on or before February 28, 2003. Comments may be filed 
using the Commission's Electronic Comment Filing System (ECFS) or by 
filing paper copies.
    36. Comments filed through the ECFS can be sent as an electronic 
file via the Internet to <http://www.fcc.gov/e-file/ecfs.html. Generally, only one copy of an electronic 
submission must be filed. If multiple docket or rulemaking numbers 
appear in the caption of this proceeding, however, commenters must 
transmit one electronic copy of the comments to each docket or 
rulemaking number referenced in the caption. In completing the 
transmittal screen, commenters should include their full name, U.S. 
Postal Service mailing address, and the applicable docket or rulemaking 
number. Parties may also submit an electronic comment by Internet e-
mail. To get filing instructions for e-mail comments, commenters should 
send an e-mail to [email protected], and should include the following words 
in the body of the message, ``get form .'' A sample form and directions will be sent in 
reply.
    37. Parties who choose to file by paper must file an original and 
four copies of each filing. If more than one docket or rulemaking 
number appears in the caption of this proceeding, commenters must 
submit two additional copies for each additional docket or rulemaking 
number. Filings can be sent by hand or messenger delivery, by 
commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail (although we continue to experience delays in 
receiving U.S. Postal Service mail). The Commission's contractor, 
Vistronix, Inc., will receive hand-delivered or messenger-delivered 
paper filings for the Commission's Secretary at 236 Massachusetts 
Avenue, NE., Suite 110, Washington, DC 20002. The filing hours at this 
location are 8 a.m. to 7 p.m. All hand deliveries must be held together 
with rubber bands or fasteners. Any envelopes must be disposed of 
before entering the building. Commercial overnight mail (other than 
U.S. Postal Service Express Mail and Priority Mail) must be sent to 
9300 East Hampton Drive, Capitol Heights, MD 20743. U.S. Postal Service 
first-class mail, Express Mail, and Priority Mail should be addressed 
to 445 12th Street, SW., Washington, DC 20554. All filings must be 
addressed to the Commission's Secretary, Marlene H. Dortch, Office of 
the Secretary, Federal Communications Commission. In addition to filing 
comments with the Secretary, a copy of any comments on the information 
collection(s) contained herein should be submitted to Judith B. Herman, 
Federal Communications Commission, Room 1-C804, 445 12th Street, SW., 
Washington, DC 20554, or via the Internet to [email protected] and to Kim 
A. Johnson, OMB Desk Officer, 10236 NEOB, 725 17th Street, NW., 
Washington, DC 20503, or via the Internet to [email protected].
    38. Parties also must send three paper copies of their filing to 
Sheryl Todd, Telecommunications Access Policy Division, Wireline 
Competition Bureau, Federal Communications Commission, 445 12th Street 
SW., Room 5-B540, Washington, DC 20554. In addition, commenters must 
send diskette copies to the Commission's copy contractor, Qualex 
International, Portals II, 445 12th Street, SW., Room CY-B402, 
Washington, DC 20054.
D. Ex Parte Presentations
    39. This is a permit but disclose rulemaking proceeding. Ex parte 
presentations are permitted, except during the Sunshine Agenda period, 
provided that they are disclosed as provided in the Commission's rules.

IV. Ordering Clauses

    40. It is further ordered that, pursuant to the authority contained 
in sections 4(i), 4(j), 201-205, 254, and 403 of the Communications Act 
of 1934, as amended, this Second Further Notice of Proposed Rulemaking 
is adopted.
    41. The Commission's Consumer and Governmental Affairs Bureau, 
Reference Information Center, shall send a copy of this Second Further 
Notice of Proposed Rulemaking, including the Initial Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

List of Subjects in 47 CFR Part 54

    Reporting and recordkeeping requirements, Telecommunications, 
Telephone.

Federal Communications Commission.

William F. Caton,
Deputy Secretary.
[FR Doc. 02-32926 Filed 12-27-02; 8:45 am]
BILLING CODE 6712-01-P