[Federal Register Volume 69, Number 176 (Monday, September 13, 2004)]
[Proposed Rules]
[Pages 55128-55135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-20467]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 51

[WC Docket No. 04-313, CC Docket No. 01-338; FCC 04-179]


Unbundled Access to Network Elements; 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 Notice of Proposed Rulemaking (NPRM) solicits comment on 
final unbundling rules that will implement the obligations of section 
251(c)(3) of the Communications Act of 1934, as amended, in a manner 
consistent with the March 2, 2004 decision of the U.S. Court of Appeals 
for the District of Columbia Circuit (DC Circuit) in United States 
Telecom Ass'n v. FCC. The NPRM poses critical questions concerning how 
the

[[Page 55129]]

Commission might amend its interpretation of ``impairment'' as that 
term is used in section 251(d)(2)(B) of the Act, as well as asking how 
the Commission should respond to other factors when evaluating whether 
an incumbent carrier must provision a particular network element to 
competitors on an unbundled basis.

DATES: Comments are due on or before October 4, 2004, and reply 
comments are due on or before October 19, 2004.

ADDRESSES: Federal Communications Commission, 445 12th Street, SW., 
Washington, DC 20554. See SUPPLEMENTARY INFORMATION for further filing 
instructions.

FOR FURTHER INFORMATION CONTACT: Ian Dillner, Attorney, Competition 
Policy Division, Wireline Competition Bureau, at (202) 418-1191, or at 
[email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking in WC Docket No. 04-313 and CC Docket No. 01-
338, adopted July 21, 2004, and released August 20, 2004 (NPRM). The 
complete text of this 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. 
This document may also be purchased from the Commission's duplicating 
contractor, Best Copy and Printing, Inc., Portals II, 445 12th Street, 
SW., Room CY-B402, Washington, DC 20554, telephone 1-800-378-3160. It 
is also available on the Commission's Web site at http://www.fcc.gov.
    Comments may be filed using the Commission's Electronic Comment 
Filing System (ECFS) or by filing paper copies. All filings should 
refer to WC Docket No. 04-313 and CC Docket No. 01-338. Comments filed 
through ECFS can be sent as an electronic file via the Internet at 
http://www.fcc.gov/e-file/ecfs.html. Only one copy of an electronic 
submission must be filed. In completing the transmittal screen, 
commenters should include their full name, postal service mailing 
address, and the applicable docket numbers, which in this instance are 
WC Docket No. 04-313 and CC Docket No. 01-338. 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 
regarding line of the message: ``get form.'' A 
sample form and directions will be sent in reply.
    Parties who choose to file by paper must file an original and four 
copies of each filing. Parties filing by paper must also send five (5) 
courtesy copies to the attention of Janice M. Myles, Wireline 
Competition Bureau, Competition Policy Division, 445 12th Street, SW., 
Suite 5-C327, Washington, DC 20554, or via e-mail [email protected]. 
Paper filings and courtesy copies must be delivered in the following 
manner. 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, Natek, 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. This 
facility is the only location where hand-delivered or messenger-
delivered paper filings or courtesy copies for the Commission's 
Secretary and Commission staff will be accepted. 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, Office 
of the Secretary, Federal Communications Commission.
    Each comment and reply comment must include a short and concise 
summary of the substantive arguments raised in the pleading. Comments 
and reply comments must also comply with section 1.48 and all other 
applicable sections of the Commission's rules. We direct all interested 
parties to include the name of the filing party and the date of the 
filing on each page of their comments and reply comments. All parties 
are encouraged to utilize a table of contents, regardless of the length 
of their submission.

Synopsis of the Notice of Proposed Rulemaking

    1. Background. The Telecommunications Act of 1996 requires that 
incumbent local exchange carriers (LECs) provide unbundled network 
elements (UNEs) to other telecommunications carriers. In particular, 
section 251(c)(3) requires incumbent LECs to provide to requesting 
telecommunications carriers ``nondiscriminatory access to network 
elements on an unbundled basis at any technically feasible point on 
rates, terms, and conditions that are just, reasonable, and 
nondiscriminatory in accordance with . . . the requirements of this 
section and section 252.'' Section 251(d)(2)(B) authorizes the 
Commission to determine which elements are subject to unbundling. That 
section directs the Commission to consider, ``at a minimum,'' whether 
access to proprietary network elements is ``necessary'' and whether 
failure to provide a non-proprietary element on an unbundled basis 
would ``impair'' a requesting carrier's ability to provide service.
    2. The Commission has made several attempts to interpret these 
provisions and to set forth which network elements must be unbundled, 
and in what circumstances. Most recently, in August 2003, the 
Commission issued its Triennial Review Order, Review of the Section 251 
Unbundling Obligations of Incumbent Local Exchange Carriers, 
Implementation of the Local Competition Provisions of the 
Telecommunications Act of 1996, Deployment of Wireline Services 
Offering Advanced Telecommunications Capability, CC Docket Nos. 01-338, 
96-98, 98-147, Report and Order and Order on Remand and Further Notice 
of Proposed Rulemaking, 68 FR 52276, Sept. 2, 2003, vacated and 
remanded in part, affirmed in part, United States Telecom Association 
v. FCC, 359 F.3d 554 (DC Cir. 2004). That order was subsequently 
vacated and remanded in part by the United States Court of Appeals for 
the District of Columbia Circuit. See USTA II, 359 F.3d 554 (DC Cir. 
2004). This NPRM seeks comment on (1) how the Commission might best 
craft appropriate and sustainable unbundling policies in light of the 
DC Circuit's decision and, (2) appropriate transition mechanisms to 
govern unbundled access to network elements in the event the Commission 
determines that particular elements are not subject to the section 
251(c)(3) unbundling requirement.
    3. Notice of Proposed Rulemaking. First, the Commission seeks 
comment on how to respond to the DC Circuit's USTA II decision in 
establishing sustainable new unbundling rules under sections 251(c) and 
251(d)(2) of the Act. As an initial matter, the document seeks comment 
on what changes to the Commission's unbundling framework are necessary, 
given the guidance of the USTA II court. To that end, the

[[Page 55130]]

Commission seeks comment on how various incumbent LEC service offerings 
and obligations, such as tariffed offerings and Bell Operating Company 
(BOC) access obligations under section 271, fit into the Commission's 
unbundling framework. Moreover, we seek comment on how best to define 
relevant markets (e.g., product markets, geographic markets, customer 
classes) to develop rules that account for market variability and to 
conduct the service-specific inquiry to which USTA II refers. Also, the 
Commission seeks comment on how to respond to the DC Circuit's guidance 
on other threshold factors, including the relationship between 
universal service support and the provision of UNEs.
    4. Moving beyond the threshold unbundling issues, the NPRM seeks 
comment on how to apply the Commission's unbundling framework to make 
determinations on access to individual network elements. Thus, we seek 
comment on which specific network elements the Commission should 
require incumbent LECs to make available as UNEs, and how the 
Commission should make these determinations. Further, the Commission 
invites parties to comment on any other issues it should address in 
light of USTA II.
    5. The NPRM also seeks comment regarding the second phase of the 
twelve-month transition plan described in the simultaneously released 
Order, summarized separately. The first phase of this plan is designed 
to ensure the continued availability of unbundled switching, dedicated 
transport and enterprise market loops over the next six months. The 
second phase is meant to mitigate the disruption that might otherwise 
ensue in the absence of a Commission finding that any or all of those 
elements are subject to unbundling. The NPRM seeks comment on whether 
additional transition mechanisms apart from or beyond this second phase 
are appropriate. For example, we seek comment on what additional 
transition mechanisms, if any, would help to prevent service 
disruptions during cut-overs from UNE facilities to a carrier's own (or 
third-party) facilities, or for conversions to tariffed or other 
service arrangements.

Paperwork Reduction Act

    This NPRM does not contain proposed information collection(s) 
subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-
13. In addition, therefore, it does not contain any proposed 
``information collection burden for small business concerns with fewer 
than 25 employees,'' pursuant to the Small Business Paperwork Relief 
Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

Initial Regulatory Flexibility Analysis

    6. As required by the RFA, the Commission has prepared this IRFA of 
the 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 SBA Advocacy.

A. Need for, and Objectives of, the Proposed Rule

    7. We initiate this proceeding to begin a comprehensive examination 
of the circumstances under which incumbent LECs must make UNEs 
available to requesting carriers pursuant to sections 251(c)(3) and 
251(d)(2) of the Act. The Commission last reviewed its unbundling rules 
comprehensively in 2003 in the Triennial Review Order. Portions of the 
Triennial Review Order were vacated and/or remanded by the DC Circuit 
in its USTA II decision. The NPRM seeks comment on how the Commission 
should respond to the DC Circuit's opinion, both in terms of creating a 
legally sustainable impairment standard and applying that standard to 
individual network elements.

B. Legal Basis

    8. 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).

C. Description and Estimate of the Number of Small Entities To Which 
the Proposed Rules Would Apply

    9. 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 rules adopted 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.'' 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).
    10. In this section, we further describe and estimate the number of 
small entity licensees and regulatees that may be affected by our 
action. 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. Below, using 
the above size standards and others, we discuss the total estimated 
numbers of small businesses that might be affected by our actions.
    11. 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.'' 
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.
    12. 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 (LECs). Neither the 
Commission nor the SBA has developed a small business size standard 
specifically for incumbent local exchange services. The

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appropriate size standard under SBA rules is for the category Wired 
Telecommunications Carriers. Under that size standard, such a business 
is small if it has 1,500 or fewer employees. According to Commission 
data, 1,310 carriers have reported that they are engaged in the 
provision of incumbent local exchange services. Of these 1,310 
carriers, an estimated 1,025 have 1,500 or fewer employees and 285 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 our proposed action.
    14. Competitive Local Exchange Carriers (CLECs), Competitive Access 
Providers (CAPs), ``Shared-Tenant Service Providers,'' and ``Other 
Local Service Providers.'' Neither the Commission nor the SBA has 
developed a small business size standard specifically for these service 
providers. The appropriate size standard under SBA rules is for the 
category Wired Telecommunications Carriers. Under that size standard, 
such a business is small if it has 1,500 or fewer employees. According 
to Commission data, 563 carriers have reported that they are engaged in 
the provision of either competitive access provider services or 
competitive local exchange carrier services. Of these 563 carriers, an 
estimated 472 have 1,500 or fewer employees and 91 have more than 1,500 
employees. In addition, 14 carriers have reported that they are 
``Shared-Tenant Service Providers,'' and all 14 are estimated to have 
1.500 or fewer employees. In addition, 37 carriers have reported that 
they are ``Other Local Service Providers.'' Of the 37, an estimated 36 
have 1,500 or fewer employees and one has more than 1,500 employees. 
Consequently, the Commission estimates that most providers of 
competitive local exchange service, competitive access providers, 
``Shared-Tenant Service Providers,'' and ``Other Local Service 
Providers'' are small entities that may be affected by our proposed 
action.
    15. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a small business size standard specifically for 
providers of interexchange services. The appropriate size standard 
under SBA rules is for the category Wired Telecommunications Carriers. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. According to Commission data, 281 carriers have 
reported that they are engaged in the provision of interexchange 
service. Of these, an estimated 254 have 1,500 or fewer employees and 
27 have more than 1,500 employees. Consequently, the Commission 
estimates that the majority of IXCs are small entities that may be 
affected by our proposed action.
    16. Operator Service Providers (OSPs). Neither the Commission nor 
the SBA has developed a small business size standard specifically for 
operator service providers. The appropriate size standard under SBA 
rules is for the category Wired Telecommunications Carriers. Under that 
size standard, such a business is small if it has 1,500 or fewer 
employees. According to Commission data, 23 carriers have reported that 
they are engaged in the provision of operator services. Of these, an 
estimated 22 have 1,500 or fewer employees and one has more than 1,500 
employees. Consequently, the Commission estimates that the majority of 
OSPs are small entities that may be affected by our proposed action. 
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.
    17. 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, OSPs, 
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, 65 companies reported that their primary 
telecommunications service activity was the provision of other toll 
services. Of these 65 companies, an estimated 62 have 1,500 or fewer 
employees and three 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.
    18. 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, 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. 
Broadband PCS. The broadband PCS spectrum is divided into six frequency 
blocks designated A through F, and the Commission has held auctions for 
each block. The Commission defined ``small entity'' for Blocks C and F 
as an entity that has average gross revenues of $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 305, including judicial and agency

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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.
    19. Narrowband Personal Communications Services. The Commission 
held an auction for Narrowband PCS licenses that commenced on July 25, 
1994, and closed on July 29, 1994. A second auction commenced on 
October 26, 1994 and closed on November 8, 1994. For purposes of the 
first two Narrowband PCS auctions, ``small businesses'' were entities 
with average gross revenues for the prior three calendar years of $40 
million or less. Through these auctions, the Commission awarded a total 
of 41 licenses, 11 of which were obtained by four small businesses. To 
ensure meaningful participation by small business entities in future 
auctions, the Commission adopted a two-tiered small business size 
standard in the Narrowband PCS Second Report and Order, 65 FR 35875, 
Jun. 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. The SBA has approved these small business 
size standards. A third auction commenced on October 3, 2001 and closed 
on October 16, 2001. Here, five bidders won 317 (Metropolitan Trading 
Areas and nationwide) licenses. Three of these claimed status as a 
small or very small entity and won 311 licenses.
    20. 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 
definition of 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 category provides that a small 
business is a wireless company employing no more than 1,500 persons. 
According to the Census Bureau data for 1997, only twelve firms out of 
a total of 1,238 such firms that operated for the entire year in 1997, 
had 1,000 or more employees. 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 standard.
    21. 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, 62 FR 16004 Apr. 3, 1997, we adopted a small 
business size standard for defining ``small'' and ``very small'' 
businesses for purposes of determining their eligibility for special 
provisions such as bidding credits and installment payments. This small 
business 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 defined as 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 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 373 licenses in the first 220 MHz auction. A 
second auction included 225 licenses: 216 EA licenses and 9 EAG 
licenses. Fourteen companies claiming small business status won 158 
licenses. A third auction included four licenses: 2 BEA licenses and 2 
EAG licenses in the 220 MHz Service. No small or very small business 
won any of these licenses.
    22. Specialized Mobile Radio. The Commission awards ``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. The Commission awards ``very small entity'' bidding 
credits to firms that had revenues of no more than $3 million in each 
of the three previous calendar years. The SBA has approved these small 
business size standards for the 900 MHz Service. The Commission has 
held auctions for geographic area licenses in the 800 MHz and 900 MHz 
bands. The 900 MHz SMR auction began on December 5, 1995, and closed on 
April 15, 1996. Sixty bidders claiming that they qualified as small 
businesses under the $15 million size standard won 263 geographic area 
licenses in the 900 MHz SMR band. The 800 MHz SMR auction for the upper 
200 channels began on October 28, 1997, and was completed on December 
8, 1997. Ten bidders claiming that they qualified as small businesses 
under the $15 million size standard won 38 geographic area licenses for 
the upper 200 channels in the 800 MHz SMR band. A second auction for 
the 800 MHz band was held on January 10, 2002 and closed on January 17, 
2002 and included 23 BEA licenses. One bidder claiming small business 
status won five licenses.
    23. Common Carrier Paging. The SBA has developed a small business 
size standard for wireless firms within the broad economic census 
categories of ``Cellular and Other Wireless Telecommunications.'' Under 
this SBA category, 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.
    24. In the Paging Second Report and Order, 62 FR 11616, Mar. 12, 
1997, the Commission adopted a size standard for ``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. The SBA has approved this definition. An 
auction of Metropolitan Economic Area (MEA) licenses commenced on 
February 24, 2000, and closed on March 2, 2000. Of the 2,499 licenses 
auctioned, 985 were sold. Fifty-seven companies claiming small business 
status won 440 licenses. An auction of MEA and Economic Area

[[Page 55133]]

(EA) licenses commenced on October 30, 2001, and closed on December 5, 
2001. Of the 15,514 licenses auctioned, 5,323 were sold. One hundred 
thirty-two companies claiming small business status purchased 3,724 
licenses. A third auction, consisting of 8,874 licenses in each of 175 
EAs and 1,328 licenses in all but three of the 51 MEAs commenced on May 
13, 2003, and closed on May 28, 2003. Seventy-seven bidders claiming 
small or very small business status won 2,093 licenses. Currently, 
there are approximately 74,000 Common Carrier Paging licenses. 
According to the most recent Trends in Telephone Service, 379 private 
and common carriers reported that they were engaged in the provision of 
either paging or ``other mobile'' services. Of these, we estimate that 
373 are small, under the SBA-approved small business size standard. We 
estimate that the majority of common carrier paging providers would 
qualify as small entities under the SBA definition.
    25. 700 MHz Guard Band Licenses. In the 700 MHz Guard Band Order, 
we adopted size standards 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 in this service is an entity that, together with its 
affiliates and controlling principals, has average gross revenues not 
exceeding $40 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 $15 million for the preceding three years. SBA approval of these 
definitions is not required. 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. 
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 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 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.
    26. Air-Ground Radiotelephone Service. The Commission has not 
adopted a small business size standard specific to the Air-Ground 
Radiotelephone Service. We 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.
    27. 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.
    28. 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 proposed herein. We noted, however, that the common 
carrier microwave fixed licensee category includes some large entities.
    29. Offshore Radiotelephone Service. This service operates on 
several ultra high frequencies (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.
    30. Wireless Communications Services. This service can be used for 
fixed, mobile, radiolocation, and digital audio broadcasting satellite 
uses. The Commission defined ``small business'' for the wireless 
communications services (WCS) auction as an entity with average gross 
revenues of $40 million for each of the three preceding years,

[[Page 55134]]

and a ``very small business'' as an entity with average gross revenues 
of $15 million for each of the three preceding years. The SBA has 
approved these definitions. The Commission auctioned geographic area 
licenses in the WCS service. In the auction, which commenced on April 
15, 1997 and closed on April 25, 1997, there were seven bidders that 
won 31 licenses that qualified as very small business entities, and one 
bidder that won one license that qualified as a small business entity. 
An auction for one license in the 1670-1674 MHz band commenced on April 
30, 2003 and closed the same day. One license was awarded. The winning 
bidder was not a small entity.
    31. 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 proposed herein.
    32. Multipoint Distribution Service, Multichannel Multipoint 
Distribution Service, and Instructional Television Fixed Service. 
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 defined 
``small business'' as an entity that, together with its affiliates, has 
average gross annual revenues that are not more than $40 million for 
the preceding three calendar years. The SBA has approved of this 
standard. The MDS auction resulted in 67 successful bidders obtaining 
licensing opportunities for 493 Basic Trading Areas (BTAs). Of the 67 
auction winners, 61 claimed status as a small business. At this time, 
we estimate that of the 61 small business MDS auction winners, 48 
remain small business licensees. In addition to the 48 small businesses 
that hold BTA authorizations, there are approximately 392 incumbent MDS 
licensees that have gross revenues that are not more than $40 million 
and are thus considered small entities.
    33. 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 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 proposed rules and policies.
    34. Finally, while SBA approval for a Commission-defined small 
business size standard applicable to ITFS is pending, educational 
institutions are included in this analysis as small entities. There are 
currently 2,032 ITFS licensees, and all but 100 of these licenses are 
held by educational institutions. Thus, we tentatively conclude that at 
least 1,932 ITFS 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 986 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 32 small and very small businesses bidding that won 119 
licenses.
    36. 218-219 MHz Service. The first auction of 218-219 MHz 
(previously referred to as the Interactive and Video Data Service or 
IVDS) spectrum resulted in 178 entities winning licenses for 594 
Metropolitan Statistical Areas (MSAs). Of the 594 licenses, 567 were 
won by 167 entities qualifying as a small business. For that auction, 
we defined a small business as 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 
defined 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 
exceeding $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 exceeding $3 million 
for the preceding three years. The SBA has approved of these 
definitions. At this time, we cannot estimate 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. 
Given the success of small businesses in the previous auction, and the 
prevalence of small businesses in the subscription television services 
and message communications industries, we assume for purposes of this 
analysis that in future auctions, many, and perhaps all, of the 
licenses may be awarded to small businesses.
    37. Incumbent 24 GHz 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

[[Page 55135]]

entity. Thus, only one incumbent licensee in the 24 GHz band is a small 
business entity.
    38. Future 24 GHz Licensees. With respect to new applicants in the 
24 GHz band, we have defined ``small business'' as an entity that, 
together with controlling interests and affiliates, has average annual 
gross revenues for the three preceding years not exceeding $15 million. 
``Very small business'' in the 24 GHz band is defined as 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 definitions. The Commission will not know 
how many licensees will be small or very small businesses until the 
auction, if required, is held.
    39. Internet Service Providers. The SBA has developed a small 
business size standard for Internet Service Providers. This category 
comprises establishments ``primarily engaged in providing direct access 
through telecommunications networks to computer-held information 
compiled or published by others.'' Under the SBA size standard, such a 
business is small if it has average annual receipts of $21 million or 
less. According to Census Bureau data for 1997, there were 2,751 firms 
in this category that operated for the entire year. Of these, 2,659 
firms had annual receipts of under $10 million, and an additional 67 
firms had receipts of between $10 million and $24,999,999. Thus, under 
this size standard, the great majority of firms can be considered small 
entities.

D. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities

    40. In this NPRM, we seek comment on proposed rules that would 
establish unbundling requirements for incumbent LECs, pursuant to 
sections 251(c) and 251(d)(2) of the Act. The Commission last reviewed 
its unbundling rules comprehensively in 2003 in the Triennial Review 
Order. Portions of the Triennial Review Order were vacated and/or 
remanded by the DC Circuit in its USTA II decision. The NPRM seeks 
comment on how the Commission should respond to the DC Circuit's 
opinion, in terms of both how to create a legally sustainable 
impairment standard, as well as applying that standard to individual 
network elements.

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

    41. The RFA requires an agency to describe any significant 
alternatives that it has considered in developing its 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 and reporting requirements under the rule for such 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 
such small entities.''
    42. In this NPRM, we seek comment on how to develop legally 
sustainable rules for access to unbundled network elements. We seek 
comment, for instance, on how best to define markets, including product 
markets and customer classes. We also wish to solicit comment on the 
economic effect that various UNE approaches might have on small entity 
telecommunications providers.

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

    43. None.

Ordering Clause

    Accordingly, it is ordered that the Notice of Proposed Rulemaking 
is adopted.

Federal Communications Commission.
William F. Caton,
Deputy Secretary
[FR Doc. 04-20467 Filed 9-10-04; 8:45 am]
BILLING CODE 6712-01-P