[Federal Register Volume 68, Number 235 (Monday, December 8, 2003)]
[Proposed Rules]
[Pages 68312-68319]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-30309]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[WC Docket No. 03-225; FCC 03-265]


Request To Update Default Compensation Rate for Dial-Around Calls 
From Payphones

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: By this Notice of Proposed Rulemaking (NPRM), the Commission 
commences a proceeding to consider a new default compensation rate for 
dial-around calls from payphones. The NPRM seeks comment on whether to 
modify the default rate of $0.24 per-call for dial-around payphone 
calls established more than four years ago.

DATES: Comments are due on or before January 7, 2004. Written comments 
by the public on the proposed information collections are due on or 
before January 7, 2004. Reply comments are due on or before January 22, 
2004. Written reply comments by the public on the proposed information 
collections are due on or before January 22, 2004. Written comments 
must be submitted by the Office of Management and Budget (OMB) on the 
proposed information collection(s) on or before February 6, 2004.

ADDRESSES: All filings must be sent to the Commission's Secretary, 
Marlene H. Dortch, Office of the Secretary, Federal Communications 
Commission, Room TW-A325, 445 Twelfth Street SW., Washington, DC 20554. 
In addition to filing comments with the Secretary, a copy of any 
comments on the information collections contained herein must be 
submitted to Judith Boley Herman, Federal Communications Commission, 
Room 1-C804, 445 Twelfth Street SW., Washington, DC 20554, or via the 
Internet to [email protected], and to Kim A. Johnson, OMB Desk 
Officer, Room 10236 NEOB, 725 17th Street NW., Washington, DC 20503, or 
via the Internet to [email protected].

FOR FURTHER INFORMATION CONTACT: Jon Stover, Wireline Competition 
Bureau, Pricing Policy Division, (202) 418-0390. For additional 
information concerning the information collection(s) contained in this 
document, contact Judith Boley Herman at 202-418-0214, or via the 
Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM) in WC Docket No. 03-225, RM No. 10568, 
adopted on October 28, 2003, and released on October 31, 2003. The 
complete text of this NPRM is available for public inspection Monday 
through Thursday from 8 a.m. to 4:30 p.m. and Friday from 8 a.m. to 
11:30 a.m. in the Commission's Consumer and Governmental Affairs 
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 http://www.fcc.gov. Alternative formats 
are available to persons with disabilities by contacting Brian Millin 
at (202) 418-7426 or TTY (202) 418-7365. The complete text of the NPRM 
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 Notice of Proposed Rulemaking

    1. The NPRM grants petitions for rulemaking filed by the American 
Public Communications Council (APCC)

[[Page 68313]]

and the RBOC Payphone Coalition (BellSouth Public Communications, Inc., 
SBC Communications, Inc., and the Verizon telephone companies). The 
Commission asks whether the $0.24 rate still ensures that all payphone 
service providers (PSPs) are fairly compensated for each and every 
completed call as mandated by 47 U.S.C. 276, or whether a change in the 
default rate is mandated.
    2. According to cost studies submitted by APCC and the RBOC 
Payphone Coalition, per-payphone costs have not changed dramatically 
since 1998, but falling call volumes at payphones have caused a major 
increase in per-call costs at marginal payphones. These two groups of 
PSPs assert that the current dial-around compensation rate is no longer 
adequate to ensure widespread deployment of payphones because $0.24 no 
longer provides cost recovery for PSPs.
    3. The petitions for rulemaking were opposed by six interexchange 
carriers (IXCs) and the Attorney General of the State of Texas. While 
they do not assert that IXCs can implement targeted call blocking at 
this time, some IXCs contend that the Commission should not change the 
default compensation rate because market forces by themselves are able 
to determine the appropriate level of payphone deployment. These IXCs 
will be afforded an opportunity to demonstrate how PSPs can be 
effectively compensated in a fully deregulated market.
    4. In finding it unnecessary to issue a Notice of Inquiry (NOI), as 
requested by some IXCs, the Commission decided it is possible to 
resolve certain methodological and factual issues, to the extent that 
they are relevant to our ratesetting task, in the course of determining 
what, if any, modifications the Commission should make to the dial-
around compensation rate.
    5. The Commission invites comments both on the general issue of 
whether to prescribe a different payphone compensation rate and on the 
specific issue of the amount of the rate. The Commission seeks comment 
on the cost studies presented in the petitions for rulemaking by APCC 
and the RBOC Payphone Coalition (Coalition). The Commission seeks 
comment on whether the methodologies reflected in those studies are 
consistent with the rate methodology the Commission used in 
Implementation of the Pay Telephone Reclassification and Compensation 
Provisions of the Telecommunications Act of 1996, CC Docket No. 96-128, 
Third Report and Order, 64 FR 13701, March 22, 1999. The Commission 
also asks whether the cost information presented in those studies 
accurately represents the costs currently incurred by payphone service 
providers. The Commission further invites commenting parties to submit 
additional studies that support or refute the information presented in 
the APCC and Coalition studies.
    6. In the NPRM, the Commission tentatively concludes that the 
methodology the Commission adopted in the Third Report and Order is the 
appropriate methodology to use in reevaluating the default dial-around 
compensation rate. The decision to use that methodology was affirmed by 
the United States Court of Appeals for the D.C. Circuit. The Commission 
seeks comment on this tentative conclusion.
    7. The Commission also invites comment on whether the methodology 
should be modified in any way due to changes in the payphone industry 
since its adoption. For example, some IXCs argue that, due to the 
elasticity of the demand for dial-around calling, an increase in the 
dial-around rate would suppress demand to such an extent as to reduce 
total revenues, resulting in increased removal of payphones. APCC and 
the Regional Bell Operating Companies (RBOCs), on the other hand, argue 
that there is no reason to believe that dial-around calling is highly 
price-elastic. In the Third Report and Order, the Commission considered 
the issue of demand elasticity in determining the appropriate 
allocation of overhead between dial-around calls and other calls, but 
was unable to reach a firm conclusion. Thus, elasticity issues bear on 
both the allocation of overhead and the potential for demand 
suppression. The Commission seeks further comment on the issue of 
demand elasticity, including the impact of recent increases in the coin 
calling rate and the cross-elasticity of demand between payphones and 
wireless telephone service. The Commission invites the submission of 
any further data that may have become available on these questions. 
Also, because monthly call volume is a key driver in determining the 
per-call compensation rate, the Commission seeks comment on the 
efficacy and merit of the use in the APCC and Coalition cost studies of 
marginal payphone monthly call volumes of 233.9 and 219, respectively.
    8. The Commission seeks comment on whether the particular inputs 
the Commission adopted in the Third Report and Order for various cost 
categories continue to be appropriate or whether there are changed 
conditions that warrant modifications of the particular inputs used in 
1999. For example, is the depreciation rate used in the Third Report 
and Order still valid? As another example, WorldCom claims that, given 
the declining payphone base, estimates of capital costs should be based 
on the price of second-hand payphones. The Commission invites comment 
on this and other aspects of the cost studies.
    9. The Commission seeks comment on whether additional cost 
categories are needed beyond those identified in the Third Report and 
Order. Are there other cost categories that should be added or modified 
beyond those on which the Commission relied in the Third Report and 
Order? Specifically, the APCC and Coalition cost studies add an element 
for collection costs specific to dial-around compensation, and the 
Coalition study adds an element for uncollectibles. In the Third Report 
and Order, the Commission declined to include these costs in setting 
the dial-around rate, finding that the record in that docketed 
proceeding contained insufficient information to determine the extent 
to which administration costs vary when the number of coinless calls 
increases relative to coin calls. AT&T and others argue that the Third 
Report and Order methodology precludes the inclusion of an element for 
bad debt. The Commission invites comment on whether there is now an 
adequate record to justify such an element, and the appropriate amount 
of such an element.
    10. The Commission seeks comment on whether and how the Commission 
should consider the revenues and costs associated with the provision of 
additional services and activities in conjunction with payphones, such 
as Internet access or rental of advertising space. Are these revenues 
and costs relevant to the Commission's marginal payphone analysis, and, 
if so, how? While APCC argues that such contribution is minimal, is 
there evidence regarding the extent of the net contribution to payphone 
cost recovery resulting from these activities? Is there any net 
contribution? If so, the Commission invites parties to supply such 
evidence with respect to payphones generally and to marginal payphones 
in particular.
    11. Sprint urges the Commission to reconsider adopting a ``caller-
pays'' compensation scheme, in which the caller would deposit coins or 
other forms of advance payment before making a dial-around call. In the 
Third Report and Order, the Commission noted that some economists would 
argue that a caller-pays methodology forms the basis for the purest 
market-based approach. The Commission rejected this approach based on

[[Page 68314]]

evidence that Congress disapproved of a caller-pays methodology. For 
this reason, the Commission tentatively concluded in this NPRM that it 
should not adopt a ``caller-pays'' methodology. The Commission seeks 
comment on this tentative conclusion.
    12. Nevertheless, the Commission seeks comment on whether 
circumstances have changed such that it is now appropriate to 
reconsider a caller-pays approach to payphone compensation. In fact, in 
the Third Report and Order, the Commission concluded that it should 
monitor the advance of call blocking technology and other marketplace 
developments before reconsidering a caller-pays approach. As noted in 
the NPRM, consumers using dial-around services from payphones may be 
billed by their interexchange carriers at rates higher than both the 
default compensation rate and the local coin call rate. Thus the 
convenience of coinless calling may come at a high price to the 
consumer. The Commission asks parties to provide information about what 
service providers charge customers for dial-around and other coinless 
payphone services. More generally, the Commission seeks comment on how 
it should analyze the costs and benefits of the Commission policy of 
prescribing a dial-around compensation rate to be paid by service 
providers to payphone operators in lieu of a caller-pays system. 
Finally, the Commission seeks comment on Commission authority to allow 
advance consumer payment for use of payphones. In particular, does 47 
U.S.C. 226(e) permit the Commission to conclude that the Commission 
need not prescribe compensation apart from advance payment by the 
consumer? Is so, what factual findings or policy goals would support 
such a conclusion?

Initial Paperwork Reduction Act Analysis

    13. This NPRM contains either proposed or modified information 
collections. As part of its continuing effort to reduce paperwork 
burdens, the Commission invites the general public and the Office of 
Management and Budget (OMB) to take this opportunity to comment on the 
information collections contained in this NPRM, as required by the 
Paperwork Reduction Act of 1995, Public Law 104-13. Comments must be 
identified as responses to the Initial Paperwork Reduction Act 
Analysis. Public and agency comments are due at the same time as other 
comments on this NPRM; OMB comments are due 60 days from the date of 
publication of this NPRM in the Federal Register. 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.

Initial Regulatory Flexibility Act Analysis

    14. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C. 
603, the Commission has prepared this Initial Regulatory Flexibility 
Analysis (IRFA) of the possible significant economic impact on small 
entities by the policies and rule(s) proposed in this Notice of 
Proposed Rulemaking (NPRM). Written public comments are requested on 
this IRFA. Comments must be identified as responses to the IRFA.
    15. This present IRFA 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). The Commission 
will send a copy of this NPRM, including this IRFA, to the Chief 
Counsel for Advocacy of the Small Business Administration. See 5 U.S.C. 
604(b).

Need for, and Objectives of, the Proposed Rules

    16. 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 NPRM, the Commission decided to reexamine 
the default payphone compensation rate the Commission prescribed in 
1999. The overall objective of this proceeding is to evaluate whether 
changes are necessary to the current default rate of compensation for 
dial-around calls originating at payphones, in order to ensure that 
payphone service providers are fairly compensated, promote payphone 
competition, and promote the widespread deployment of payphone 
services. The NPRM seeks comment on specific issues related solely to 
the level of dial-around compensation.

Legal Basis

    17. The proposed action is supported by 47 U.S.C. 151, 152, 154(i)-
(j), 201, 226 and 276, as well as 47 CFR 1.1, 1.48, 1.411, 1.412, 
1.415, 1.419, and 1.1200-1216.

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

    18. The RFA directs agencies to provide a description of, and an 
estimate of, the number of small entities that may be affected by the 
rule(s) proposed herein, where feasible. 5 U.S.C. 604(a)(3). The RFA 
generally defines ``small entity'' as having the same meaning as the 
terms ``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 more 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.''
    19. Small Incumbent Local Exchange Carriers. We have included small 
incumbent local exchange carriers in 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.'' 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

[[Page 68315]]

is not ``national'' in scope.\1\ The Commission therefore included 
small incumbent LECs in this RFA analysis, although the Commission 
emphasizes that this RFA has no effect on the Commission's analyses and 
determinations in other, non-RFA contexts.
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    \1\ Letter from Jere W.Glover, Chief Counsel of Advocacy, SBA, 
to William E. Kennard, Chairman, 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 15 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).
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    20. 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. 
13 CFR 121.201, NAICS code 717110. According to Census Bureau data for 
1997, there were 2,225 firms in this category, total, that operated for 
the entire year. U.S. Census Bureau, 1997 Economic Census, Subject 
Series: Information, ``Establishment and Firm Size (Including Legal 
Form of Organization),'' Table 5, NAICS code 513310 (issued October of 
2000). 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. Id. The Commission notes that the census data do not provide a 
more precise estimate of the number of firms that have employment of 
1,500 or fewer employees; the largest category provided is ``Firms with 
1,000 employees or more.'' Under the size standard of 1,500 or fewer 
employees, the great majority of Wired Telecommunications Carriers can 
be considered small.
    21. Incumbent Local Exchange Carriers. 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 the SBA rules is for Wired Telecommunications 
Carriers. Under that size standard, such a business is small if it has 
1,500 or fewer employees. 13 CFR 121.201, North American Industry 
Classification System (NAICS) code 517110. According to Commission 
data, 1,329 carriers reported that they were engaged in the provision 
of local exchange services. FCC, Wireline Competition Bureau, Industry 
Analysis and Technology Division, Trends in Telephone Service (May 
2002) (hereinafter Telephone Trends Report), Table 5.3. Of these 1,329 
carriers, an estimated 1,024 have 1,500 or fewer employees and 305 have 
more than 1,500 employees. Id. Consequently, the Commission estimates 
that most providers of local exchange service are small businesses that 
may be affected by the rule(s) and policies proposed herein.
    22. Competitive Local Exchange Carriers (CLECs). Neither the 
Commission nor the SBA has developed a size standard for small 
businesses specifically applicable to providers of competitive local 
exchange services or to competitive access providers (CAPs) or to 
``Other Local Exchange Carriers,'' all of which are discrete categories 
under which Telecommunications Relay Service (TRS) data are collected. 
The closest applicable size standard under the SBA rules is for Wired 
Telecommunications Carriers. Under that SBA size standard, such a 
business is small if it has 1,500 or fewer employees. 13 CFR 121.201, 
NAICS code 517110. According to Commission data, 532 companies 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 532 companies, an 
estimated 411 have 1,500 or fewer employees and 121 have more than 
1,500 employees. Id. In addition, 55 carriers reported that they were 
``Other Local Exchange Carriers.'' Id. Of the 55 ``Other Local Exchange 
Carriers,'' an estimated 53 have 1,500 or fewer employees and two have 
more than 1,500 employees. Id. 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 rule(s) and policies proposed 
herein.
    23. Local Resellers. The SBA has developed a size standard for 
small businesses within the category of Telecommunications Resellers. 
Under that SBA size standard, such a business is small if it has 1,500 
or fewer employees. 13 CFR 121.201, NAICS code 517310. According to the 
Commission data, 134 companies reported that they were engaged in the 
provision of local resale services. Telephone Trends Report, Table 5.3. 
Of these 134 companies, an estimated 131 have 1,500 or fewer employees 
and three have more than 1,500 employees. Id. Consequently, the 
Commission estimates that the great majority of local resellers are 
small entities that may be affected by the rules and policies proposed 
herein.
    24. Toll Resellers. The SBA has developed a size standard for small 
businesses within the category of Telecommunications Resellers. Under 
that SBA size standard, such a business is small if it has 1,500 or 
fewer employees. 13 CFR 121.201, NAICS code 517310. According to the 
Commission's most recent Telephone Trends Report data, 576 companies 
reported that they were engaged in the provision of toll resale 
services. Telephone Trends Report, Table 5.3. Of these 576 companies, 
an estimated 538 have 1,500 or fewer employees and 38 have more than 
1,500 employees. Id. Consequently, the Commission estimates that the 
great majority of toll resellers are small entities that may be 
affected by the rules and policies proposed herein.
    25. Payphone Service Providers. Neither the Commission nor the SBA 
has developed a size standard for small businesses specifically 
applicable to payphone service providers (PSPs). The closest applicable 
size standard under the SBA rules is for Wired Telecommunications 
Carriers. Under that standard, such a business is small if it has 1,500 
or fewer employees. 13 CFR 121.201, NAICS code 517110. According to the 
Commission's most recent Telephone Trends Report data, 936 PSPs 
reported that they were engaged in the provision of payphone services. 
Telephone Trends Report, Table 5.3. Of these 936 PSPs, an estimated 933 
have 1,500 or fewer employees and three have more than 1,500 employees. 
Id. Consequently, the Commission estimates that the great majority of 
PSPs are small entities that may be affected by the rules and policies 
proposed herein.
    26. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a size standard for small businesses specifically 
applicable to providers of interexchange services. The closest 
applicable size standard under the SBA rules is for Wired 
Telecommunications Carriers. Under that standard, such a business is 
small if it has 1,500 or fewer employees. 13 CFR 121.201, NAICS code 
517110. According to Commission data, 229 carriers reported that their 
primary telecommunications service activity was the provision of 
interexchange services. Telephone Trends Report, Table 5.3. Of these 
229 companies, an estimated 181 have 1,500 or fewer employees and 48 
have more than 1,500 employees. Id. Consequently, the Commission 
estimates that the majority of interexchange carriers are small 
entities that may be affected by the rules and policies proposed 
herein.

[[Page 68316]]

    27. Operator Service Providers. 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 the SBA rules is for Wired Telecommunications Carriers. 
Under that standard, such a business is small if it has 1,500 or fewer 
employees. 13 CFR 121.201, NAICS code 517110. According to Commission 
data, 22 companies reported that they were engaged in the provision of 
operator services. Telephone Trends Report, Table 5.3. Of these 22 
companies, an estimated 20 have 1,500 or fewer employees and two have 
more than 1,500 employees. Id. Consequently, the Commission estimates 
that the great majority of operator service providers are small 
entities that may be affected by the rules and policies proposed 
herein.
    28. Wired Telecommunication Resellers. The SBA has developed a size 
standard for small businesses within the category of Telecommunications 
Resellers including prepaid calling card providers. Under that SBA size 
standard, such a business is small if it has 1,500 or fewer employees. 
13 CFR 121.201, NAICS code 517310. According to Commission data, 32 
companies reported that they were engaged in the provision of prepaid 
calling cards. Telephone Trends Report, Table 5.3. Of these 32 
companies, an estimated 31 have 1,500 or fewer employees and one has 
more than 1,500 employees. Id. 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 proposed 
herein.
    29. Satellite Service Carriers. The SBA has developed a small 
business size standard for Satellite Telecommunications, which consists 
of all such firms having $12.5 million or less in annual receipts.(13 
CFR 121.201, NAICS code 51741). According to Census Bureau data for 
1997, in this category there was a total of 324 firms that operated for 
the entire year (U.S. Census Bureau, 1997 Economic Census, Subject 
Series: Information, ``Establishment and Firm Size {Including Legal 
Form of Organization{time} ,'' Table 4, NAICS code 513340). Of this 
total, 273 firms had annual receipts of under $10 million, and an 
additional twenty-four firms had receipts of $10 million to 
$24,999,999. Id. Thus, under this size standard, the majority of firms 
can be considered small.
    30. 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 
the SBA rules is for Wired Telecommunications Carriers. Under that 
standard, such a business is small if it has 1,500 or fewer employees. 
13 CFR 121.201, NAICS code 517110. According to Commission data, 42 
companies reported that their primary telecommunications service 
activity was the provision of ``Other Toll'' services. Telephone Trends 
Report, Table 5.3. Of these 42 companies, an estimated 37 have 1,500 or 
fewer employees and five have more than 1,500 employees. Id. 
Consequently, the Commission estimates that most ``Other Toll 
Carriers'' are small entities that may be affected by the rules and 
policies proposed herein.
    31. Paging. The SBA has developed a small business size standard 
for paging firms. Under that SBA size standard, such a business is 
small if it has 1,500 or fewer employees. 13 CFR 121.201, NAICS code 
517211, and 13 CFR 121.201, NAICS code 517212, respectively.
    32. Cellular and other Wireless Telecommunications. For the census 
category of Paging, Census Bureau data for 1997 show that there were 
1320 firms in this category, total, that operated for the entire year. 
U.S. Census Bureau, 1997 Economic Census, Subject Series: Information, 
``Employment Size of Firms Subject to Federal Income Tax: 1997,'' Table 
5, NAICS code 513321 (issued October of 2000). Of this total, 1303 
firms had employment of 999 or fewer employees, and an additional 17 
firms had employment of 1,000 employees or more. Id. Thus, under this 
category and associated small business size standard, the great 
majority of or the census category of 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. U.S. Census Bureau, 1997 Economic Census, Subject Series: 
Information, ``Employment Size of Firms Subject to Federal Income Tax: 
1997,'' Table 5, NAICS code 513322. 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. Consequently, the Commission estimates that most 
wireless service providers are small entities that may be affected by 
the rule(s) and policies proposed herein.
    33. 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. 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 FR 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 FR 33859, July 1, 1996. These standards 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 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. 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, October 24, 
1997. On March 23, 1999, the Commission reauctioned 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.
    34. Of the 35 winning bidders in this auction, 29 qualified as 
``small'' or ``very small'' businesses. Based on this

[[Page 68317]]

information, the Commission concludes 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 Block auctions, 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, the Commission estimates that 
260 broadband PCS providers are small entities that may be affected by 
the rules and policies proposed herein.
    35. 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 and policies 
proposed herein.
    36. Rural Radiotelephone Service. The Commission has not adopted a 
size standard for small businesses 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 IRFA, the Commission uses the SBA's size standard 
applicable to Cellular and Other Wireless Telecommunications--an entity 
employing no more than 1,500 persons. 13 CFR 121.201, NAICS code 
517212. 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, 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 and policies proposed herein.
    37. 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.
    38. For purposes of this IRFA, the Commission uses the SBA's size 
standard for the category Cellular and Other Telecommunications, which 
is 1,500 or fewer employees. 13 CFR 121.201, NAICS code d to 517212. 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 microwave services. 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 and policies 
proposed herein. The Commission notes, however, that the common carrier 
microwave fixed licensee category includes some large entities.
    39. 39 GHz Licensees. The Commission has 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. 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, February 6, 1998. 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. Id. The SBA has approved these size standards. 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 18 or fewer 39 GHz 
licensees are small entities that may be affected by the rules and 
policies proposed herein.

Description of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    40. The Commission does not intend that any proposal it may adopt 
pursuant to this NPRM will increase existing reporting, recordkeeping 
or other compliance requirements.

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

    41. The RFA requires an agency to describe any significant, 
specifically small business, alternatives that it has considered in 
reaching its proposed

[[Page 68318]]

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 performance, rather than design, standards; 
and (4) an exemption from coverage of the rule, or any part thereof, 
for small entities. 5 U.S.C. 603(c).
    42. According to the Petitioners, the existing rate of $.24 does 
not provide the statutory requirement of fair compensation. Thus, the 
Commission is concerned that inadequate compensation may undermine the 
statutory goals of promoting competition among payphone providers while 
simultaneously ensuring the widespread deployment of payphones. 47 
U.S.C. 276. The Commission is further concerned that inadequate 
payphone compensation may have adverse economic impacts on smaller 
entities that provide payphone service. The Commission, therefore, is 
examining various options, including a proposed rule increasing the 
default rate, to ensure the provision of fair compensation.
    43. The Commission, however, recognizes that an alternative 
approach to increasing the default rate has been proposed by parties 
who contend that any increase in the default rate may further suppress 
demand for payphone services. The Commission also recognizes that in 
proposing this alternative approach, these parties contend that the 
fully distributed cost methodology may be ripe for reexamination.
    44. Another proposed rule under consideration may entail an 
examination of the revenues generated by non-traditional payphone 
services such as the provision of internet access. In the alternative, 
services other than access to the internet, such as data transfer and 
interactive functionalities may be taken into consideration. 
Accordingly, the Commission will consider assessments of both the 
impact of internet access and other new technology services.
    45. Finally, the Commission requests comment on any small business 
related concerns occasioned by proposed rules addressing the 
reexamination of the default rate, the use of non-traditional payphone 
services, and other alternatives that may impact small businesses.

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

    46. None.

Ex Parte Presentations

    47. This matter shall be treated as a ``permit-but-disclose'' 
proceeding in accordance with the Commission's ex parte rules. 47 CFR 
1.1200 et seq. Persons making oral ex parte presentations are reminded 
that memoranda summarizing the presentations must contain summaries of 
the substance of the presentations and not merely a listing of the 
subjects discussed. More than a one or two-sentence description of the 
views and arguments presented generally is required. Other requirements 
pertaining to oral and written presentations are set forth in 47 CFR 
1.1206(b).

Comment Filing Procedures

    48. In order to facilitate review of comments and reply comments, 
parties must include the name of the filing party and the date of the 
filing on all comments and reply comments. Comments and reply comments 
must clearly identify the specific portion of the NPRM to which a 
particular comment or set of comments is responsive.
    49. Comments may be filed by using the Commission's Electronic 
Comment Filing System (ECFS). See Electronic Filing of Documents in 
Rulemaking Proceedings, 63 FR 2421 (May 1, 1998). Comments filed 
through the ECFS may 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. In completing the transmittal 
screen, commenters must include their full name, 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 must include the following words in the body of the 
message, ``get form