[Federal Register Volume 73, Number 161 (Tuesday, August 19, 2008)]
[Proposed Rules]
[Pages 48352-48359]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-19178]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 54
[CC Docket No. 02-6; FCC 08-173]
Schools and Libraries Universal Service Support Mechanism
AGENCY: Federal Communications Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: In this document, the Commission seeks comment on whether
certain services should be designated as eligible for funding under the
schools and libraries universal service support mechanism, also known
as the E-rate program. The Commission also seeks comment on whether to
retain interconnected Voice over Internet Protocol (interconnected
VoIP) as an eligible service for future funding years.
DATES: Comments are due on or before September 18, 2008. Reply comments
are due on or before October 3, 2008.
ADDRESSES: You may submit comments, identified by CC Docket No. 02-6,
by any of the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Federal Communications Commission's Web Site: http://www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
E-mail: [email protected], and include the following words in
the body of the message, ``get form.'' A sample form and directions
will be sent in response. Include the docket number in the subject line
of the message.
[[Page 48353]]
Mail: Secretary, Federal Communications Commission, 445
12th Street, SW., Washington, DC 20554.
People with Disabilities: Contact the FCC to request
reasonable accommodations (accessible format documents, sign language
interpreters, CART, etc.) by e-mail: [email protected] or phone: 202-418-
0530 or TTY 202-418-0432.
For detailed instructions for submitting comments and additional
information on the rulemaking process, see the SUPPLEMENTARY
INFORMATION section of this document.
FOR FURTHER INFORMATION CONTACT: James Bachtell or Cara Voth, Wireline
Competition Bureau, Telecommunications Access Policy Division, 202-418-
7400 or TTY 202-418-0484.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Notice of Proposed Rulemaking in CC Docket No. 02-6, FCC 08-173,
adopted July 25, 2008, and released July 31, 2008. The complete text of
this document 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. The document may
also be purchased from the Commission's duplicating contractor, Best
Copy and Printing, Inc., 445 12th Street, SW., Room CY-B402,
Washington, DC 20554, telephone 800-378-3160 or 202-863-2893, facsimile
202-863-2898, or via e-mail at http://www.bcpiweb.com. It is also
available on the Commission's Web site at http://www.fcc.gov.
Initial Paperwork Reduction Act of 1995 Analysis
This document 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 new or modified
``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).
Synopsis of the Notice of Proposed Rulemaking
Introduction
1. In this Notice of Proposed Rulemaking (NPRM), we seek comment on
whether certain services should be designated as eligible for funding
under the schools and libraries universal service support mechanism,
also known as the E-rate program. We seek comment on whether, beginning
in Funding Year 2009, the Eligible Services List (ESL) should include
filtering software, a broader classification of basic telephone
service, dark fiber, text messaging, firewall service, anti-virus/anti-
spam software, scheduling services, telephone broadcast messaging, and
certain wireless Internet access applications. In addition, we seek
comment on whether to retain interconnected Voice over Internet
Protocol (interconnected VoIP) as an eligible service for future
funding years. During the pleading cycles established for the Funding
Years 2007 and 2008 ESLs, numerous parties commented on the need to
make these services eligible for E-rate program discounts. We now seek
comment on whether these services may be supported and whether support
for these services will encourage access to advanced telecommunications
and information services for public and non-profit elementary and
secondary school classrooms and libraries.
Background
2. Under the E-rate program, eligible schools, libraries, and
consortia that include eligible schools and libraries may receive
discounts for eligible telecommunications services, Internet access,
and internal connections. Section 254 of the Communications Act of
1934, as amended (the Act), gives the Commission the authority to
designate ``telecommunications services'' and certain additional
services eligible for support under the E-rate program. The Commission
has also determined that it has the authority to designate services
eligible for schools and libraries support as part of its authority to
enhance, to the extent technically feasible and economically
reasonable, access to advanced telecommunications and information
services for all public and non-profit elementary and secondary school
classrooms and libraries.
3. Since the initial implementation of the E-rate program in 1998,
the Universal Service Administrative Company (USAC) has developed
various procedures and guidelines, consistent with the Commission's
rules and requirements, for applicants to ensure that funding is
provided only for eligible services. The ESL indicates whether specific
products or services are eligible to receive discounts under the E-rate
program. The ESL is divided into several categories--telecommunications
service, Internet access, internal connections, basic maintenance of
internal connections, and miscellaneous.
4. On December 23, 2003, the Commission adopted Sec. 54.522 of its
rules, formalizing the process for updating the ESL for the E-rate
program. Specifically, Sec. 54.522 requires the Commission to seek
comment on USAC's proposed ESL and to issue a Public Notice attaching
the final ESL for the upcoming funding year at least 60 days prior to
the opening of the funding window for the E-rate program.
5. Pursuant to the Commission's rules, the Commission released
Public Notices seeking comment on USAC's proposed ESL for Funding Years
2007 and 2008. In revising the 2007 and 2008 ESLs, we noted that the
proceedings were limited to determining what services are eligible
under the Commission's current rules and were not intended to be a
vehicle for changing eligibility rules. Therefore, we indicated that
those comments not addressed in the ESLs may be more appropriately
filed for the Commission's consideration in the general docket for the
E-rate program.
Discussion
6. In this NPRM, we seek comment on a number of issues raised by
the commenters that may not have been addressed as part of the ESL
process for Funding Year 2008 or prior years. Specifically, we seek
comment on whether to include interconnected VoIP service, filtering,
dark fiber, and other services in the ESL, in future funding years. We
also seek comment on which rules, if any, would need to be amended to
effectuate any changes made as a result of this NPRM. For instance,
Sec. Sec. 54.502 and 54.503 describe services that can be provided by
telecommunications carriers while Sec. 54.517 describes what services
can be provided by non-telecommunications carriers. Should we
reorganize or restructure the rules relating to the eligible services
and the ESL to better inform applicants of which services are
supported?
Interconnected VoIP Service
7. Interconnected VoIP service is defined as a service that: (1)
Enables real-time, two-way voice communications; (2) requires a
broadband connection from the user's location; (3) requires Internet
protocol-compatible customer premises equipment (CPE); and (4) permits
users generally to receive calls that originate on the public switched
telephone network and to terminate calls to the public switched
telephone network.
8. The Commission has addressed interconnected VoIP services in
various contexts other than E-rate eligible services in recent years.
In June 2006, the Commission established universal service obligations
for providers of
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interconnected VoIP service. The Commission required providers of
interconnected VoIP services to contribute to the Universal Service
Fund (USF) on an interim basis in order to sustain the USF, but the
Commission did not classify interconnected VoIP service as either a
telecommunications service or an information service. It did, however,
for purposes of finding permissive authority under section 254(d) of
the Act, find that interconnected VoIP providers are providers of
interstate telecommunications. In 2007, the Commission also extended
local number portability obligations to interconnected VoIP providers
and extended the disability access requirements that currently apply to
telecommunications service providers and equipment manufacturers to
interconnected VoIP providers.
9. Consistent with these recent Commission actions, interconnected
VoIP service was included as an eligible service in the 2007 and 2008
ESLs. The Commission has not yet determined if interconnected VoIP
services are telecommunications services or information services.
Consequently, the 2007 and 2008 ESLs listed interconnected VoIP
services under the ``Miscellaneous'' category.
10. As established by section 254(c)(3) of the Act, the Commission
may designate additional services for universal service support.
Furthermore, the Act also authorizes the Commission to establish
competitively neutral rules to enhance access to advanced
telecommunications and information services. We tentatively conclude
that interconnected VoIP service should be designated as a supported
service for the E-rate program in future funding years. Because the
Commission required interconnected VoIP service providers to contribute
to the USF, the policy of competitive neutrality would support a
finding that providers of interconnected VoIP services should also be
able to participate in the universal service E-rate program and,
consequently, that interconnected VoIP service be included in the ESL.
We also agree with commenters that the inclusion of interconnected VoIP
service as an eligible service enhances the options available to
schools and libraries to effectuate meaningful communications among
parents, teachers, and school and library administrators.
11. We tentatively conclude that it is administratively and
operationally appropriate for interconnected VoIP service requests to
be processed as a Priority 1 service. We seek comment on this tentative
conclusion. If interconnected VoIP service is deemed an eligible
service, we also seek comment on how USAC would implement this
tentative conclusion. For example, is it appropriate for applicants to
label interconnected VoIP service as an Internet access service when
applying for E-rate program funding? If so, should we require
applicants requesting funding for interconnected VoIP services to
certify to Children's Internet Protection Act (CIPA) requirements? All
schools and libraries seeking funding for Internet access or internal
connections under the E-rate program must have technology that blocks
or filters Internet access to obscenity, pornography, and material
deemed harmful to minors under the CIPA. Applicants seeking funding
only for telecommunications services do not have to comply with CIPA.
Should we require applicants requesting funding for interconnected VoIP
services to comply with CIPA if the applicant does not also receive E-
rate funds for Internet access, Internet service, or internal
connections? As noted earlier, the 2008 ESL identifies interconnected
VoIP service under the miscellaneous category. As the Commission
explained in the VoIP 911 Order, customers who purchase interconnected
VoIP service receive a service that ``enables a customer to do
everything (or nearly everything) the customer could do using an analog
telephone.'' We therefore seek comment on whether ``Miscellaneous'' is
the appropriate category for interconnected VoIP services or if another
category would be more appropriate. If a commenter believes that
another category is more appropriate, we ask that the commenter
identify the appropriate category and explain why such category is more
appropriate. Finally, we seek comment on the effect, if any, that the
removal of interconnected VoIP service from the 2009 ESL would have on
the E-rate program or upon applicants that rely on this service.
Filtering Software
12. We seek comment on whether stand-alone filtering software
should be funded under the E-rate program. Filtering software protects
users from inappropriate content by selectively blocking certain words
or Internet sites. In 2001, the Commission determined that CIPA
prohibited the use of E-rate funding for filtering software. Section
1721(g) of CIPA states that funds from the Elementary and Secondary
Education Act of 1965 or the Library Services and Technology Act may be
used to purchase filtering technology necessary to meet the
requirements of CIPA, but ``[n]o other sources of funds for the
purchase or acquisition of such measures are authorized by this title,
or the amendments made by this title.'' The Commission interpreted this
passage to mean that no sources of funds other than those explicitly
listed in CIPA, which did not include E-rate program funds, could be
used for the purchase of filtering software to comply with CIPA.
13. We seek comment on the Commission's prior interpretation of
section 1721(g) of CIPA and whether it should be reconsidered.
Specifically, parties are asked to comment on whether this provision
explicitly prohibits E-rate program funding from being used for
filtering software or whether the statute can be interpreted so that
the Commission is not precluded from funding filtering software through
the E-rate program. We also seek comment on whether schools and
libraries have an additional need for subsidized filtering services
because Congress requires content filtering for the receipt of E-rate
funding. We further seek comment on whether making filtering eligible
may help streamline the application review process by reducing the
administrative effort and costs associated with determining whether a
school or library is seeking E-rate funding for costs associated with
stand-alone filtering services. We also seek comment on whether
classifying stand-alone filtering services as eligible for E-rate
support would also reduce confusion for applicants.
Basic Telephone Service
14. We seek comment on whether the definition of ``basic''
telephone service should be expanded to include additional services
under the E-rate program. The Commission requires participating schools
and libraries to base their requests for discounts on an approved
technology plan, unless they are seeking discounts on ``basic local,
cellular, PCS, and/or long distance telephone service and/or voicemail
only.'' We seek comment on whether the classification of basic
telephone service should include services such as a Private Branch
eXchange (PBX), key systems, T1 lines, and interconnected VoIP and
Primary Rate Interface (PRI) trunk lines connecting a PBX to the Public
Switched Telephone Network (PSTN), for the purpose of also exempting
these services from the technology plan requirement. We seek comment on
whether applicants will continue to sufficiently align their funding
requests with their service needs if we classify these services as
``basic'' telephone service for purposes
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of eliminating the technology plan requirement. We seek comment on
whether it is appropriate to expand the definition to classify certain
Priority 2 services as ``basic'' telephone service, a Priority 1
service. Commenters should discuss how any changes to the definition of
``basic'' telephone service to include certain Priority 2 services
affect the Commission's determination that facilities located on an
applicant's premises are presumed to be Priority 2 internal
connections.
Dark Fiber
15. We seek comment on whether unlit (dark) fiber should be
eligible for discounts under the E-rate program. Dark fiber was
conditionally eligible for E-rate discounts prior to Funding Year 2004.
In the Schools and Libraries Third Report and Order, FCC 03-323,
released in 2003, however, the Commission found that dark fiber was not
eligible for discounts and sought comment on whether dark fiber should
be funded under the E-rate program. We now incorporate that record into
this proceeding and ask commenters to refresh the record on whether
dark fiber should be included as an eligible service. While the
statutory classification of dark fiber remains an open issue, we note
that if dark fiber were eligible for E-rate discounts, the service
could be supported under the Act as an ``additional'' service, rather
than as a ``telecommunications service.'' As such, we seek comment on
whether dark fiber should be classified under the miscellaneous
category or some other category of service. We also seek comment on
technological or other changes that have occurred since we last sought
comment on this issue in 2003. Commenters should address whether these
changes alter the Commission's prior conclusion that only a functioning
(lit) fiber optic service provided by a telecommunications service
provider or Internet access provider should be eligible for E-rate
support.
Other Services
16. We seek comment on whether several individual services--text
messaging, firewall, anti-virus/anti-spam software, scheduling services
and telephone broadcast messaging--should be eligible for the E-rate
program under section 254(c)(3) of the Act. We seek comment on whether
funding these services through E-rate will encourage access to advanced
telecommunications and information services for public and non-profit
elementary and secondary school classrooms and libraries. We also seek
comment on how schools and libraries would use these services and
whether the use would be for ``educational purposes,'' as required by
our rules. For the services discussed in this section, we seek comment
on how each service, if it is added to the ESL, should be categorized.
Specifically, commenters should indicate whether the service should be
categorized as a telecommunications service, Internet access service,
and/or listed in the miscellaneous category. Should we require
applicants requesting funding for the services discussed in this
section to certify to CIPA requirements? As discussed above, we note
that all schools and libraries seeking funding for Internet access or
internal connections under the E-rate program must have technology that
blocks or filters Internet access to obscenity, pornography, and
material deemed harmful to minors under the CIPA. Applicants seeking
funding only for telecommunications services do not have to comply with
CIPA. Should we require applicants requesting funding for the services
discussed in this section to comply with CIPA if the applicant does not
also receive E-rate funds for Internet access, Internet service, or
internal connections?
17. Text Messaging. We seek comment on whether text messaging
should be an eligible service. Text messaging, known as short message
service or SMS, is a service that allows short messages, typically up
to 160 characters, to be sent to and from handheld wireless devices. We
specifically seek comment on the extent to which SMS is functionally
equivalent to e-mail and paging and how the current eligibility of
these two messaging services should affect our treatment of text
messaging as an eligible service. Because text messaging is often
bundled with other eligible telecommunications services, we seek
comment on whether including text messaging as an eligible service
would reduce the burden and administrative costs for applicants,
service providers and USAC.
18. Firewall. We seek comment on whether separately priced firewall
services should be eligible under the E-rate program, as recommended by
a number of commenters. Firewall service is described as ``a hardware
and software combination that sits at the boundary between an
organization's network and the outside world, and protects the network
against unauthorized access or intrusions.'' In the 2007 ESL, the
Commission clarified that only basic firewall services that are
provided as a standard component of a vendor's Internet access service
are eligible for E-rate program discounts. We seek comment on whether a
new definition of eligible firewall services should be adopted and
whether it should include such technology as intrusion prevention
devices, network access control, firewall traversal, and deep packet
inspection devices. Commenters should also identify any technologies
other than these that should be considered for funding. We ask
commenters to provide a proposed definition and to explain why such
definition is appropriate.
19. Anti-Virus/Anti-Spam Software. We seek comment on whether we
should extend E-rate program eligibility to anti-virus and anti-spam
software. Currently, only network operating system software and server-
based e-mail and voice mail software are eligible for E-rate funds.
Software that protects computer components from viruses and spam e-
mails is ineligible for E-rate support. Thus, we seek comment on
whether the increased prevalence of viruses and spam justifies
including as an eligible service software that protects equipment at
schools and libraries from these threats.
20. Scheduling Services. We seek comment on whether to allow
scheduling services to be eligible for E-rate support. Scheduling
software allows schools and libraries more efficiently to use video
teleconferencing for distance learning by controlling the video linkage
between the classrooms and the originating video feed, sometimes
coordinating between hundreds of locations. Scheduling services were
explicitly made ineligible in Funding Year 2006. Many commenters,
however, have noted that scheduling software is a necessary component
of distance learning, which is eligible as a digital transmission
service in the telecommunications services category. Thus, we seek
comment on whether video and voice conferencing services, which are
eligible services, require scheduling software as an essential
component of the services. We seek comment on how scheduling software
is similar or different from other telecommunications components that
are eligible.
21. Telephone Broadcast Messaging. We seek comment on whether
telephone broadcast messaging should be eligible for E-rate support.
Telephone broadcast messaging allows pre-recorded messages to be sent
over phone lines to individuals concerning school delays or closures,
reported absences, upcoming activities and events, and emergencies.
22. Wireless Internet Access Applications. We seek comment on
whether certain wireless Internet access applications should be
eligible for E-rate support. Currently, wireless Internet
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access service that is used for an educational purpose is eligible in
the same manner that wired Internet access is eligible. The Commission
has determined that, to qualify as an educational purpose under the E-
rate program, an activity must be integral, immediate, and proximate to
the education of students in the case of schools, or integral,
immediate, and proximate to the provision of library services to
library patrons in the case of libraries. Activities that occur on
library or school property are presumed to be integral, immediate, and
proximate to the education of students or the provision of library
services to patrons. Although the Commission has previously found that
wireless services used on library or classroom property are presumed to
be eligible, we seek comment on various technologies that are used away
from the library or school property. Commenters should discuss how
other wireless Internet access applications are similar or different
from other currently eligible services which are used off-site for
educational purposes.
Procedural Matters
23. Pursuant to Sec. Sec. 1.415 and 1.419 of the Commission's
rules, 47 CFR 1.415, 1.419, interested parties may file comments on or
before September 18, 2008 and reply comments are due on or before
October 20, 2008. Comments may be filed using: (1) The Commission's
Electronic Comment Filing System (ECFS), (2) the Federal Government's
eRulemaking Portal, or (3) by filing paper copies. See Electronic
Filing of Documents in Rulemaking Proceedings, 63 FR 24121, May 1,
1998.
Electronic Filers: Comments may be filed electronically
using the Internet by accessing the ECFS: http://www.fcc.gov/cgb/ecfs/
or the Federal eRulemaking Portal: http://www.regulations.gov. Filers
should follow the instructions provided on the Web site for submitting
comments.
For ECFS filers, if multiple docket or rulemaking numbers
appear in the caption of this proceeding, filers must transmit one
electronic copy of the comments for each docket or rulemaking number
referenced in the caption. In completing the transmittal screen, filers
should include their full name, U.S. Postal Service mailing address,
and the applicable docket or rulemaking number. Parties may also submit
an electronic comment by Internet e-mail. To get filing instructions,
filers should send an e-mail to [email protected], and include the following
words in the body of the message, ``get form.'' A sample form and
directions will be sent in response.
Paper Filers: Parties who choose to file by paper must
file an original and four copies of each filing. If more than one
docket or rulemaking number appears in the caption of this proceeding,
filers must submit two additional copies for each additional docket or
rulemaking number.
Filings can be sent by hand or messenger delivery, by
commercial overnight courier, or by first-class or overnight U.S.
Postal Service mail (although we continue to experience delays in
receiving U.S. Postal Service mail). All filings must be addressed to
the Commission's Secretary, Office of the Secretary, Federal
Communications Commission.
The Commission's contractor will receive hand-delivered or
messenger-delivered paper filings for the Commission's Secretary at 236
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing
hours at this location are 8 a.m. to 7 p.m. All hand deliveries must be
held together with rubber bands or fasteners. Any envelopes must be
disposed of before entering the building.
Commercial overnight mail (other than U.S. Postal Service
Express Mail and Priority Mail) must be sent to 9300 East Hampton
Drive, Capitol Heights, MD 20743.
U.S. Postal Service first-class, Express, and Priority
mail must be addressed to 445 12th Street, SW., Washington, DC 20554.
People with Disabilities: To request materials in accessible
formats for people with disabilities (braille, large print, electronic
files, audio format), send an e-mail to [email protected] or call the
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (TTY).
Ex Parte Requirements
24. These matters shall be treated as a ``permit-but-disclose''
proceeding in accordance with the Commission's ex parte rules. 47 CFR
1.1200 through 1.1216. 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 is generally required.
47 CFR 1.1206(b)(2). Other requirements pertaining to oral and written
presentations are set forth in Sec. 1.1206(b) of the Commission's
rules. 47 CFR 1.1206(b).
Initial Regulatory Flexibility Analysis
25. 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 rules proposed in the NPRM. Written public
comments are requested on this IRFA. Comments must be identified as
responses to the IRFA and must be filed on or before September 18,
2008. The Commission will send a copy of the NPRM, including this IRFA,
to the Chief Counsel for Advocacy of the Small Business Administration
(SBA). 5 U.S.C. 603(a).
Need for, and Objectives of, the Proposed Rules
26. The Commission is required by section 254 of the Act to
promulgate rules to implement the universal service provisions of
section 254. On May 8, 1997, the Commission adopted rules to reform its
system of universal service support mechanisms so that universal
service is preserved and advanced as markets move toward competition.
Specifically, under the schools and libraries universal service support
mechanism, also known as the E-rate program, eligible schools,
libraries, and consortia that include eligible schools and libraries
may receive discounts for eligible telecommunications services,
Internet access, and internal connections. Since the initial
implementation of the E-rate program, USAC has developed various
procedures and guidelines, consistent with the Commission's rules and
requirements, for applicants to ensure that funding is provided only
for eligible services.
27. Pursuant to the Commission's rules, the Commission released
Public Notices seeking comment on USAC's proposed ESL for Funding Years
2007 and 2008. The ESL indicates whether specific products or services
may be able to receive discounts under the E-rate program. The final
2007 and 2008 ESLs and accompanying Public Notices were released on
October 19, 2006 and October 19, 2007, respectively. In revising the
2007 and 2008 ESLs, we noted that the proceedings were limited to
determining what services are eligible under the Commission's current
rules and were not intended to be a vehicle for changing eligibility
rules. Therefore, we indicated that those comments not addressed in the
ESLs may be more appropriately filed for the Commission's consideration
in the general docket for the E-rate program. In this NPRM, we seek
comment on the eligibility of
[[Page 48357]]
certain services under the E-rate program raised by the commenters that
may not have been addressed as part of the 2008 or prior ESLs.
Specifically, we seek comment on whether to include filtering software,
an expanded classification of basic telephone service, dark fiber, text
messaging, firewall service, anti-virus/anti-spam software, scheduling
services, telephone broadcast messaging, and certain wireless Internet
access applications in the ESL beginning in Funding Year 2009. We also
seek comment on whether to retain interconnected Voice over Internet
Protocol (interconnected VoIP) as an eligible service for future
funding years.
Legal Basis
28. The legal basis for this NPRM is contained in sections 1
through 4, 201 through 205, 254, 303(r), and 403 of the Communications
Act of 1934, as amended by the Telecommunications Act of 1996, 47
U.S.C. 151 through 154, 201 through 205, 254, 303(r), and 403, and
Sec. 1.411 of the Commission's rules, 47 CFR 1.411.
Description and Estimate of the Number of Small Entities to Which Rules
Will Apply
29. 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 proposed rules, if adopted. 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 that: (1) Is independently owned
and operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the SBA. Nationwide,
there are a total of approximately 22.4 million small businesses,
according to SBA data. A small organization is generally ``any not-for-
profit enterprise which is independently owned and operated and is not
dominant in its field.'' Nationwide, as of 2002, there were
approximately 1.6 million small organizations. ``Small governmental
jurisdiction'' generally means ``governments of cities, counties,
towns, townships, villages, school districts, or special districts,
with a population of less than 50,000.'' Census Bureau data for 2002
indicate that there were 87,525 local governmental jurisdictions in the
United States. We estimate that, of this total, 84,377 entities were
``small governmental jurisdictions.'' Thus, we estimate that most
governmental jurisdictions are small.
30. Small entities potentially affected by the proposals herein
include eligible schools and libraries and the eligible service
providers offering them discounted services, including
telecommunications service providers, Internet Service Providers
(ISPs), and vendors of the services and equipment used for internal
connections.
Schools and Libraries
31. Under the E-rate program, which provides universal service
support for elementary and secondary schools and libraries, an
elementary school is ``a non-profit institutional day or residential
school that provides elementary education, as determined under state
law.'' A secondary school is defined as ``a non-profit institutional
day or residential school that provides secondary education, as
determined under state law,'' and not offering education beyond grade
12. For-profit schools and libraries, and schools and libraries with
endowments in excess of $50 million are not eligible to receive
discounts under the program, nor are libraries whose budgets are not
completely separate from any schools. Certain other statutory
definitions apply as well. The SBA has defined as small entities
elementary and secondary schools and libraries having $6.5 million or
less in annual receipts. In funding year 2005 (July 1, 2005 to June 30,
2006) approximately 15,050 school districts, 6,547 individual schools,
3,641 library and library consortiums, and 449 school and library
consortiums received funding under the E-rate program. Although we are
unable to estimate with precision the number of these entities that
would qualify as small entities under SBA's definition, we estimate
that fewer than 15,050 school districts, 6,547 individual schools,
3,641 library and library consortiums, and 449 school and library
consortiums would be affected annually by the rules proposed in this
NPRM, under current operation of the program.
Telecommunications Service Providers
32. Incumbent Local Exchange Carriers (LECs). Neither the
Commission nor the SBA has developed a size standard for small
incumbent local exchange services. The closest size standard under SBA
rules is for Wired Telecommunications Carriers. Under that size
standard, such a business is small if it has 1,500 or fewer employees.
According to Commission data, 1,303 incumbent carriers reported that
they were engaged in the provision of local exchange services. Of these
1,303 carriers, an estimated 1,020 have 1,500 or fewer employees and
283 have more than 1,500 employees. Consequently, the Commission
estimates that most providers of incumbent local exchange service are
small businesses that may be affected by the rules and policies adopted
herein.
33. We have included small incumbent local exchange carriers in
this RFA analysis. 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 carriers in this RFA analysis, although we
emphasize that this RFA action has no effect on the Commission's
analyses and determinations in other, non-RFA contexts.
34. Interexchange Carriers. Neither the Commission nor the SBA has
developed a definition of small entities specifically applicable to
providers of interexchange services (IXCs). The closest applicable
definition under the SBA rules is for wired telecommunications
carriers. This provides that a wired telecommunications carrier is a
small entity if it employs no more than 1,500 employees. According to
the Commission's 2005 Trends Report, 316 companies reported that they
were engaged in the provision of interexchange services. Of these 316
IXCs, an estimated 292 have 1,500 or fewer employees and 24 have more
than 1,500 employees. Consequently, the Commission estimates that most
providers of interexchange services are small businesses that may be
affected by the rules and policies adopted herein.
35. Competitive Access Providers. Neither the Commission nor the
SBA has developed a definition of small entities specifically
applicable to competitive access services providers (CAPs). The closest
applicable definition under the SBA rules is for wired
telecommunications carriers. This provides that a wired
telecommunications carrier is a small entity if it employs no more than
1,500 employees. According to the 2005 Trends Report, 769 CAPs and
competitive local exchange carriers (competitive LECs) reported that
they were engaged in the provision of
[[Page 48358]]
competitive local exchange services. Of these 769 CAPs and competitive
LECs, an estimated 676 have 1,500 or fewer employees and 93 have more
than 1,500 employees. Consequently, the Commission estimates that most
providers of competitive exchange services are small businesses that
may be affected by the rules and policies adopted herein.
36. Cellular and Wireless Providers. Neither the Commission nor the
SBA has developed a definition of small entities specifically for
wireless telephony. The closest definition is the SBA definition for
cellular and other wireless telecommunications. Under this definition,
a cellular licensee is a small entity if it employs no more than 1,500
employees. According to the 2005 Trends Report, 437 providers
classified themselves as providers of wireless telephony, including
cellular telecommunications, Personal Communications Service, and
Specialized Mobile Radio (SMR) Telephony Carriers. Of these 437
wireless telephony providers, an estimated 260 have 1,500 or fewer
employees and 177 have more than 1,500 employees. Consequently, the
Commission estimates that more than half of the providers of wireless
telephony services are small businesses that may be affected by the
rules and policies adopted herein.
37. Other Wireless Services. Neither the Commission nor the SBA has
developed a definition of small entities specifically applicable to
wireless services other than wireless telephony. The closest applicable
definition under the SBA rules is again that of cellular and other
wireless telecommunications, under which a service provider is a small
entity if it employs no more than 1,500 employees. According to the
2005 Trends Report, 33 providers classified themselves as wireless data
carriers or other mobile service providers. Of these 33 providers, an
estimated 32 have 1,500 or fewer employees and 1 has more than 1,500
employees. Consequently, the Commission estimates that most providers
of wireless services other than wireless telephony are small businesses
that may be affected by the rules and policies adopted herein.
38. Private and Common Carrier Paging. In the Paging Third Report
and Order, we developed a small business size standard for ``small
businesses'' and ``very small businesses'' for purposes of determining
their eligibility for special provisions such as bidding credits and
installment payments. A ``small business'' is an entity that, together
with its affiliates and controlling principals, has average gross
revenues not exceeding $15 million for the preceding three years.
Additionally, a ``very small business'' is an entity that, together
with its affiliates and controlling principals, has average gross
revenues that are not more than $3 million for the preceding three
years. An auction of Metropolitan Economic Area licenses commenced on
February 24, 2000, and closed on March 2, 2000. Of the 985 licenses
auctioned, 440 were sold. Fifty-seven companies claiming small business
status won. At present, there are approximately 24,000 Private-Paging
site-specific licenses and 74,000 Common Carrier Paging licenses.
According to Commission data, 408 carriers reported that they were
engaged in the provision of either paging and messaging services or
other mobile services. Of those, the Commission estimates that 402 are
small, under the SBA approved small business size standard.
39. Internet Service Providers. Under the category of Internet
service provider, a small business is one having annual receipts of $23
million or less. According to SBA's most recent data, there are a total
of 2,829 firms with annual receipts of less than $10 million, and an
additional 111 firms with annual receipts of $10 million or more. Thus,
the number of On-line Information Services firms that are small under
the SBA's $18 million size standard is between 2,829 and 2,940.
Further, some of these Internet Service Providers (ISPs) might not be
independently owned and operated. Consequently, we estimate that there
are fewer than 2,940 small entity ISPs that may be affected by the
decisions and rules of the present action.
Vendors of Internal Connections
40. Communications Equipment Manufacturers. The Commission has not
developed a definition of small entities applicable to the
manufacturers of internal network connections. The most applicable
definitions of a small entity are the definitions under the SBA rules
applicable to manufacturers of ``Radio and Television Broadcasting and
Wireless Communications Equipment Manufacturing'' and ``Other
Communications Equipment Manufacturing.'' According to the SBA's
regulations, manufacturers of these types of communications equipment
must have 750 or fewer employees in order to qualify as a small
business. The most recent available Census Bureau data indicates that
there are 1,187 companies with fewer than 1,000 employees in the United
States that manufacture radio and television broadcasting and
communications equipment, and 271 companies with less than 1,000
employees that manufacture other communications equipment. Some of
these manufacturers might not be independently owned and operated.
Consequently, we estimate that there are fewer than 1,458 small entity
internal connections manufacturers that may be affected by the
decisions and rules of the present action.
41. Wireless Communications Equipment Manufacturers. The SBA has
established a small business size standard for radio and television
broadcasting and wireless communications equipment manufacturing. Under
this standard, firms are considered small if they have 750 or fewer
employees. Census Bureau data for 1997 indicate that, for that year,
there were a total of 1,215 establishments in this category. Of those,
there were 1,150 that had employment under 500, and an additional 37
that had employment of 500 to 999. The percentage of wireless equipment
manufacturers in this category is approximately 61 percent, so the
Commission estimates that the number of wireless equipment
manufacturers with employment under 500 was actually closer to 706,
with an additional 23 establishments having employment of between 500
and 999. Given the above, the Commission estimates that the majority of
wireless communications equipment manufacturers are small businesses.
Description of Projected Reporting, Recordkeeping, and Other Compliance
Requirements
42. The specific proposals under consideration in the NPRM would
not, if adopted, result in additional recordkeeping requirements for
small businesses.
Steps Taken To Minimize Significant Economic Impact on Small Entities,
and Significant Alternatives Considered
43. The RFA requires an agency to describe any significant
alternatives that it has considered in reaching its proposed approach,
which may include the following four alternatives (among others): (1)
The establishment of differing compliance and 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 part thereof, for small
entities.
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44. In this NPRM, we seek comment on a number of issues raised by
the commenters that may not have been addressed as part of the ESL
proceedings. Specifically, we seek comment on whether to include
interconnected VoIP service, filtering software, dark fiber, and other
services in future funding years. We tentatively conclude that
interconnected VoIP service should be eligible for discounts under the
E-rate program. We tentatively conclude that it is administratively and
operationally appropriate for interconnected VoIP service requests to
be processed as a Priority 1 service. We seek comment on this tentative
conclusion. If interconnected VoIP service is deemed an eligible
service, we also seek comment on how USAC would implement this
tentative conclusion. We believe that the inclusion of interconnected
VoIP service will not have an adverse impact on small entities. We
welcome, however, comments from parties that have opinions different
from those reached in this analysis.
45. We also seek comment on whether several individual services--
filtering software, an expanded classification of basic telephone
service, dark fiber, text messaging, firewall service, anti-virus/anti-
spam software, scheduling services, telephone broadcast messaging, and
certain wireless Internet access applications--should be eligible for
E-rate program eligibility. We believe that, if eligible, the benefits
conferred by making these services eligible will not have an adverse
impact on small entities. We welcome, however, comments from parties
that have opinions different from those reached in this analysis.
46. We believe our proposals and tentative conclusions will have a
similar impact on both small and large schools and libraries, because
both small and large schools and libraries will benefit equally from
the possible addition of eligible services available under the E-rate
program. Because this NPRM does not propose additional regulation for
service providers and equipment vendors, these small entities will also
experience no additional burden. We believe that small schools and
libraries, as well as small service providers and equipment vendors,
will benefit if we add more services to the eligible services list
because it will open up more opportunities for small businesses to
participate in the E-rate program. Therefore, we do not discuss any
alternatives to the proposals contained in this NPRM. We invite
commenters, in responding to the questions posed and tentative
conclusions in the NPRM, to discuss any economic impact that such
changes may have on small entities.
Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
47. None.
Ordering Clauses
48. Accordingly, it is ordered that, pursuant to the authority
contained in sections 1 through 4, 201 through 205, 254, 303(r), and
403 of the Communications Act of 1934, as amended by the
Telecommunications Act of 1996, 47 U.S.C. 151 through 154, 201 through
205, 254, 303(r), and 403, this Notice of Proposed Rulemaking is
adopted.
49. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Notice of Proposed Rulemaking, including the Initial
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of
the Small Business Administration.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. E8-19178 Filed 8-18-08; 8:45 am]
BILLING CODE 6712-01-P