[Federal Register Volume 68, Number 169 (Tuesday, September 2, 2003)]
[Proposed Rules]
[Pages 52307-52312]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-22194]



  Federal Register / Vol. 68, No. 169 / Tuesday, September 2, 2003 / 
Proposed Rules  

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 51

[CC Docket No. 01-338; CC Docket No. 96-98; CC Docket No. 98-147; FCC 
03-36]


Review of the Section 251 Unbundling Obligations of Incumbent 
Local Exchange Carriers

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: This document initiates an inquiry regarding proposed 
modifications to the Commission's existing rules implementing section 
252(i) which requires local exchange carriers (LECs) to make available 
to other telecommunications carriers interconnection agreements 
approved under section 252.

DATES: Comments are due October 2, 2003 and Reply Comments are due 
October 23, 2003. It is also available on the Commission's Web site at 
http://www.fcc.gov.

FOR FURTHER INFORMATION CONTACT: Robert Tanner, Attorney-Advisor, 
Wireline Competition Bureau, at (202) 418-1580 or via the Internet at 
[email protected]. The complete text of this Notice of Proposed 
Rulemaking (NPRM) is available for inspection and copying during normal 
business hours in the FCC Reference Information Center, Portals II, 445 
12th Street, SW., Room CY-A257, Washington, DC 20554. Further 
information may also be obtained by calling the Common Carrier Bureau's 
TTY number: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking in WC Docket No. 01-338, FCC 03-36, adopted 
February 20, 2003, and released August 21, 2003. This full text may be 
purchased from the Commission's duplicating contractor, Qualex 
International, Portals II, 445 12th Street, SW., Room CY-B402, 
Washington, DC 20554, telephone 202-863-2893, facsimile 202-863-2898, 
or via e-mail [email protected].

Synopsis of the Notice of Proposed Rulemaking (NPRM)

    1. The Commission seeks comment on whether to alter its 
interpretation of section 252(i) to promote more meaningful commercial 
negotiations. The Commission tentatively concludes that modifying its 
current approach would better serve the goals of section 252(i) and 
sections 251-252 generally. The Commission also incorporates into this 
docket a related Petition for Forbearance and Rulemaking filed by 
Mpower Communications (``Mpower Petition'') and the comments and ex 
partes filed in response to the Mpower Petition. See Petition of Mpower 
Communications Corp. for Establishment of New Flexible Contract 
Mechanism Not Subject to ``Pick-and-Choose'', CC Docket No. 01-117, 
Petition for Forbearance and Rulemaking (May 25, 2001).
    2. In the Local Competition Order, (61 FR 52706, October 8, 1996) 
the Commission adopted an interpretation of section 252(i) of the Act 
that required incumbent LECs to permit ``third parties to obtain access 
under section 252(i) to any individual interconnection, service or 
network element arrangement on the same terms and conditions as those 
contained in any agreement approved under section 252.'' This 
interpretation is often referred to as the ``pick and choose'' rule. 
See 47 CFR 51.809. In its petition, Mpower argues that the current rule 
``inhibit[s] innovative deal-making'' and has led to ``a great sameness 
and very little meaningful choice'' in interconnection agreements. 
Mpower and several carriers filing comments in CC Docket 01-117 propose 
that carriers seeking to use section 252(i) be required to adopt the 
entire terms and conditions of an interconnection agreement approved 
under section 252 rather than allow adoption of individual terms as 
conditions.
    3. The Commission seeks comment on its legal authority to alter its 
interpretation of the statute in view of the Supreme Court's 
characterization of the Commission's current rule as ``the most readily 
apparent'' reading of the statute. Iowa Utils. Bd., 525 U.S. at 396. 
The Commission tentatively concludes that it may adopt a different rule 
pursuant to section 252(i), provided the Commission's modified rule is 
a reasonable interpretation of the statutory text. The Commission 
observes that the public record in response to the Mpower petition 
indicates that under the current rules incumbent LECs seldom make 
significant concessions in return for some trade-off for fear that 
third parties will obtain the equivalent benefits without making any 
trade-off at all. The Commission invites parties to submit concrete 
evidence to the contrary.
    4. The Commission identifies two key concerns expressed by 
commenters in response to the proposal put forward by Mpower to create 
``FLEX'' contracts that would provide an alternative form of 
interconnection agreement outside of section 252(i) and not subject to 
the ``pick and choose'' rule. First, incumbent LECs might insert 
``poison pills'' into such agreements to make them unsuitable for 
adoption by third parties. Second, commenters argue that there is not a 
valid basis for exempting ``FLEX'' contracts from the requirement to 
submit interconnection agreements to state commissions for approval or 
from other requirements in section 252.
    5. The Commission seeks comment on a proposal described as follows: 
If an incumbent LEC does not file and obtain state approval for a 
statement of generally available terms and conditions (SGAT) the 
current pick and choose rule would continue to apply to all of that 
incumbent LEC's interconnection agreements. If an incumbent LEC does 
file and obtain state approval for an SGAT, the current pick and choose 
rule would apply solely to the SGAT and all other interconnection 
agreements entered into by that incumbent would be subject to an ``all-
or-nothing'' rule requiring third parties to adopt the interconnection 
agreement in its entirety. The Commission notes that the Act only 
requires Bell Operating Companies (BOCs) to file SGATs and it seeks 
comment on whether it should apply the above approach to non-BOC 
incumbent LECs as well. The Commission also seeks comment on whether 
the SGAT condition, together with preservation of the Act's good faith 
obligation and non-discrimination safeguards be sufficient to prevent 
the above described proposal from eviscerating the obligation Congress 
imposed in section 252(i).
    6. The Commission seeks comment on whether the above described 
proposal would be workable for all classes of carriers, including 
smaller competitive LECs. The Commission seeks comment on whether there 
are other means of restoring the Congressional goal of meaningful 
marketplace negotiations, including modifications to the above 
described proposal.

Initial Regulatory Flexibility Analysis

    7. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) of possible significant economic impact on 
a substantial number of small entities by the policies and rules 
proposed in this NPRM. Written public comments are sought on this IRFA. 
Comments must be identified as responses to the IRFA and must be filed 
by the deadlines for comments on the NPRM. The Commission will send a 
copy of the NPRM, including this IRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration. In addition, the NPRM 
and IRFA (or

[[Page 52308]]

summaries thereof) will be published in the Federal Register.

Need for, and Objectives of, the Proposed Rules

    8. The Commission initiates this NPRM to ensure that market-based 
incentives exist for incumbent and competitive LECs to negotiate 
innovative commercial interconnection arrangements. The current pick-
and-choose rules implementing section 252(i) may discourage give-and-
take negotiation because incumbent LECs may be reluctant to make 
significant concessions (in exchange for negotiated benefit) if those 
concessions become automatically available--without any tradeoff--to 
every potential market entrant. It therefore seeks comment on whether 
alternate approaches to implementing section 252(i), such as requiring 
third parties to opt into entire agreements, would promote more 
innovative and flexible arrangements between parties. Any changes to 
the current pick-and-choose rule, however, may raise concerns as to 
whether there is the potential for parties to interconnection 
agreements to include ``poison pill'' language that would deter third 
parties from opting into those agreements under section 252(i). This 
NPRM proposes an approach that would eliminate the current pick-and-
choose regime for incumbent LECs wherever the incumbent LEC has filed 
and received state approval of a statement of generally available terms 
and conditions, and this NPRM seeks to build a record from which to 
judge the wisdom of this approach.

Legal Basis

    9. The legal basis for any action that may be taken pursuant to the 
NPRM is contained in Sections 1, 3, 4, 201-205, 251, 256, 271, 303(r) 
of the Communications Act of 1934, as amended, 47 U.S.C. 151, 153, 154, 
201-205, 251, 252, 256, 271, 303(r).

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

    10. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that will be 
affected by the proposed rules. The RFA generally defines the term 
``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A small business concern is one which: (1) Is independently owned 
and operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (SBA).
    11. In this section, the Commission further describes and estimates 
the number of small entity licensees and regulatees that may be 
affected by rules adopted pursuant to this FNPRM. The most reliable 
source of information regarding the total numbers of certain common 
carrier and related providers nationwide, as well as the number of 
commercial wireless entities, appears to be the data that the 
Commission publishes in its Trends in Telephone Service report. The SBA 
has developed small business size standards for wireline and wireless 
small businesses within the three commercial census categories of Wired 
Telecommunications Carriers, Paging, and Cellular and Other Wireless 
Telecommunications. Under these categories, a business is small if it 
has 1,500 or fewer employees. Further, using the above size standards 
and others, we discuss the total estimated numbers of small businesses 
that might be affected by our actions.
    12. The Commission has included small incumbent LECs in this 
present RFA analysis. As noted previously, a ``small business'' under 
the RFA is one that, inter alia, meets the pertinent small business 
size standard (e.g., a wired telecommunications carrier 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 LECs are not dominant in their field of operation because any 
such dominance is not ``national'' in scope. The Commission has 
therefore included small incumbent LECs in this RFA analysis, although 
we emphasize that this RFA action has no effect on its analyses and 
determinations in other, non-RFA contexts.
    13. Wired Telecommunications Carriers. The SBA has developed a 
small business size standard for Wired Telecommunications Carriers, 
which consists of all such companies having 1,500 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.
    13. Incumbent Local Exchange Carriers (incumbent LECs). Neither the 
Commission nor the SBA has developed a size standard for small 
businesses specifically applicable to incumbent local exchange 
services. The closest applicable size standard under SBA rules is for 
Wired Telecommunications Carriers. Under that size standard, such a 
business is small if it has 1,500 or fewer employees. According to 
Commission data, 1,329 carriers reported that they were engaged in the 
provision of local exchange services. Of these 1,329 carriers, an 
estimated 1,024 have 1,500 or fewer employees and 305 have more than 
1,500 employees. Consequently, the Commission estimates that most 
providers of incumbent local exchange service are small businesses that 
may be affected by the rules and policies adopted herein.
    14. Competitive Local Exchange Carriers (competitive LECs). Neither 
the Commission nor the SBA has developed a size standard for small 
businesses specifically applicable to providers of competitive exchange 
services or to competitive access providers or to ``Other Local 
Exchange Carriers,'' all of which are discrete categories under which 
TRS data are collected. The closest applicable size standard under SBA 
rules is for Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to Commission data, 532 companies reported that they were 
engaged in the provision of either competitive access provider services 
or competitive LEC services. Of these 532 companies, an estimated 411 
have 1,500 or fewer employees and 121 have more than 1,500 employees. 
In addition, 55 carriers reported that they were ``Other Local Exchange 
Carriers.'' Of the 55 ``Other Local Exchange Carriers,'' an estimated 
53 have 1,500 or fewer employees and two have more than 1,500 
employees. Consequently, the Commission estimates that most providers 
of competitive local exchange service, competitive access providers, 
and ``Other Local Exchange Carriers'' are small entities that may be 
affected by the rules and policies adopted herein.
    15. Interexchange Carriers. Neither the Commission nor the SBA has 
developed a size standard for small businesses specifically applicable 
to interexchange services. The closest applicable size standard under 
SBA rules is for Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to Commission data, 229 companies reported that their primary 
telecommunications service activity was

[[Page 52309]]

the provision of payphone services. Of these 229 companies, an 
estimated 181 have 1,500 or fewer employees and 48 have more than 1,500 
employees. Consequently, the Commission estimates that the majority of 
payphone service providers are small entities that may be affected by 
the rules and policies adopted herein.
    16. Operator Service Providers (OSPs). Neither the Commission nor 
the SBA has developed a size standard for small businesses specifically 
applicable to operator service providers. The closest applicable size 
standard under SBA rules is for Wired Telecommunications Carriers. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. According to Commission data, 22 companies reported 
that they were engaged in the provision of operator services. Of these 
22 companies, an estimated 20 have 1,500 or fewer employees and two 
have more than 1,500 employees. Consequently, the Commission estimates 
that the great majority of payphone service providers are small 
entities that may be affected by the rules and policies adopted herein.
    17. Prepaid Calling Card Providers. The SBA has developed a size 
standard for a small business within the category of Telecommunications 
Resellers. Under that SBA size standard, such a business is small if it 
has 1,500 or fewer employees. According to Commission data, 32 
companies reported that they were engaged in the provision of prepaid 
calling cards. Of these 32 companies, an estimated 31 have 1,500 or 
fewer employees and one has more than 1,500 employees. Consequently, 
the Commission estimates that the great majority of prepaid calling 
card providers are small entities that may be affected by the rules and 
policies adopted herein.
    18. Other Toll Carriers. Neither the Commission nor the SBA has 
developed a size standard for small businesses 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 size standard under 
SBA rules is for Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to Commission's data, 42 companies reported that their 
primary telecommunications service activity was the provision of 
payphone services. Of these 42 companies, an estimated 37 have 1,500 or 
fewer employees and five have more than 1,500 employees. Consequently, 
the Commission estimates that most ``Other Toll Carriers'' are small 
entities that may be affected by the rules and policies adopted herein.
    19. Wireless Service Providers. The SBA has developed a small 
business size standard for wireless firms within the two broad economic 
census categories of Paging and Cellular and Other Wireless 
Telecommunications. Under both SBA categories, a wireless business is 
small if it has 1,500 or fewer employees. For the census category of 
Paging, Census Bureau data for 1997 show that there were 1,320 firms in 
this category, total, that operated for the entire year. Of this total, 
1,303 firms had employment of 999 or fewer employees, and an additional 
17 firms had employment of 1,000 employees or more. Thus, under this 
category and associated small business size standard, the great 
majority of firms can be considered small. For the census category 
Cellular and Other Wireless Telecommunications firms, Census Bureau 
data for 1997 show that there were 977 firms in this category, total, 
that operated for the entire year. Of this total, 965 firms had 
employment of 999 or fewer employees, and an additional 12 firms had 
employment of 1,000 employees or more. Thus, under this second category 
and size standard, the great majority of firms can, again, be 
considered small.
    20. 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 $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 its 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 small business size standards 
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. Subsequent events, 
concerning Auction 35, including judicial and agency determinations, 
resulted in a total of 163 C and F Block licenses being available for 
grant. In addition, we note that, as a general matter, the number of 
winning bidders that qualify as small businesses at the close of an 
auction does not necessarily represent the number of small businesses 
currently in service. Also, the Commission does not generally track 
subsequent business size unless, in the context of assignments or 
transfers, unjust enrichment issues are implicated.
    21. Narrowband Personal Communications Services. To date, two 
auctions of narrowband personal communications services (PCS) licenses 
have been conducted. For purposes of the two auctions that have already 
been held, ``small businesses'' were entities with average gross 
revenues for the prior three calendar years of $40 million or less. 
Through these auctions, the Commission has awarded a total of 41 
licenses, out of which 11 were obtained by small businesses. To ensure 
meaningful participation of small business entities in future auctions, 
the Commission has adopted a two-tiered small business size standard in 
the Narrowband PCS Second Report and Order. 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. The SBA has 
approved these small business size standards. In the future, the 
Commission will auction 459 licenses to serve Metropolitan Trading 
Areas (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 actions. 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.

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The Commission assumes, for purposes of this analysis, 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.
    22. 220 MHz Radio Service--Phase I Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. Phase I licensing was conducted 
by lotteries in 1992 and 1993. There are approximately 1,515 such non-
nationwide licensees and four nationwide licensees currently authorized 
to operate in the 220 MHz band. The Commission has not developed a 
small business size standard for small entities specifically applicable 
to such incumbent 220 MHz Phase I licensees. To estimate the number of 
such licensees that are small businesses, we apply the small business 
size standard under the SBA rules applicable to ``Cellular and Other 
Wireless Telecommunications'' companies. This standard provides that 
such a company is small if it employs no more than 1,500 persons. 
According to Census Bureau data for 1997, there were 977 firms in this 
category, total, that operated for the entire year. Of this total, 965 
firms had employment of 999 or fewer employees, and an additional 12 
firms had employment of 1,000 employees or more. If this general ratio 
continues in the context of Phase I 220 MHz licensees, the Commission 
estimates that nearly all such licensees are small businesses under the 
SBA's small business size standard.
    23. 220 MHz Radio Service--Phase II Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. The Phase II 220 MHz service is 
a new service, and is subject to spectrum auctions. In the 220 MHz 
Third Report and Order, we adopted a small business size standard for 
``small'' and ``very small'' businesses for purposes of determining 
their eligibility for special provisions such as bidding credits and 
installment payments. This small business size standard indicates that 
a ``small business'' is an entity that, together with its affiliates 
and controlling principals, has average gross revenues not exceeding 
$15 million for the preceding three years. A ``very small business'' is 
an entity that, together with its affiliates and controlling 
principals, has average gross revenues that do not exceed $3 million 
for the preceding three years. The SBA has approved these small 
business size standards. Auctions of Phase II licenses commenced on 
September 15, 1998, and closed on October 22, 1998. In the first 
auction, 908 licenses were auctioned in three different-sized 
geographic areas: three nationwide licenses, 30 Regional Economic Area 
Group (EAG) Licenses, and 875 Economic Area (EA) Licenses. Of the 908 
licenses auctioned, 693 were sold. Thirty-nine small businesses won 
licenses in the first 220 MHz auction. The second auction included 225 
licenses: 216 EA licenses and 9 EAG licenses. Fourteen companies 
claiming small business status won 158 licenses.
    24. 800 MHz and 900 MHz Specialized Mobile Radio Licenses. 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 previous 
calendar years, respectively. 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 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 or very 
small entities in the 900 MHz SMR auctions. Of the 1,020 licenses won 
in the 900 MHz auction, bidders qualifying as small or very small 
entities won 263 licenses. In the 800 MHz 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 and policies adopted herein.
    25. Common Carrier Paging. In the Paging Third Report and Order, we 
developed a small business size standard for ``small businesses'' and 
``very small businesses'' for purposes of determining their eligibility 
for special provisions such as bidding credits and installment 
payments. A ``small business'' is an entity that, together with its 
affiliates and controlling principals, has average gross revenues not 
exceeding $15 million for the preceding three years. Additionally, a 
``very small business'' is an entity that, together with its affiliates 
and controlling principals, has average gross revenues that are not 
more than $3 million for the preceding three years. An auction of 
Metropolitan Economic Area licenses commenced on February 24, 2000, and 
closed on March 2, 2000. Of the 985 licenses auctioned, 440 were sold. 
Fifty-seven companies claiming small business status won. At present, 
there are approximately 24,000 Private-Paging site-specific licenses 
and 74,000 Common Carrier Paging licenses. According to the most recent 
Trends in Telephone Service, 471 carriers reported that they were 
engaged in the provision of either paging and messaging services or 
other mobile services. Of those, the Commission estimates that 450 are 
small, under the SBA business size standard specifying that firms are 
small if they have 1,500 or fewer employees.
    26. 700 MHz Guard Band Licensees. In the 700 MHz Guard Band Order, 
we adopted a small business size standard for ``small businesses'' and 
``very small businesses'' for purposes of determining their eligibility 
for special provisions such as bidding credits and installment 
payments. A ``small business'' as an entity that, together with its 
affiliates and controlling principals, has average gross revenues not 
exceeding $15 million for the preceding three years. Additionally, a 
``very small business'' is an entity that, together with its affiliates 
and controlling principals, has average gross revenues that are not 
more than $3 million for the preceding three years. An auction of 52 
Major Economic Area (MEA) licenses commenced on September 6, 2000, and 
closed on September 21, 2000. Of the 104 licenses auctioned, 96 
licenses were sold to nine bidders. Five of these bidders were small 
businesses that won a total of 26 licenses. A second auction of 700 MHz 
Guard Band licenses commenced on February 13, 2001 and closed on 
February 21, 2001. All eight of the licenses auctioned were sold to 
three bidders. One of these bidders was a small business that won a 
total of two licenses.
    27. Rural Radiotelephone Service. The Commission has not adopted a 
size standard for small businesses specific to the Rural Radiotelephone 
Service. A significant subset of the Rural Radiotelephone Service is 
the Basic Exchange Telephone Radio System (BETRS). The Commission uses 
the SBA's small business size standard applicable to ``Cellular and 
Other Wireless Telecommunications,'' i.e., an entity employing no more 
than 1,500

[[Page 52311]]

persons. There are approximately 1,000 licensees in the Rural 
Radiotelephone Service, and the Commission estimates that there are 
1,000 or fewer small entity licensees in the Rural Radiotelephone 
Service that may be affected by the rules and policies adopted herein.
    28. Air-Ground Radiotelephone Service. The Commission has not 
adopted a small business size standard specific to the Air-Ground 
Radiotelephone Service. It will use SBA's small business size standard 
applicable to ``Cellular and Other Wireless Telecommunications,'' i.e., 
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 small business 
size standard.
    29. Aviation and Marine Radio Services. Small businesses in the 
aviation and marine radio services use a very high frequency (VHF) 
marine or aircraft radio and, as appropriate, an emergency position-
indicating radio beacon (and/or radar) or an emergency locator 
transmitter. The Commission has not developed a small business size 
standard specifically applicable to these small businesses. For 
purposes of this analysis, the Commission uses the SBA small business 
size standard for the category ``Cellular and Other 
Telecommunications,'' which is 1,500 or fewer employees. Most 
applicants for recreational licenses are individuals. Approximately 
581,000 ship station licensees and 131,000 aircraft station licensees 
operate domestically and are not subject to the radio carriage 
requirements of any statute or treaty. For purposes of our evaluations 
in this analysis, we estimate that there are up to approximately 
712,000 licensees that are small businesses (or individuals) under the 
SBA standard. In addition, between December 3, 1998 and December 14, 
1998, the Commission held an auction of 42 VHF Public Coast licenses in 
the 157.1875-157.4500 MHz (ship transmit) and 161.775-162.0125 MHz 
(coast transmit) bands. For purposes of the auction, the Commission 
defined a ``small'' business as an entity that, together with 
controlling interests and affiliates, has average gross revenues for 
the preceding three years not to exceed $15 million dollars. In 
addition, a ``very small'' business is one that, together with 
controlling interests and affiliates, has average gross revenues for 
the preceding three years not to exceed $3 million dollars. There are 
approximately 10,672 licensees in the Marine Coast Service, and the 
Commission estimates that almost all of them qualify as ``small'' 
businesses under the above special small business size standards.
    30. Fixed Microwave Services. Fixed microwave services include 
common carrier, private operational-fixed, and broadcast auxiliary 
radio services. 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 created a size standard for a small business 
specifically with respect to fixed microwave services. For purposes of 
this analysis, the Commission uses the SBA small business size standard 
for the category ``Cellular and Other Telecommunications,'' which is 
1,500 or fewer employees. The Commission does not have data specifying 
the number of these licensees that have more than 1,500 employees, and 
thus are 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 small business size standard. 
Consequently, the Commission estimates that there are up to 22,015 
common carrier fixed licensees and up to 61,670 private operational-
fixed licensees and broadcast auxiliary radio licensees in the 
microwave services that may be small and may be affected by the rules 
and policies adopted herein. We noted, however, that the common carrier 
microwave fixed licensee category includes some large entities.
    31. Offshore Radiotelephone Service. This service operates on 
several UHF television broadcast channels that are not used for 
television broadcasting in the coastal areas of states bordering the 
Gulf of Mexico. There are presently approximately 55 licensees in this 
service. We are unable to estimate at this time the number of licensees 
that would qualify as small under the SBA's small business size 
standard for ``Cellular and Other Wireless Telecommunications'' 
services. Under that SBA small business size standard, a business is 
small if it has 1,500 or fewer employees.
    32. Wireless Communications Services. This service can be used for 
fixed, mobile, radiolocation, and digital audio broadcasting satellite 
uses. The Commission established small business size standards for the 
wireless communications services (WCS) auction. A ``small business'' is 
an entity with average gross revenues of $40 million for each of the 
three preceding years, and a ``very small business'' is an entity with 
average gross revenues of $15 million for each of the three preceding 
years. The SBA has approved these small business size standards. The 
Commission auctioned geographic area licenses in the WCS service. In 
the auction, there were seven winning bidders that qualified as ``very 
small business'' entities, and one that qualified as a ``small 
business'' entity. We conclude that the number of geographic area WCS 
licensees affected by this analysis includes these eight entities.
    33. 39 GHz Service. The Commission created a special small business 
size standard for 39 GHz licenses--an entity that has average gross 
revenues of $40 million or less in the three previous calendar years. 
An additional size standard for ``very small business'' is an entity 
that, together with affiliates, has average gross revenues of not more 
than $15 million for the preceding three calendar years. The SBA has 
approved these small business size standards. 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 18 or fewer 39 GHz 
licensees are small entities that may be affected by the rules and 
polices adopted herein.
    34. Multipoint Distribution Service, Multichannel Multipoint 
Distribution Service, and ITFS. Multichannel Multipoint Distribution 
Service (MMDS) systems, often referred to as ``wireless cable,'' 
transmit video programming to subscribers using the microwave 
frequencies of the Multipoint Distribution Service (MDS) and 
Instructional Television Fixed Service (ITFS). In connection with the 
1996 MDS auction, the Commission established a small business size 
standard as an entity that had annual average gross revenues of less 
than $40 million in the previous three calendar years. The MDS auctions 
resulted in 67 successful bidders obtaining licensing opportunities for 
493 Basic Trading Areas (BTAs). Of the 67 auction winners, 61 met the 
definition of a small business. MDS also includes licensees of stations 
authorized prior to the auction. In addition, the SBA has developed a 
small business size standard for Cable and Other Program Distribution, 
which includes all such companies generating $12.5 million or less in 
annual receipts. According to Census Bureau data for 1997, there were a 
total of 1,311 firms in this category, total, that had operated for the 
entire year. Of this total, 1,180 firms had annual receipts of under 
$10 million and an additional 52 firms had receipts

[[Page 52312]]

of $10 million or more but less than $25 million. Consequently, we 
estimate that the majority of providers in this service category are 
small businesses that may be affected by the rules and policies adopted 
herein. This SBA small business size standard also appears applicable 
to ITFS. There are presently 2,032 ITFS licensees. All but 100 of these 
licenses are held by educational institutions. Educational institutions 
are included in this analysis as small entities. Thus, we tentatively 
conclude that at least 1,932 licensees are small businesses.
    35. Local Multipoint Distribution Service. Local Multipoint 
Distribution Service (LMDS) is a fixed broadband point-to-multipoint 
microwave service that provides for two-way video telecommunications. 
The auction of the 1,030 Local Multipoint Distribution Service (LMDS) 
licenses began on February 18, 1998 and closed on March 25, 1998. The 
Commission established a small business size standard for LMDS licenses 
as an entity that has average gross revenues of less than $40 million 
in the three previous calendar years. An additional small business size 
standard for ``very small business'' was added as an entity that, 
together with its affiliates, has average gross revenues of not more 
than $15 million for the preceding three calendar years. The SBA has 
approved these small business size standards in the context of LMDS 
auctions. There were 93 winning bidders that qualified as small 
entities in the LMDS auctions. A total of 93 small and very small 
business bidders won approximately 277 A Block licenses and 387 B Block 
licenses. On March 27, 1999, the Commission re-auctioned 161 licenses; 
there were 40 winning bidders. Based on this information, we conclude 
that the number of small LMDS licenses consists of the 93 winning 
bidders in the first auction and the 40 winning bidders in the re-
auction, for a total of 133 small entity LMDS providers.
    36. 218-219 MHz Service. The first auction of 218-219 MHz spectrum 
resulted in 170 entities winning licenses for 594 Metropolitan 
Statistical Area (MSA) licenses. Of the 594 licenses, 557 were won by 
entities qualifying as a small business. For that auction, the small 
business size standard was an entity that, together with its 
affiliates, has no more than a $6 million net worth and, after federal 
income taxes (excluding any carry-over losses), has no more than $2 
million in annual profits each year for the previous two years. In the 
218-219 MHz Report and Order and Memorandum Opinion and Order, we 
established a small business size standard for a ``small business'' as 
an entity that, together with its affiliates and persons or entities 
that hold interests in such an entity and their affiliates, has average 
annual gross revenues not to exceed $15 million for the preceding three 
years. A ``very small business'' is defined as an entity that, together 
with its affiliates and persons or entities that hold interests in such 
an entity and its affiliates, has average annual gross revenues not to 
exceed $3 million for the preceding three years. We cannot estimate, 
however, the number of licenses that will be won by entities qualifying 
as small or very small businesses under our rules in future auctions of 
218-219 MHz spectrum.
    37. 24 GHz--Incumbent Licensees. This analysis may affect incumbent 
licensees who were relocated to the 24 GHz band from the 18 GHz band, 
and applicants who wish to provide services in the 24 GHz band. The 
applicable SBA small business size standard is that of ``Cellular and 
Other Wireless Telecommunications'' companies. This category provides 
that such a company is small if it employs no more than 1,500 persons. 
According to Census Bureau data for 1997, there were 977 firms in this 
category, total, that operated for the entire year. Of this total, 965 
firms had employment of 999 or fewer employees, and an additional 12 
firms had employment of 1,000 employees or more. Thus, under this size 
standard, the great majority of firms can be considered small. These 
broader census data notwithstanding, we believe that there are only two 
licensees in the 24 GHz band that were relocated from the 18 GHz band, 
Teligent and TRW, Inc. It is our understanding that Teligent and its 
related companies have less than 1,500 employees, though this may 
change in the future. TRW is not a small entity. Thus, only one 
incumbent licensee in the 24 GHz band is a small business entity.
    38. 24 GHz--Future Licensees. With respect to new applicants in the 
24 GHz band, the small business size standard for ``small business'' is 
an entity that, together with controlling interests and affiliates, has 
average annual gross revenues for the three preceding years not in 
excess of $15 million. ``Very small business'' in the 24 GHz band is an 
entity that, together with controlling interests and affiliates, has 
average gross revenues not exceeding $3 million for the preceding three 
years. The SBA has approved these small business size standards. These 
size standards will apply to the future auction, if held.
    39. Internet Service Providers. While internet service providers 
(ISPs) would only be indirectly affected by the proposed rules, and 
ISPs are therefore not formally included within this present IRFA, we 
address them informally to create a fuller record. The SBA has 
developed a small business size standard for Online Information 
Services, which consists of all such companies having $21 million or 
less in annual receipts. According to Census Bureau data for 1997, 
there were 2,751 firms in this category, total, that operated for the 
entire year. Of this total, 2,659 firms had annual receipts of 
$9,999,999 or less, and an additional 67 had receipts of $10 million to 
$24,999,999. Thus, under this size standard, the great majority of 
firms can be considered small.

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

    None.

Ordering Clauses

    12. Accordingly, pursuant to the authority contained in sections 1, 
2, 4(i)-4(j), 201, 202, 205, 251, 271, 272, and 303(r) of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 152, 154(i)-
4(j), 201, 202, 205, 251, 271, 272, and 303(r), this NPRM is adopted.
    13. The Commission's Consumer and Governmental Affairs Bureau, 
Reference Information Center, shall send a copy of this NPRM, including 
the Initial Regulatory Flexibility Certification, to the Chief Counsel 
for Advocacy of the Small Business Administration.

List of Subjects in 47 CFR Part 51

    Interconnection, Telecommunications carriers.

Federal Communications Commission.
William F. Caton,
Deputy Secretary.
[FR Doc. 03-22194 Filed 8-29-03; 8:45 am]
BILLING CODE 6712-01-P