[Federal Register Volume 83, Number 51 (Thursday, March 15, 2018)]
[Rules and Regulations]
[Pages 11422-11428]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05201]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[WC Docket No. 17-141, CC Docket No. 96-128, WC Docket No. 16-132; FCC 
18-21]


Modernization of Payphone Compensation Rules

AGENCY: Federal Communications Commission

ACTION: Final rule.

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SUMMARY: In this document, a Report and Order takes a number of actions 
aimed at modernizing the Commission's payphone compensation procedure 
rules by eliminating costly requirements that are no longer necessary 
in light of technological and marketplace changes. These actions 
further the Commission's goal of regularly examining and updating its 
rules to keep pace with technology and the changing communications 
landscape, and to eliminate requirements that are no longer necessary, 
thereby reducing the costs and burdens of rules that have outlived 
their purpose. These have no impact on Completing Carriers' continuing 
obligations under the Commission's rules to maintain accurate call 
tracking systems and to fully compensate payphone service providers for 
the calls covered by these rules.

DATES: Effective April 16, 2018, except for the amendment to 47 CFR 
64.1310(a)(3), which contains information collection requirements that 
have not been approved by OMB. The Federal Communications Commission 
will publish a document in the Federal Register announcing the 
effective date.

FOR FURTHER INFORMATION CONTACT: Wireline Competition Bureau, 
Competition Policy Division, Michele Berlove, at (202) 418-1477, 
[email protected]. For additional information concerning the 
Paperwork Reduction Act information collection requirements contained 
in this document, send an email to [email protected] or contact Nicole Ongele 
at (202) 418-2991.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order in WC Docket No. 17-141, FCC 18-21, adopted and released 
February 22, 2018. The full text of this document is available for 
public inspection during regular business hours in the FCC Reference 
Information Center, Portals II, 445 12th Street SW, Room CY-A257, 
Washington, DC 20554. It is available on the Commission's website at 
https://transition.fcc.gov/Daily_Releases/Daily_Business/2018/db0222/FCC-18-21A1.pdf.

Synopsis

I. Introduction

    1. In this Report and Order, we continue our efforts to modernize 
our rules by eliminating costly requirements that are no longer 
necessary in light of technological and marketplace changes. Based on 
the substantial decline in payphone use and corresponding payphone 
compensation, we eliminate rules that are no longer needed to ensure 
that payphone service providers (PSPs) receive the compensation to 
which they are entitled. Specifically, first, we eliminate all payphone 
call tracking system audit and associated reporting requirements. 
Second, we revise our rules to permit a company official other than the 
chief financial officer (CFO) to certify that a Completing Carrier's 
quarterly compensation payments to PSPs are accurate and complete. A 
Completing Carrier is ``a long distance carrier or switch-based long 
distance reseller that completes a coinless access code or subscriber 
toll-free payphone call or a local exchange carrier that completes a 
local, coinless access code or subscriber toll-free payphone call.'' 
Our rules require that ``a Completing Carrier that completes a coinless 
access code or subscriber toll-free payphone call from a switch that 
the Completing Carrier either owns or leases shall compensate the 
payphone service provider for that call at a rate agreed upon by the 
parties by contract.'' Finally, we eliminate expired interim and 
intermediate per-payphone compensation rules that no longer apply to 
any entity. The actions we take today further our goal of regularly 
examining and updating our rules to keep pace with technology and the 
changing communications landscape, and to eliminate requirements that 
are no longer necessary, thereby reducing the costs and burdens of 
rules that have outlived their purpose.

II. Background

    2. Section 276 of the Communications Act of 1934, as amended, 
directs the Commission to ensure that PSPs are fairly compensated for 
all completed calls using their payphones. In 2003, the Commission 
revised its rules to require Completing Carriers to establish effective 
call tracking systems, undergo initial and annual audits verifying the 
accuracy of those tracking systems, and file associated audit reports 
with the Commission.
    3. On June 22, 2017, the Commission adopted a Notice of Proposed 
Rulemaking and Order (NPRM) proposing and seeking comment on

[[Page 11423]]

reforms to its payphone compensation procedures. The NPRM was published 
in the Federal Register on July 10, 2017 (82 FR 31743). Specifically, 
the NPRM proposed eliminating or revising the annual audit and 
associated reporting requirements. It also sought comment on other 
potential reforms, including eliminating the initial audit and 
associated requirements, and revising the quarterly CFO certification 
requirement to allow certification by some other company official. The 
Commission received nine comments in response to its NPRM, all of which 
support revising the Commission's payphone compensation procedures. The 
Commission initiated this proceeding in response to waiver petitions 
and to comments filed in the 2016 Biennial Review.

III. Modernizing Payphone Compensation Regulatory Obligations

A. Eliminating Audits and Associated Requirements

    4. Today, we eliminate both the initial and annual audit and all 
associated requirements contained in our payphone compensation 
compliance rules. The record strongly supports these actions, and no 
commenter opposes them.
    5. We identify several reasons why the audit requirements are no 
longer necessary. First, the steady and steep decline over more than a 
decade of the number of payphones in service demonstrates that they no 
longer play as critical a role in society's communications as they once 
did, as would-be users rely instead on mobile subscriptions. At the 
peak of payphone usage in 1999, over 2.1 million payphones were in 
service across the United States. By 2013, due to the rapid growth of 
mobile service subscribership, that number had dropped by more than 90 
percent, and subsequently dropped again by almost half over the 
following three years, with fewer than 100,000 payphones remaining in 
service at the end of 2016. In contrast, mobile voice subscriptions 
have consistently grown each year since 1999, when approximately 79.1 
million mobile voice subscriptions were reported, to approximately 
310.7 million in 2013, and approximately 341 million mobile voice 
subscriptions in the United States as of the end of 2016. Until 2005, 
however, carriers with under 10,000 subscribers in a state were not 
required to report Form 477 data, so not all mobile voice subscriptions 
were reflected in reported data. Moreover, the data show that, as of 
November 2016, over 90 percent of households and between 92 percent and 
95 percent of adults in the United States own a mobile phone. The Pew 
Center's demographic findings regarding mobile phone ownership indicate 
that 100% of adults ages 18-29, 99% of adults ages 30-49, and 97% of 
adults ages 50-64 own mobile phones.
    6. The decline in the number of payphones reflects a concomitant 
decline in the number of payphone calls completed, and together these 
trends have led to a massive decrease in the amount of compensation 
paid by Completing Carriers to PSPs. CenturyLink and Verizon each 
maintain that the amount of payphone compensation paid each year has 
declined by over 90 percent in the last 10 years and 98.5 percent in 
the last 12 years, respectively. And Sprint asserts that since its peak 
in 2005, the amount of payphone compensation it pays each year has 
declined by 99.3 percent. In light of the foregoing data, we agree with 
commenters that there is no reason to expect the declining trend of 
payphone use to change.
    7. Additionally, the record indicates that audit requirements are 
no longer needed as safeguards to ensure that PSPs receive the 
compensation they are due. No commenter refutes this fact. No formal or 
informal payphone compensation-related complaints have been filed with 
the Commission in recent years, and there is no evidence of looming 
disputes likely to lead to such complaints in the near future. Many 
Completing Carriers use clearinghouse vendors to calculate and 
distribute the compensation due to PSPs. These clearinghouses act as 
intermediaries between PSPs and Completing Carriers, and they have 
dispute resolution procedures in place in the event a disagreement 
regarding the accuracy of compensation should arise. According to 
National Payphone Clearinghouse, its services include: (1) 
``electronically accept[ing] claims of payphone ownership from Payphone 
Service Providers (PSPs) and ownership verification data from the Local 
Exchange Carriers (LECs)''; (2) ``validat[ing] the PSP claims against 
the LEC reported data to ensure that the correct payphone ownership has 
been established''; (3) us[ing] direct deposit to make quarterly 
compensation payments to the industry on behalf of the IXCs''; (4) 
serv[ing] its Clients as a control point to facilitate communication 
with all PSPs and Aggregators''; (5) ``utiliz[ing] a 3rd party auditor 
to audit all processes in an effort to aide their Clients with the FCC 
Audit/Attestation requirements''; (6) ``provid[ing] a central site for 
the sharing of CFO certifications and audit/attestation reports to the 
industry''; and (7) ``produc[ing] valuable and detailed End of Quarter 
reports to the NPC Clients and to the industry to aid in compensation 
reconciliation.'' And, the Commission retains the authority to 
investigate any payphone compensation compliance issues of which it 
becomes aware, as today's actions have no impact on Completing 
Carriers' continuing obligations under our rules to maintain an 
accurate call tracking system and to fully compensate PSPs for the 
calls covered by these rules. The requirement that Completing Carriers 
compensate PSPs for 100 percent of all completed calls originating from 
the PSPs' payphones remains in place, as does the requirement that 
Completing Carriers maintain call tracking systems that ``accurately 
track[] coinless access code or subscriber toll-free payphone calls to 
completion.'' There have been no formal or informal complaints filed 
with the Commission in recent years.
    8. Annual Audit Requirement. We eliminate a Completing Carrier's 
obligation to annually certify that there have been no material changes 
to its payphone call tracking system, an obligation that required an 
annual audit by the Completing Carrier. In light of the changed 
payphone marketplace dynamics since this requirement was adopted and 
the unanimous record reflecting that the costs of this requirement far 
exceed any remaining benefit, we find that the annual audit and 
associated reporting requirements are no longer necessary. While the 
number of payphones and associated compensation have dramatically 
declined, the costs of complying with the annual audit requirement have 
either remained steady or increased, dwarfing the compensation paid 
out. For example, Puerto Rico Telephone's audit cost is now 18 times 
the amount of payphone compensation it pays. And according to 
Cincinnati Bell, the cost of its audit on a per-call basis increased 
900%, from $0.10 per call in 2007 to over $1.00 per call in 2016. And 
while Sprint paid $226,920.88 in compensation for fiscal year 2016, an 
audit, absent the Commission's waiver earlier this year, would have 
cost Sprint $46,500. Likewise, as noted above, Verizon stated that its 
compensation payments decreased by 98.5 percent from 2004 to 2016. By 
comparison, Completing Carriers must pay PSPs $0.494 per compensable 
call.
    9. Moreover, the record confirms that the only option under the 
rules to avoid an annual audit, i.e., to enter into alternative 
compensation agreements with PSPs, is not an economically

[[Page 11424]]

feasible alternative. We agree with commenters that the transaction 
costs of negotiating, implementing, and managing alternative 
compensation agreements with numerous individual PSPs would 
significantly outweigh the amount of compensation paid. In addition, 
unless a Completing Carrier entered into an alternative compensation 
arrangement with every PSP to which it owed compensation, an annual 
audit would still be required.
    10. We thus conclude that the benefits, if any, of the annual 
audit, which were expressly adopted ``[t]o ensure the accuracy'' of 
Completing Carriers' call tracking systems, no longer outweigh the 
burden imposed on Completing Carriers, and eliminating these 
requirements will avoid unnecessary regulatory costs while not harming 
PSPs. For these same reasons, we see no need to adopt a new annual 
self-certification obligation in lieu of the annual audit as Sprint and 
Cincinnati Bell proposed in their waiver petitions.
    11. Initial Audit Requirement. We likewise eliminate the initial 
audit and associated requirements. The drastically changed 
communications landscape that precipitated the decline in payphones 
today has similarly made it unlikely that many, if any, new carriers 
will become Completing Carriers. Moreover, we agree with commenters 
that the industry has successfully developed systems that work to 
ensure accurate PSP call tracking. Any new Completing Carrier has the 
benefit of this development in establishing its own accurate payphone 
call tracking and compensation system, obviating the need to expend 
significant costs associated with a burdensome initial audit 
requirement. This is particularly true in light of the rules that 
remain in place to ensure that PSPs receive the compensation to which 
they are entitled.
    12. Other Audit-Related Requirements. Finally, because this Order 
eliminates both the initial and annual payphone call tracking system 
audit requirements, the remaining requirements associated with these 
audit requirements no longer serve any purpose. Consequently, we 
eliminate Sec.  64.1320 in its entirety. As a result, Completing 
Carriers no longer must file statements with the Commission, PSPs, or 
other carriers identifying and updating contact information for persons 
responsible for handling the Completing Carrier's payphone 
compensation. While one commenter suggests that the Commission may wish 
to retain this requirement to help protect PSPs' rights to full 
compensation, our rules already require that Completing Carriers 
provide this same information to PSPs on a quarterly basis, and that 
requirement remains in effect. We see no added benefit to retaining a 
redundant provision. Similarly, because Completing Carriers will no 
longer be required to conduct audits and file audit reports, we 
eliminate the requirement that Completing Carriers make underlying 
audit documents available upon request. Aside from the fact that there 
will be no associated underlying audit documents for PSPs to request, 
the record suggests PSPs may not have relied on this provision, as one 
Completing Carrier commenter states it never received a request from a 
PSP for this information. Completing Carriers must continue to retain 
call verification data for 27 months after submitting their quarterly 
compensation payments and reports to PSPs and provide such data to PSPs 
upon request.

B. Quarterly Sworn Statement

    13. We also revise the requirement that a Completing Carrier 
provide a sworn statement from its chief financial officer (CFO) 
certifying to the accuracy and completeness of its quarterly payphone 
compensation to PSPs. Under our revised rule, any company official with 
knowledge of and responsibility for the accuracy of payphone 
compensation by the carrier may provide the requisite sworn statement. 
We agree with commenters that requiring this certification only from a 
senior level corporate executive such as the CFO, who necessarily must 
rely on assurances from company personnel responsible for payphone 
compensation, consumes unnecessary time and resources. We note that no 
commenter opposed eliminating the CFO certification. Some Completing 
Carrier commenters do not object to retaining the CFO sworn statement 
obligation.
    14. We decline to eliminate the quarterly sworn statement 
altogether, as some commenters request. Since PSPs have no contractual 
relationships with Completing Carriers, the quarterly sworn statement 
accompanying Completing Carriers' required quarterly compensation 
payments remains the only assurance PSPs now have that they are being 
appropriately compensated for the use of their payphones. Implicit in a 
certification that the quarterly compensation payment ``is accurate and 
is based on 100% of all completed calls that originated from that 
payphone service provider's payphones,'' as required under our rules, 
is the fact that the carrier's payphone call tracking system is 
necessarily operating effectively. And though we recognize such 
quarterly sworn statements impose some burden on carriers, our action 
today eliminating the CFO requirement reduces that burden 
substantially. But because ``most completing carriers . . . have 
contracted with vendors to calculate their payphone compensation,'' 
they presumably already require and receive assurances from those 
vendors upon which they can rely in making their sworn statements. We 
also decline the suggestion that we replace the quarterly sworn 
statement with an annual sworn statement to the PSPs because it was 
raised for the first time in response to the NPRM and the record is 
accordingly spare.

C. Expired Interim and Intermediate Per-Payphone Compensation Rules

    15. Finally, we eliminate interim and intermediate per-payphone 
compensation rules that, by their own terms, expired 18 and 20 years 
ago. Sections 64.1301(a)-(d) were adopted as interim and intermediate 
compensation measures to ensure that PSPs remained compensated while 
carriers established effective call-tracking systems. Sections 
64.1301(a)-(c), which established interim default compensation for 
certain types of payphone calls, by its express terms applied for the 
period ``beginning November 7, 1996, and ending October 6, 1997.'' 
Similarly, Sec.  64.1301(d), also applicable to certain payphone calls, 
established default compensation for an intermediate period ``beginning 
October 7, 1997, and ending April 20, 1999.'' No commenters opposed 
elimination of these rules, nor did they bring any similarly expired 
provisions warranting elimination to our attention.

IV. Final Regulatory Flexibility Analysis

    16. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated into the NPRM for the payphone compensation proceeding. 
The Commission sought written public comment on the proposals in the 
Notice, including comment on the IRFA. The Commission received no 
comments on the IRFA. Because the Commission amends its rules in this 
Order, the Commission has included this Final Regulatory Flexibility 
Analysis (FRFA). This present FRFA conforms to the RFA.

A. Need for, and Objectives of, the Rules

    17. In the NPRM, the Commission proposed to eliminate the audit and 
associated reporting requirements, easing the burden on carriers

[[Page 11425]]

responsible for completing coinless access and subscriber toll-free 
calls originating from payphones (Completing Carriers). The Commission 
also proposed to revise its rules to allow a company official capable 
of binding the carrier, as opposed to requiring a carrier's chief 
financial officer (CFO), to provide quarterly sworn statements that 
compensation to Payphone Service Providers (PSPs) is accurate. 
Additionally, the Commission proposed to eliminate the interim and 
intermediate per-phone compensation rules. In so doing, the Commission 
sought to modernize its rules to reflect the changing communications 
landscape based on the substantial decline in payphone use and 
eliminate interim and intermediate expired rules.
    18. Pursuant to these objectives, this Order adopts changes to 
Commission rules regarding payphone audit and associated reporting 
requirements and interim and intermediate rules. The Order adopts 
changes to the payphone rules that: (1) Eliminate the payphone call 
tracking system initial and annual audits, (2) eliminate the associated 
audit reporting requirements, (3) modify the quarterly sworn 
statements, allowing a company official responsible for payphone 
compensation for the Completing Carrier to provide quarterly sworn 
statements, and (4) eliminate the interim and intermediate per-phone 
compensation rules. The modifications to our payphone rules, which 
reflect the changing communications landscape, advance our goals of 
reducing regulatory burdens and abolishing unnecessary rule provisions.

B. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA

    19. The Commission did not receive comments specifically addressing 
the rules and policies proposed in the IRFA.

C. Response to Comments by the Chief Counsel for Advocacy of the Small 
Business Administration

    20. Pursuant to the Small Business Jobs Act of 2010, which amended 
the RFA, the Commission is required to respond to any comments filed by 
the Chief Counsel for Advocacy of the Small Business Administration 
(SBA), and to provide a detailed statement of any change made to the 
proposed rules as a result of those comments.
    21. The Chief Counsel did not file any comments in response to this 
proceeding.

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

    22. The RFA directs agencies to provide a description and, where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules and by the rule revisions on which the 
NPRM seeks comment, 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. Pursuant to 5 U.S.C. 601(3), the statutory definition of a small 
business applies ``unless an agency, after consultation with the Office 
of Advocacy of the Small Business Administration and after opportunity 
for public comment, establishes one or more definitions of such term 
which are appropriate to the activities of the agency and publishes 
such definition(s) in the Federal Register.'' 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 SBA.
    23. The majority of our changes will affect obligations on carriers 
who complete calls originating from payphones, including incumbent LECs 
and, in some cases, competitive LECs.
    24. Small Businesses, Small Organizations, Small Governmental 
Jurisdictions. Our actions, over time, may affect small entities that 
are not easily categorized at present. We therefore describe here, at 
the outset, three comprehensive small entity size standards that could 
be directly affected herein. First, while there are industry specific 
size standards for small businesses that are used in the regulatory 
flexibility analysis, according to data from the SBA's Office of 
Advocacy, in general a small business is an independent business having 
fewer than 500 employees. These types of small businesses represent 
99.9% of all businesses in the United States which translates to 28.8 
million businesses.
    25. Next, the type of small entity described as 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 Aug 2016, there were approximately 356,494 small 
organizations based on registration and tax data filed by nonprofits 
with the Internal Revenue Service (IRS). Data from the Urban Institute, 
National Center for Charitable Statistics (NCCS) reporting on nonprofit 
organizations registered with the IRS was used to estimate the number 
of small organizations. Reports generated using the NCCS online 
database indicated that as of August 2016 there were 356,494 registered 
nonprofits with total revenues of less than $100,000. Of this number, 
326,897 entities filed tax returns with 65,113 registered nonprofits 
reporting total revenues of $50,000 or less on the IRS Form 990-N for 
Small Exempt Organizations and 261,784 nonprofits reporting total 
revenues of $100,000 or less on some other version of the IRS Form 990 
within 24 months of the August 2016 data release date.
    26. Finally, the small entity described as a ``small governmental 
jurisdiction'' is defined generally as ``governments of cities, 
counties, towns, townships, villages, school districts, or special 
districts, with a population of less than fifty thousand.'' U.S. Census 
Bureau data from the 2012 Census of Governments indicates that there 
were 90,056 local governmental jurisdictions consisting of general 
purpose governments and special purpose governments in the United 
States. The Census of Government is conducted every five (5) years 
compiling data for years ending with ``2'' and ``7.'' Of this number 
there were 37,132 General purpose governments (county, municipal and 
town or township) with populations of less than 50,000 and 12,184 
Special purpose governments (independent school districts and special 
districts) with populations of less than 50,000. There were 2,114 
county governments with populations less than 50,000. There were 18,811 
municipal and 16,207 town and township governments with populations 
less than 50,000. There were 12,184 independent school districts with 
enrollment populations less than 50,000. The 2012 U.S. Census Bureau 
data for most types of governments in the local government category 
shows that the majority of these governments have populations of less 
than 50,000. While U.S. Census Bureau data did not provide a population 
breakout for special district governments, if the population of less 
than 50,000 for this category of local government is consistent with 
the other types of local governments the majority of the 38,266 special 
district governments have populations of less than 50,000. Based on 
this data we estimate that at least 49,316 local government 
jurisdictions fall in the category of ``small governmental 
jurisdictions.''

[[Page 11426]]

    27. Wired Telecommunications Carriers. The U.S. Census Bureau 
defines this industry as ``establishments primarily engaged in 
operating and/or providing access to transmission facilities and 
infrastructure that they own and/or lease for the transmission of 
voice, data, text, sound, and video using wired communications 
networks. Transmission facilities may be based on a single technology 
or a combination of technologies. Establishments in this industry use 
the wired telecommunications network facilities that they operate to 
provide a variety of services, such as wired telephony services, 
including VoIP services, wired (cable) audio and video programming 
distribution, and wired broadband internet services. By exception, 
establishments providing satellite television distribution services 
using facilities and infrastructure that they operate are included in 
this industry.'' 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. Census data for 2012 show 
that there were 3,117 firms that operated that year. Of this total, 
3,083 operated with fewer than 1,000 employees. Thus, under this size 
standard, the majority of firms in this industry can be considered 
small.
    28. Local Exchange Carriers (LECs). Neither the Commission nor the 
SBA has developed a size standard for small businesses specifically 
applicable to local exchange services. The closest applicable NAICS 
Code category is for Wired Telecommunications Carriers, as defined in 
paragraph 27 of this FRFA. Under that size standard, such a business is 
small if it has 1,500 or fewer employees. Census data for 2012 show 
that there were 3,117 firms that operated that year. Of this total, 
3,083 operated with fewer than 1,000 employees. The Commission 
therefore estimates that most providers of local exchange carrier 
service are small entities that may be affected by the rules adopted.
    29. Incumbent Local Exchange Carriers (incumbent LECs). Neither the 
Commission nor the SBA has developed a small business size standard 
specifically for incumbent local exchange services. The closest 
applicable NAICS Code category is Wired Telecommunications Carriers as 
defined in paragraph 27 of this FRFA. Under that size standard, such a 
business is small if it has 1,500 or fewer employees. According to 
Commission data, 3,117 firms operated in that year. Of this total, 
3,083 operated with fewer than 1,000 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. One thousand three hundred and seven (1,307) 
Incumbent Local Exchange Carriers reported that they were incumbent 
local exchange service providers. Of this total, an estimated 1,006 
have 1,500 or fewer employees.
    30. Competitive Local Exchange Carriers (competitive LECs), 
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 NAICS Code category is Wired 
Telecommunications Carriers, as defined in paragraph 27 of this FRFA. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. U.S. Census data for 2012 indicate that 3,117 firms 
operated during that year. Of that number, 3,083 operated with fewer 
than 1,000 employees. Based on this data, the Commission concludes that 
the majority of Competitive LECs, CAPs, Shared-Tenant Service 
Providers, and Other Local Service Providers are small entities. 
According to Commission data, 1,442 carriers reported that they were 
engaged in the provision of either competitive local exchange services 
or competitive access provider services. Of these 1,442 carriers, an 
estimated 1,256 have 1,500 or fewer employees. In addition, 17 carriers 
have reported that they are Shared-Tenant Service Providers, and all 17 
are estimated to have 1,500 or fewer employees. In addition, 72 
carriers have reported that they are Other Local Service Providers. Of 
this total, 70 have 1,500 or fewer 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 the adopted rules.
    31. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a definition for Interexchange Carriers. The closest 
NAICS Code category is Wired Telecommunications Carriers as defined in 
paragraph 27 of this FRFA. The applicable size standard under SBA rules 
is that such a business is small if it has 1,500 or fewer employees. 
According to Commission data, 359 companies reported that their primary 
telecommunications service activity was the provision of interexchange 
services. Of this total, an estimated 317 have 1,500 or fewer employees 
and 42 have more than 1,500 employees. Consequently, the Commission 
estimates that the majority of interexchange service providers are 
small entities that may be affected by rules adopted.
    32. 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, 33 carriers have reported that 
they are engaged in the provision of operator services. Of these, an 
estimated 31 have 1,500 or fewer employees and two have more than 1,500 
employees. Consequently, the Commission estimates that the majority of 
OSPs are small entities that may be affected by the adopted rules.
    33. Other Toll Carriers. Neither the Commission nor the SBA has 
developed a size standard for small businesses specifically applicable 
to Other Toll Carriers. This category includes toll carriers that do 
not fall within the categories of interexchange carriers, operator 
service providers, prepaid calling card providers, satellite service 
carriers, or toll resellers. The closest applicable NAICS Code category 
is for Wired Telecommunications Carriers, as defined in paragraph 27 of 
this FRFA. Under that size standard, such a business is small if it has 
1,500 or fewer employees. Census data for 2012 show that there were 
3,117 firms that operated that year. Of this total, 3,083 operated with 
fewer than 1,000 employees. Thus, under this category and the 
associated small business size standard, the majority of Other Toll 
Carriers can be considered small. According to Commission data, 284 
companies reported that their primary telecommunications service 
activity was the provision of other toll carriage. Of these, an 
estimated 279 have 1,500 or fewer employees. Consequently, the 
Commission estimates that most Other Toll Carriers that may be affected 
by our rules are small.
    34. Payphone Service Providers. Neither the Commission nor the SBA 
has developed a definition of small entities specifically applicable to 
payphone service providers (PSPs). The closest applicable definition 
under the SBA rules is for Wired Telecommunications Carriers. Under 
that SBA definition, such a business is small if it has 1,500 or fewer 
employees. According to the Commission's Form 499 Filer Database, 1,100 
PSPs reported

[[Page 11427]]

that they were engaged in the provision of payphone services. The 
Commission does not have data regarding how many of these 1,100 
companies have 1,500 or fewer employees. The Commission does not have 
data specifying the number of these payphone service providers that are 
not independently owned and operated, and thus is unable at this time 
to estimate with greater precision the number of PSPs that would 
qualify as small business concerns under the SBA's definition. 
Consequently, the Commission estimates that there are 1,100 or fewer 
PSPs that may be affected by the rules.
    35. Prepaid Calling Card Providers. The SBA has developed a 
definition for small businesses within the category of 
Telecommunications Resellers. Under that SBA definition, such a 
business is small if it has 1,500 or fewer employees. According to the 
Commission's Form 499 Filer Database, 500 companies reported that they 
were engaged in the provision of prepaid calling cards. The Commission 
does not have data regarding how many of these 500 companies have 1,500 
or fewer employees. Consequently, the Commission estimates that there 
are 500 or fewer prepaid calling card providers that may be affected by 
the rules.
    36. Wireless Telecommunications Carriers (except Satellite). This 
industry comprises establishments engaged in operating and maintaining 
switching and transmission facilities to provide communications via the 
airwaves, such as cellular services, paging services, wireless internet 
access, and wireless video services. The appropriate size standard 
under SBA rules is that such a business is small if it has 1,500 or 
fewer employees. For this industry, Census data for 2012 show that 
there were 967 firms that operated for the entire year. Of this total, 
955 firms had fewer than 1,000 employees. Thus under this category and 
the associated size standard, the Commission estimates that the 
majority of wireless telecommunications carriers (except satellite) are 
small entities. Similarly, according to internally developed Commission 
data, 413 carriers reported that they were engaged in the provision of 
wireless telephony, including cellular service, Personal Communications 
Service (PCS), and Specialized Mobile Radio (SMR) services. Of this 
total, an estimated 261 have 1,500 or fewer employees. Consequently, 
the Commission estimates that approximately half of these firms can be 
considered small. Thus, using available data, we estimate that the 
majority of wireless firms can be considered small.
    37. All Other Telecommunications. ``All Other Telecommunications'' 
is defined as follows: ``This U.S. industry is comprised of 
establishments that are primarily engaged in providing specialized 
telecommunications services, such as satellite tracking, communications 
telemetry, and radar station operation. This industry also includes 
establishments primarily engaged in providing satellite terminal 
stations and associated facilities connected with one or more 
terrestrial systems and capable of transmitting telecommunications to, 
and receiving telecommunications from, satellite systems. 
Establishments providing internet services or voice over internet 
protocol (VoIP) services via client supplied telecommunications 
connections are also included in this industry.'' The SBA has developed 
a small business size standard for ``All Other Telecommunications,'' 
which consists of all such firms with gross annual receipts of $32.5 
million or less. For this category, Census Bureau data for 2012 show 
that there were 1,442 firms that operated for the entire year. Of those 
firms, a total of 1,400 had annual receipts less than $25 million. 
Consequently, we conclude that the majority of All Other 
Telecommunications firms can be considered small.

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

    38. Completing Carriers. The Order finds that eliminating the 
Commission's payphone call tracking system audit and associated 
reporting requirements reflects changes to the current communications 
landscape. The Order determines that due to the substantial decline in 
payphone use, Completing Carriers, and the corresponding decline in 
payphone compensation, removing the costly audits and associated 
requirements outweigh any benefits to PSPs and will ease the burden on 
small carriers. The Order also determines that it is reasonable to 
allow a company official responsible for payphone compensation for the 
carrier, as opposed to requiring a carrier's CFO, to provide quarterly 
sworn statements that compensation to PSPs is accurate in Sec.  
64.1310(a)(3). Additionally, the Order finds it appropriate to 
eliminate Sec. Sec.  64.1301(a)-(d), the interim and intermediate per-
phone compensation rules, as they expired and no longer apply to any 
entity.

F. Steps Taken To Minimize the Significant Economic Impact on Small 
Entities and Significant Alternatives Considered

    39. 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.''
    40. In this Order, the Commission modifies its payphone rules to 
reduce costs for Completing Carriers, reform quarterly sworn statements 
procedures, and eliminate expired interim and intermediate rules. 
Overall, we believe the actions in this document will reduce burdens on 
small carriers.

G. Report to Congress

    41. The Commission will send a copy of the Report and Order, 
including this FRFA, in a report to be sent to Congress pursuant to the 
Congressional Review Act. In addition, the Commission will send a copy 
of the Report and Order, including this FRFA, to the Chief Counsel for 
Advocacy of the SBA. A copy of the Order and FRFA (or summaries 
thereof) will also be published in the Federal Register.

V. Procedural Matters

A. Final Regulatory Flexibility Analysis

    42. As required by the Regulatory Flexibility Act of 1980 (RFA), 
the Commission has prepared a Final Regulatory Flexibility Analysis 
(FRFA) relating to this Report and Order. The FRFA is contained in 
section IV above.

B. Paperwork Reduction Act

    43. The Order contains modified information collection requirements 
subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104-
13. It will be submitted to the Office of Management and Budget (OMB) 
for review under section 3507(d) of the PRA. OMB, the general public, 
and other Federal agencies will be invited to comment on the modified 
information collection requirements contained in this proceeding. In 
addition, we note that pursuant to the Small Business Paperwork Relief 
Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4),

[[Page 11428]]

we previously sought specific comment on how the Commission might 
further reduce the information collection burden for small business 
concerns with fewer than 25 employees.
    44. In this document, we have assessed the effects of revising or 
eliminating certain payphone compensation procedural requirements, and 
find that doing so will serve the public interest and is unlikely to 
directly affect businesses with fewer than 25 employees.

C. Congressional Review Act

    45. The Commission will send a copy of this Report and Order, 
including a copy of the Final Regulatory Flexibility Certification, in 
a report to Congress and the Government Accountability Office pursuant 
to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).
    In addition, the Report and Order and this final certification will 
be sent to the Chief Counsel for Advocacy of the Small Business 
Administration (SBA), and will be published in the Federal Register.

D. Contact Person

    46. For further information about this proceeding, please contact 
Michele Levy Berlove, FCC Wireline Competition Bureau, Competition 
Policy Division, Room 5-C313, 445 12th Street SW, Washington, DC 20554, 
(202) 418-1477, [email protected].

VI. Ordering Clauses

    47. Accordingly, it is ordered that, pursuant to the authority 
contained in sections 1-4, 11, and 276 of the Communications Act of 
1934, as amended, 47 U.S.C. 151-154, 161, 276, this Report and Order is 
adopted.
    48. It is further ordered that part 64 of the Commission's rules is 
amended as set forth in Appendix A, and that any such rule amendments 
that contain new or modified information collection requirements that 
require approval by the Office of Management and Budget under the 
Paperwork Reduction Act shall be effective after announcement in the 
Federal Register of Office of Management and Budget approval of the 
rules, and on the effective date announced therein.
    49. It is further ordered that this Report and Order shall be 
effective 30 days after publication in the Federal Register, except for 
47 CFR 64.1310(a)(3), which contains information collection 
requirements previously approved by OMB and which provision shall 
become effective as set forth in the preceding paragraph.
    50. It is further ordered that the Commission's Consumer & 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Report and Order to Congress and the Government 
Accountability Office pursuant to the Congressional Review Act, see 5 
U.S.C. 801(a)(1)(A).
    51. It is further ordered that the Commission's Consumer & 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Report and Order, including the Final Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration, see 5 U.S.C. 801(a)(1)(A).

List of Subjects in 47 CFR Part 64

    Common carriers, Communications, Telecommunications, Telephone.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR part 64 as follows:

PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS

0
1. The authority citation for part 64 continues to read as follows:

    Authority:  47 U.S.C. 154, 202, 225, 251(e), 254(k), 
403(b)(2)(B), (c), 616, 620, Pub. L. 104-104, 110 Stat. 56. 
Interpret or apply 47 U.S.C. 201, 202, 218, 222, 225, 226, 227, 228, 
254(k), 276, 616, 620, and the Middle Class Tax Relief and Job 
Creation Act of 2012, Pub. L. 112-96, unless otherwise noted.

0
2. Section 64.1301 is revised to read as follows:


Sec.  64.1301  Per-payphone compensation.

    In the absence of a negotiated agreement to pay a different amount, 
each entity listed in Appendix C of the Fifth Order on Reconsideration 
and Order on Remand in CC Docket No. 96-128, FCC 02-292, must pay 
default compensation to payphone service providers for access code 
calls and payphone subscriber 800 calls for the period beginning April 
21, 1999, in the amount listed in Appendix C for any payphone for any 
month during which per-call compensation for that payphone for that 
month was or is not paid by the listed entity. A complete copy of 
Appendix C is available at www.fcc.gov.

0
3. Section 64.1310 is amended by revising paragraph (a)(3) to read as 
follows:


Sec.  64.1310  Payphone compensation procedures.

    (a) * * *
    (3) When payphone compensation is tendered for a quarter, a company 
official with the authority to bind the Completing Carrier shall submit 
to each payphone service provider to which compensation is tendered a 
sworn statement that the payment amount for that quarter is accurate 
and is based on 100% of all completed calls that originated from that 
payphone service provider's payphones. Instead of transmitting 
individualized statements to each payphone service provider, a 
Completing Carrier may provide a single, blanket sworn statement 
addressed to all payphone service providers to which compensation is 
tendered for that quarter and may notify the payphone service providers 
of the sworn statement through any electronic method, including 
transmitting the sworn statement with the Sec.  64.1310(a)(4) quarterly 
report, or posting the sworn statement on the Completing Carrier or 
clearinghouse website. If a Completing Carrier chooses to post the 
sworn statement on its website, the Completing Carrier shall state in 
its Sec.  64.1310(a)(4) quarterly report the web address of the sworn 
statement.
* * * * *


Sec.  64.1320  [Removed]

0
4. Remove Sec.  64.1320.

[FR Doc. 2018-05201 Filed 3-14-18; 8:45 am]
 BILLING CODE 6712-01-P