[Federal Register Volume 69, Number 229 (Tuesday, November 30, 2004)]
[Proposed Rules]
[Pages 69573-69578]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-26385]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 51

[WC Docket No. 02-78; FCC 04-252]


Petition of Mid-Rivers Telephone Cooperative, Inc. for Order 
Declaring It To Be an Incumbent Local Exchange Carrier in Terry, MT 
Pursuant to Section 251(h)(2)

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: This Notice of Proposed Rulemaking (NPRM) solicits comment on 
the application of section 251(h)(2) of the Communications Act of 1934, 
as amended, regarding the reclassification of competitive local 
exchange carriers (LECs) to incumbent LECs. Mid-Rivers Telephone 
Cooperative, Inc. (Mid-Rivers) filed a petition to be classified as an 
incumbent LEC. The Commission makes tentative conclusions addressing 
Mid-Rivers petition in part and poses questions concerning the 
application of section 251(h)(2) in Mid-Rivers case, as well as other 
similar cases.

DATES: Comments are due on or before December 30, 2004, and reply 
comments are due on or before January 14, 2005.

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. 02-78, adopted October 21, 
2004, and released November 15, 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. 02-78. 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 number, 
which in this instance is WC Docket No. 02-78. 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 three (3) 
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. Mid-Rivers Telephone Cooperative, Inc. (Mid-Rivers), 
a competitive LEC in the Terry, Montana exchange, filed a petition with 
the Commission requesting classification as an incumbent LEC in the 
Terry exchange pursuant to section 251(h)(2) of the Communications Act 
of 1934, as amended (the Act or Communication Act). This provision 
allows the Commission to determine ``by rule'' to treat a competitive 
LEC as an incumbent LEC if it satisfies a three-prong test: (1) The 
carrier occupies a market position comparable to an incumbent LEC; (2) 
the carrier has ``substantially replaced'' an incumbent LEC, and; (3) 
the reclassification serves the public interest, convenience, and 
necessity. 47 U.S.C. 251(h)(2).
    2. Mid-Rivers, also an incumbent LEC in a nearby exchange, filed 
this petition as a result of its success in acquiring approximately 93 
percent of the access

[[Page 69574]]

lines in the Terry exchange, almost exclusively on its own facilities. 
Mid-Rivers asserts that it should be classified as an incumbent LEC. 
Mid-Rivers' petition is supported by several parties, but also is 
opposed by two parties.
    3. Notice of Proposed Rulemaking. For Mid-Rivers to be treated as 
an incumbent LEC, the Commission must first find that it ``occupies a 
position in the market for telephone exchange service with an area that 
is comparable to the position occupied by [an incumbent LEC]''. 47 
U.S.C. 251(h)(2)(A). The Commission seeks comment on how to define the 
relevant ``area'' under section 251(h)(2)(A). Assuming that the Terry 
exchange is the relevant ``area,'' the Commission tentatively concludes 
that Mid-Rivers satisfies the first prong of the statutory standard, 
based on their provisioning of facilities based service to 93 percent 
of the exchange.
    4. The second prong of section 251(h)(2)(B) requires a showing that 
Mid-Rivers has ``substantially replaced'' an incumbent LEC. 47 U.S.C. 
251(h)(2)(B). The Commission set out a standard for fulfilling this 
requirement in the Guam Declaratory Ruling and NPRM, where the 
applicant LEC provides services ``to all or virtually all'' of the 
subscribers in the area. 62 FR 29320-01, adopted, 63 FR 42275-01. 
Again, assuming the relevant ``area'' is the Terry exchange, the 
Commission tentatively concludes that Mid-Rivers has ``substantially 
replaced'' Qwest, based on its 93 percent share of the exchange, 
satisfying section 251(h)(2)(B). 47 U.S.C. 251(h)(2)(B).
    5. Additionally, the Commission seeks comment on whether the 
requested classification will fulfill the ``public interest, 
convenience, and necessity'' requirements under 251(h)(2)(C). As part 
of this inquiry, we also seek comment on the benefits of advanced 
services provided by Mid-Rivers and on whether the public interest is 
satisfied, possibly including consideration of broader market 
conditions. We also seek comment on the significance of universal 
service concerns, including possible effects on high-cost universal 
service support. Further, we seek comment on the relevance of access 
charge issues to the public interest analysis.
    6. Another consideration, which the Mid-Rivers petition does not 
discuss, is the subsequent regulatory treatment of Qwest, as Qwest 
still fits the literal definition of an incumbent LEC. Because this is 
a novel issue for the Commission, and section 251(h) is silent on the 
matter, we seek comment on what regulatory treatment is appropriate for 
legacy incumbent LECs. Furthermore, the Commission seeks comment on 
whether automatic reclassification of the legacy incumbent LEC is an 
appropriate result of reclassifying the competitive LEC. The Commission 
also requests comment on whether two incumbent LECs can co-exist in an 
exchange, and the implications this would have on the current 
implementation of the Act including, universal service, and other rules 
predicated on a single incumbent LEC per area. The Commission has 
authority under section 10 of the Act to forbear from certain 
requirements and seeks comments on whether this is the required 
mechanism to address the situation.
    7. Finally, the Commission seeks to develop a record on other 
considerations regarding this petition. We seek comment on whether 
revised Commission rules might resolve this situation. We also seek 
comment on current market trends that are related to this issue, and 
what underlying market and regulatory motivations are driving such a 
trend. We seek further comment on the process the Commission should use 
to address any further applications of this type. If the record 
indicates that a number of similar carriers are interested in filing 
similar applications, we seek comment on whether and how to administer 
an efficient process.

Paperwork Reduction Act

    8. 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

    9. 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.

1. Need for, and Objectives of, the Proposed Rules

    10. The Commission initiates this rulemaking proceeding because the 
Mid-Rivers' petition raises novel and difficult questions implicating 
several of the Commission's major policies affecting LECs of all sizes, 
including local competition, universal service, and access charges. In 
this proceeding, we seek comment on whether Mid-Rivers satisfies the 
requirements of section 251(h)(2) to be classified as an incumbent LEC 
in Terry, Montana. To this end, the Commission makes tentative 
conclusions that Mid-Rivers satisfies the first two statutory prongs of 
section 251(h)(2). However, the Commission will weigh these tentative 
conclusions against the alternative possibility that Mid-Rivers does 
not satisfy the standards set forth in the Act. The Commission also 
plans to consider whether the petition satisfies the third prong of 
section 251(h)(2)--the public interest standard--and will weigh the 
benefits of granting the application against other considerations, such 
as the impact on other major Commission policies. Furthermore, the 
Commission plans to review: (1) The subsequent regulatory treatment of 
Qwest, including whether two incumbent LECs can serve the same 
exchange, and whether the Commission is authorized to reclassify Qwest 
as a competitive LEC; (2) whether the Act permits expected future 
applications of this type to be decided by final order rather than by 
rulemaking; and (3) the appropriate regulatory requirements for 
classification changes such as these. Thus, we ask interested parties 
to address how the Commission can best balance its objective to advance 
local competition and other policy goals within the existing statutory 
and regulatory framework. The Commission also plans to consider the 
various alternative approaches, as described in the Notice of Proposed 
Rulemaking.

2. Legal Basis

    11. The legal basis for any action that may be taken pursuant to 
this Notice is contained in sections 4, 10, 201-202, 214, 303 and 403 
of the Communications Act of 1934, as amended, 47 U.S.C. 154, 160, 201-
204, 214, 303, and 403, section 706 of the Telecommunications Act of 
1996, 47 U.S.C. 157nt, and Sec. Sec.  1.1, 1.48, 1.411, 1.412, 1.415, 
1.419, and 1.1200-1.1216, of the Commission's rules, 47 CFR 1.1, 1.48, 
1.411, 1.412, 1.415, 1.419, and 1.1200-1.1216.

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

    12. The RFA directs agencies to provide a description of, and, 
where feasible, an estimate of, the number of

[[Page 69575]]

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).
    13. In this section, we further describe and estimate the number of 
small entity licensees and regulatees that may be affected by rules 
adopted in this Order. 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.
    14. 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.
    15. 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.
    16. 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 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.
    17. 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.
    18. 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.
    19. 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.
    20. 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.
    21. 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

[[Page 69576]]

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.
    22. 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 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.
    23. 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, 
June 6, 2000. A ``small business'' is an entity that, together with 
affiliates and controlling interests, has average gross revenues for 
the three preceding years of not more than $40 million. A ``very small 
business'' is an entity that, together with affiliates and controlling 
interests, has average gross revenues for the three preceding years of 
not more than $15 million. 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.
    24. 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.
    25. 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.
    26. 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

[[Page 69577]]

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.
    27. 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.
    28. 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.
    29. 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 entity. Thus, only one 
incumbent licensee in the 24 GHz band is a small business entity.
    30. 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.

4. Description of Projected Reporting, Recordkeeping and Other 
Compliance Requirements

    31. The Commission in this Notice of Proposed Rulemaking makes 
tentative conclusions as to some, but not all of the necessary 
requirements of section 251(h)(2) for a competitive LEC, Mid-Rivers, to 
be declared an incumbent LEC. Should the Commission decide to find, 
after reviewing the record, that Mid-Rivers satisfies the requirements 
of section 251(h)(2) to be declared an incumbent LEC, and should the 
Commission make a finding as to the appropriate regulatory 
classification of the legacy incumbent LEC Qwest, the filing and 
compliance requirements of both Mid-Rivers and Qwest could potentially 
change. This is because incumbent LEC status often entails additional 
regulatory obligation and our decision on how to treat the legacy 
incumbent LEC could reduce Qwest's regulatory obligation. The 
Commission seeks comment in this Notice of Proposed Rulemaking 
regarding what, if any, broadly applicable rules would be necessary to 
properly implement this provision of the Act. Without more certainty 
about what rules, if any, the Commission will choose to adopt, we 
cannot accurately estimate the cost of compliance by small carriers. We 
therefore seek comment on the types of burdens carriers could face if 
the proposed recommendations are adopted. Entities, especially small 
businesses, are encouraged to quantify, if possible, the costs and 
benefits of potential reporting, recordkeeping, and other compliance 
requirements.

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

    32. The RFA requires an agency to describe any significant, 
specifically small business, alternatives that it has considered in 
reaching its proposed approach, which may include the following four 
alternatives (among others): (1) The establishment of differing 
compliance or reporting requirements or timetables that take into 
account the resources available to small entities; (2) the 
clarification, consolidation, or simplification of compliance or 
reporting requirements under the rule for small entities; (3) the use 
of performance, rather than design, standards; and (4) an exemption 
from coverage of the rule, or any part thereof, for small entities.
    33. While the Commission's primary concern is to implement the 
provisions of the Act, the Commission also plans to evaluate any 
adverse effect that its review of issues in this proceeding will have 
on small business entities. Our tentative conclusions that Mid-Rivers 
satisfies two of the three prongs of the statutory standard apply 
irrespective of the petitioner's size. However, some of the regulations 
and obligations that pertain to the incumbent LEC status that Mid-
Rivers seeks are, by statute, limited in many circumstances because the 
Act exempts certain small incumbent local exchange telephone companies 
from the significant obligations of section 251(c). Thus, because Mid-
Rivers qualifies for the exemption because of its small size, if our 
tentative conclusions are adopted as a part of an order granting the 
relief requested by Mid-Rivers, it is most likely that Mid-Rivers will 
not be subject to many of the costly regulations that generally pertain 
to incumbent LECs. Finally, we also consider procedural mechanisms 
that, if warranted, could potentially reduce the burdens on small 
entities that wish to seek similar treatment from the Commission. While 
it remains unclear what effect the alternative choices we face in this 
proceeding will have on small business entities, establishing this 
rulemaking will create a full record upon which we can more capably 
weigh these matters.

[[Page 69578]]

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

    34. None.

Ordering Clause

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

    Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 04-26385 Filed 11-29-04; 8:45 am]
BILLING CODE 6712-01-P