[Federal Register Volume 83, Number 85 (Wednesday, May 2, 2018)]
[Proposed Rules]
[Pages 19196-19210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-09090]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket No. 18-89; FCC 18-42]


Protecting Against National Security Threats to the 
Communications Supply Chain Through FCC Programs

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) proposes and seeks comment on a targeted rule to ensure 
that Universal Service Fund (USF) funding is not spent on equipment or 
services from suppliers that pose a national security threat to the 
integrity of communications networks or the communications supply 
chain.

DATES: Comments are due on or before June 1, 2018, and reply comments 
are due on or before July 2, 2018.

ADDRESSES: You may submit comments, identified by WC Docket No. 18-89, 
by any of the following methods:
    [ssquf] Federal Communications Commission's Website: https://www.fcc.gov/ecfs/. Follow the instructions for submitting comments.
    [ssquf] People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by email: [email protected] or phone: 202-418-
0530 or TTY: 888-835-5322.

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: John Visclosky, Competition Policy 
Division, Wireline Competition Bureau, at (202) 418-0825, 
[email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking in WC Docket No. 18-89; FCC 18-42, adopted on 
April 17, 2018 and released on April 18, 2018. The full text of this 
document is available at https://transition.fcc.gov/Daily_Releases/Daily_Business/2018/db0418/FCC-18-42A1.pdf. The full text is also 
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. To request materials in accessible 
formats for people with disabilities (e.g., braille, large print, 
electronic files, audio format, etc.) or to request reasonable

[[Page 19197]]

accommodations (e.g., accessible format documents, sign language 
interpreters, CART, etc.), send an email to [email protected] or call the 
Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice) or 
(202) 418-0432 (TTY). Pursuant to sections 1.415 and 1.419 of the 
Commission's rules, 47 CFR 1.415, 1.419, interested parties may file 
comments and reply comments on or before the dates indicated on the 
first page of this document. Comments may be filed using the 
Commission's Electronic Comment Filing System (ECFS). See Electronic 
Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998), 
http://www.fcc.gov/Bureaus/OGC/Orders/1998/fcc98056.pdf.
     Electronic Filers: Comments may be filed electronically 
using the internet by accessing the ECFS: https://www.fcc.gov/ecfs/.
     Paper Filers: Parties who choose to file by paper must 
file an original and one copy 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. All filings must be addressed to the Commission's 
Secretary, Office of the Secretary, Federal Communications Commission. 
All hand-delivered or messenger-delivered paper filings for the 
Commission's Secretary must be delivered to FCC Headquarters at 445 
12th St. SW, Room TW-A325, Washington, DC 20554. The filing hours are 
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with 
rubber bands or fasteners. Any envelopes and boxes 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 
9050 Junction Drive, Annapolis Junction, MD 20701. 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 email to [email protected] or 
call the Consumer & Governmental Affairs Bureau at 202-418-0530 
(voice), 202-418-0432 (tty).

Synopsis

I. Introduction

    1. A critical element of our national security is the security of 
America's communications networks. Therefore, threats to the security 
of our nation's communications networks posed by certain communications 
equipment providers have long been a matter of concern in the Executive 
Branch and Congress. And as the supply chain for our nation's 
communications networks increasingly reaches far beyond U.S. borders, 
the need to address these threats has become more pressing.
    2. The Federal Communications Commission has a specific, but an 
important, supporting role to play in these efforts. In keeping with 
our obligation to be responsible stewards of the public funds used in 
the Universal Service Fund (USF or the Fund) programs, we propose and 
seek comment on a rule to prohibit, going forward, the use of USF funds 
to purchase equipment or services from any communications equipment or 
service providers identified as posing a national security risk to 
communications networks or the communications supply chain. Our action 
today is intended to ensure that universal service funds are not used 
in a way that undermines or poses a threat to our national security.

II. Background

    3. Executive Action to Safeguard and Secure Telecommunications 
Networks. Over the last decade, the Executive Branch has repeatedly 
stressed the importance of identifying and eliminating potential 
security vulnerabilities in communications networks and their supply 
chains. Most recently, in May 2017, the White House released an 
Executive Order emphasizing the importance of the security of federal 
networks and critical communications infrastructure. This Executive 
Order built on the efforts of previous administrations to assess and 
alleviate weaknesses in the country's telecommunications networks. For 
example, in February 2013, the White House issued Presidential Policy 
Directive 21 (PPD 21), which directed federal agencies to exercise 
their authority and expertise to partner with other agencies to 
identify vulnerabilities in communications infrastructure and to work 
``to increase the security and resilience of critical infrastructure 
within the communications sector.'' That same year, the U.S. Government 
Accountability Office (GAO) released a report assessing the potential 
security risks of foreign-manufactured equipment in commercial 
communications networks and detailing the efforts of the federal 
government to address the risks posed by such equipment.
    4. Congressional Concern About the Security of Telecommunications 
Networks. Congress has also repeatedly expressed concerns about the 
potential for supply chain vulnerability, including possible risks 
associated with certain foreign communications equipment providers, to 
undermine national security. In October 2012, the House Permanent 
Select Committee on Intelligence (HPSCI) released a bipartisan report 
assessing the counterintelligence and security threat posed by Chinese 
telecommunications companies operating in or providing equipment to 
customers in the United States. The report ``focused on Huawei 
[Technologies Company (Huawei)] and ZTE [Corporation (ZTE)], the top 
two Chinese telecommunications equipment manufacturers.'' The report 
noted that both companies have ``histories that include connections to 
the Chinese government.'' In addition to recommending that U.S. 
government agencies and federal contractors ``should exclude ZTE or 
Huawei equipment in their systems,'' the report ``strongly encouraged'' 
private-sector entities ``to consider the long-term security risks 
associated with doing business with either Huawei or ZTE for equipment 
or services [and] . . . strongly encouraged [private entities] . . . to 
seek out other vendors for their projects.
    5. On December 20, 2017, a group of 18 Senators and Representatives 
reiterated these concerns in a letter to Chairman Pai, which 
highlighted the 2012 HPSCI report's finding that ``Huawei . . . cannot 
be trusted to be free of foreign state influence and thus poses a 
security threat to the United States and to our systems.'' They also 
echoed the report's recommendation that ``the United States . . . view 
with suspicion the continued penetration of the U.S. telecommunications 
market by Chinese telecommunications companies,'' and that U.S. 
government systems and contractors ``should not include Huawei or ZTE 
equipment.''
    6. In response to continuing concerns over the purchase and use of 
communications equipment from certain foreign entities, Congress passed 
the National Defense Authorization Act for Fiscal Year 2018 (NDAA), 
which, among other things, bars the Department of Defense from using 
``[t]elecommunications equipment [or] services produced . . . [or] 
provided by Huawei Technologies Company or ZTE

[[Page 19198]]

Corporation'' for certain critical programs, including ballistic 
missile defense and nuclear command, control, and communications. The 
NDAA also bars all federal agencies, including the Commission, from 
using any products or services made ``in whole or in part . . . by 
Kaspersky Lab,'' a company with alleged ties to the Russian government. 
Reflecting its continued concern about this issue, Congress is also 
considering pending legislation that would, if adopted, build upon 
these targeted prohibitions and block all federal agencies, including 
the Commission, from contracting with any entity that uses 
``telecommunications equipment or services . . . produced by Huawei 
Technologies Company or ZTE Corporation'' as ``a substantial or 
essential component . . . or as critical technology as part of any 
system.''
    7. Targeted Commission Actions to Protect the Nation's 
Telecommunications Infrastructure. For more than 80 years, the 
Commission has been charged by Congress with promoting a ``Nation-wide, 
and world-wide wire and radio communications service'' for the purposes 
of the ``national defense'' and preserving the ``safety of life and 
property.'' Consistent with this mission, we have relied on our 
specific statutory authorities to take a number of targeted steps to 
protect the nation's telecommunications infrastructure from potential 
security threats. For example, pursuant to the Spectrum Act of 2012, 
the Commission adopted rules prohibiting persons and entities who have 
been, for reasons of national security, barred by any federal agency 
from bidding on a contract, participating in an auction, or receiving a 
grant, from participating in auctions under the Spectrum Act. The 
Commission also adopted rules prohibiting persons and entities who have 
been, for reasons of national security, barred by any federal agency 
from bidding on a contract, participating in an auction, or receiving a 
grant, from participating in incentive auctions conducted under 47 
U.S.C. 309(j)(8)(G)(i).
    8. The Commission also considers ``national security, law 
enforcement, [and] foreign policy'' concerns in the course of reviewing 
applications under Section 214, under the Submarine Cable Landing 
License Act, and under Section 310(b) when an applicant has reportable 
foreign ownership. Recognizing that certain Executive Branch agencies 
have specific expertise in these areas, the Commission seeks input on 
these applications from Executive Branch agencies that have established 
an interest in their review. The agencies include the Department of 
Homeland Security, the Department of Justice (including the Federal 
Bureau of Investigations), the Department of Defense, the Department of 
State, the Department of Commerce and the National Telecommunications 
and Information Administration (NTIA), the United States Trade 
Representative, and the Office of Science and Technology Policy. After 
the agencies review the application, they may file comments requesting 
that the Commission condition grant of the application on compliance 
with a mitigation agreement or deny the application. The mitigation 
agreements often include a requirement that applicants submit a list of 
principal equipment they plan to use to the agencies for approval.
    9. Further, the Commission has established the Communications 
Security, Reliability and Interoperability Council (CSRIC), which is 
charged with providing recommendations to ensure the security and 
reliability of the nation's communications systems, including 
telecommunications, media, and public safety networks. The Commission 
chartered CSRIC VI on March 19, 2017. This latest iteration of the 
CSRIC includes a working group whose mission is to recommend mechanisms 
to reduce risks to network reliability and security, including 
mechanisms to best design and deploy 5G networks to mitigate risks to 
network reliability and security posed by, among other things, 
vulnerable supply chains.
    10. Oversight of Universal Service Fund. One of the Commission's 
central missions is to make ``available . . . to all the people of the 
United States . . . a rapid, efficient, Nation-wide, and world-wide 
wire and radio communication service with adequate facilities at 
reasonable charges.'' Since its inception, the USF has operated as a 
mechanism for achieving that mission. Today, the Commission provides 
universal service support through four separate programs: (1) The High-
Cost Support Program, which provides support to eligible carriers that 
provide service to high-cost areas, thereby making voice and broadband 
service affordable for residents living in such regions; (2) the Low 
Income Support Program (Lifeline), which assists eligible low income 
customers by helping to pay for monthly telephone and broadband 
charges; (3) the Rural Health Care Support Program, which helps 
subsidize rates for telecommunications and broadband services to health 
care facilities in rural areas; and (4) the Schools and Libraries 
Support Program, also known as E-Rate, which provides support for 
telecommunications services, internet access, and internal connections 
to eligible schools and libraries. The Commission has on multiple 
occasions stated that the Lifeline program supports services, not end-
user equipment, with the exception of temporary support for handsets in 
the months following Hurricane Katrina.
    11. The Commission has designated the Universal Service 
Administrative Company (USAC) as the entity responsible for 
administering the universal service support programs under the 
Commission's oversight. The Commission oversees the Fund consistent 
with the ``[u]niversal service principles'' set forth in Section 
254(b), as well as ``other principles'' that we ``determine are 
necessary and appropriate for the protection of the public interest, 
convenience, and necessity and are consistent with'' the Communications 
Act of 1934, as amended.

III. Discussion

    12. Given the Commission's oversight role with respect to the Fund 
and increasing concerns about ensuring communications supply chain 
integrity, we propose to take targeted action to ensure that USF funds 
are not used in a way that undermines or poses a threat to our national 
security. We seek comment on how best to implement such a rule, 
including the costs and benefits of doing so, as well as on alternative 
approaches and any other steps we should consider taking.

A. Prohibition on Use of USF Funds

    13. We propose to adopt a rule that, going forward, no USF support 
may be used to purchase or obtain any equipment or services produced or 
provided by a company posing a national security threat to the 
integrity of communications networks or the communications supply 
chain. We believe we have a responsibility to ensure that the public 
funds used in the USF are not spent on equipment or services from 
companies that present a risk to the supply chain. We believe that this 
targeted action is therefore necessary. We seek comment on this view, 
on our proposal generally, and on any potential alternatives.
    14. We also seek comment on whether other federal agencies have 
rules that we should follow as a model for limiting USF recipients' 
purchase of equipment or services from companies that trigger national 
security concerns. Do other civilian agencies that regulate or provide 
grants, loans or other financial assistance for key components of the 
nation's infrastructure, such as the Federal Energy Regulatory 
Commission,

[[Page 19199]]

the Nuclear Regulatory Commission, the Federal Housing Administration, 
the Department of Transportation, the Department of Agriculture's Rural 
Utilities Service, the National Telecommunications and Information 
Administration, the National Science Foundation, or financial 
regulatory bodies, have rules similar to the ones we have proposed? 
Would such existing rules serve as a model or be helpful in modifying 
our proposal? If so, which rules or regulations should we look to, and 
how should they inform our proposal? Are there any key differences that 
we should take into account in considering such rules in the context of 
telecommunications infrastructure? If so, please explain.
    15. Types of Equipment and Services. We seek comment on the types 
of equipment and services covered by our proposed rule. One bright-line 
approach would be to prohibit use of USF funds on any purchases 
whatsoever from companies that have been identified as raising national 
security risks. Would such a rule be most appropriate here? Another 
approach would be to limit the scope of the proposed rule to equipment 
and services that relate to the management of a network, data about the 
management of a network, or any system the compromise or failure of 
which could disrupt the confidentiality, availability, or integrity of 
a network. We seek comment on this approach. Alternatively, which 
components or services are most prone to supply chain vulnerabilities? 
Are there any reasons to exempt certain categories or types of 
equipment or services from the scope of the rule? For example, should 
the rule cover all software or only software that manages the 
communications network or devices used on the network? Are there any 
categories of services that would not pose a potential risk to 
communications networks or the communications supply chain, and for 
this or any other reasons, should not be covered by the scope of the 
rule? Additionally, are there existing processes or methods, such as 
supply chain risk management processes, through which equipment can be 
certified not to present a supply chain risk, thereby allowing that 
equipment to be exempted from coverage under our proposed rule? Does 
the Department of Homeland Security or another Federal entity test 
communications equipment for supply chain risk? Should the Commission 
convene an advisory group or voluntary industry panel that would be 
able to provide such certification? Further, we expect that the 
proposed rule would extend to upgrades of existing equipment or 
services, and we seek comment on this view. We also seek comment on any 
other issues commenters believe are relevant to identifying the types 
of equipment and services that should be covered by our proposal.
    16. Use of Funds. We expect that our proposed rule would limit use 
of USF funds both directly by the recipient of that funding as well as 
indirectly by any contractor or subcontractor of the recipient. We seek 
comment on this view. For example, should there be a limit on how many 
levels of subcontractors are subject to the proposed rule? Are there 
different practical or policy questions that necessitate crafting rules 
on a program-specific basis across the four separate USF programs? Or 
would an overarching rule for all USF programs better meet the goals of 
safeguarding USF-funded infrastructure and providing effective USF 
support? We seek comment on these issues and any related issues of 
application. Additionally, given the fact that projects supported 
through the Fund involve both USF funds and non-USF funds, and given 
that money is fungible, should our proposed rule prohibit the use of 
any USF funds on any project where equipment or services produced or 
provided by a company posing a national security threat to the 
integrity of communications networks or the communications supply chain 
is being purchased or obtained?
    17. Effective Date. We make clear that our proposed rule or any 
alternative to restricting the use of USF funds that we adopt in this 
proceeding would apply only prospectively and seek comment on when the 
proposed rule should become effective. How long would USF recipients 
need to begin compliance with the rule? Should we consider phasing in 
the proposed rule for certain USF programs before others? Are there 
special considerations for schools, libraries, and rural health care 
facilities, which may not be as well-positioned as a carrier receiving 
USF support to know whether the services and/or equipment they purchase 
with USF support are being provided by an entity that pose a supply 
chain integrity risk? Should we consider a later effective date for 
smaller USF recipients? Should we consider a phase-in period for 
certain programs, USF recipients, or equipment or services? If so, 
please describe. We seek comment on these and other issues we should 
consider in setting the effective date for our proposal.
    18. Multiyear Contracts. How should the proposed rule affect 
multiyear contracts or contracts with voluntary extensions between USF 
recipients and companies identified as posing a supply chain integrity 
risk, if any such contracts exist? Should we consider grandfathering 
contracts that are currently in place for legal, cost, or other 
reasons? Should the proposed rule apply if a USF recipient has entered 
into a contract to purchase equipment or services from a company 
identified as posing a supply chain integrity risk, but the USF 
recipient has not received installation of equipment at the time that 
the proposed rule would go into effect? Should these contracts be 
grandfathered? If we do grandfather contracts, should we only 
grandfather unexpired annual or multiyear contracts, or also 
grandfather one-year contracts with voluntary extensions? Do relevant 
contracts include change-of-law or similar provisions that would cover 
the new rule we are proposing? Would our adoption of the proposed rule 
trigger any such change-of-law provisions? While the proposed rule 
would not apply to equipment already in place, as discussed above, we 
anticipate that rule would extend to upgrades of existing equipment or 
services. We seek comment on this approach and whether, as a practical 
matter, USF recipients will be able to purchase equipment and services 
from non-covered companies that can interoperate with any existing, 
installed equipment from covered companies.

B. Identifying Companies That Pose a National Security Threat to the 
Integrity of Communications Networks or the Communications Supply Chain

    19. We seek comment on how to identify companies that pose a 
national security threat to the integrity of communications networks or 
the communications supply chain for purposes of our proposed rule. How 
should we define the universe of companies covered by our proposed rule 
(i.e., a covered company)? We seek comment broadly on possible 
approaches to defining the universe of companies covered by our 
proposed rule.
    20. One approach is for the Commission to establish the criteria 
for identifying a covered company. How should the Commission determine 
such criteria? One possible option would be to draw from the Spectrum 
Act of 2012, the NDAA, and pending legislation, and define a company 
covered by our proposed rule as (1) any company that has been 
prohibited from bidding on a contract, participating in an auction, or 
receiving a grant by any agency of the Federal Government, for reasons 
of national security, or (2) any company

[[Page 19200]]

from which any agency of the Federal Government has been prohibited by 
Congress from procuring or obtaining any equipment, system, or service 
that uses telecommunications equipment or services provided by that 
company as a substantial or essential component of any system, or as 
critical technology as part of any system. We seek comment on this 
potential approach and any alternatives. If we adopt this approach, how 
would USF recipients learn which companies are covered? Should the 
Commission or another federal agency maintain a list of companies that 
meet these criteria? Regardless of which agency maintains such a list, 
how can we ensure that other federal agencies inform the Commission 
when a company satisfies the criteria to be a covered company? Would 
other federal agencies inform the Commission when they prohibit a 
company from bidding on a contract, participating in an auction, or 
receiving a grant for national security reasons, or when they remove 
such a prohibition? Should we assume that such concerns sunset after 
some period of time (e.g., three years) unless prohibitions are renewed 
by a federal agency or by Congress? Or should we assume that such 
concerns remain indefinitely until the relevant agency or Congress has 
affirmatively reversed course?
    21. Another possible approach is for the Commission to rely on 
existing statutes listing companies barred from providing certain 
equipment or services to federal agencies for national security 
reasons. Under such an approach, for example, we could define covered 
companies as those specifically barred by the National Defense 
Authorization Act from providing a substantial or essential component, 
or critical technology, of any system, to any federal agency or 
component thereof. We note that the 2018 Act includes such a 
prohibition for certain entities. Or we could define covered companies 
as those that the National Defense Authorization Act specifically bars 
from developing or providing equipment or services, of any kind listed 
in the NDAA, to be used, obtained, or procured by any federal agency or 
component thereof. What are the advantages and disadvantages of relying 
on the terms of an existing statute rather than using an approach that 
necessitates a list of covered companies that may change over time? 
Does one approach entail lower compliance costs for recipients of USF 
funds, either in terms of effort or actual dollars spent? Which 
approach is best suited to ensuring that USF funds are not spent on 
equipment or services supplied by entities that pose a threat to the 
integrity of communications networks or the communications supply 
chain? Which approach best balances that goal with our mission to 
ensure that all Americans have access to communications services and 
our desire to minimize compliance costs for recipients of USF support?
    22. Another potential approach to identifying the universe of 
companies covered by our proposed rule is for a federal agency other 
than the Commission to maintain a list of communications equipment or 
service providers that raise national security concerns regarding the 
integrity of communications networks or the communications supply 
chain. We seek comment on whether a list specifying the companies that 
should be covered under our proposed rule is already available to the 
public. If not, we seek comment on which agency or agencies should 
develop and maintain a publicly available list of such suppliers. For 
example, should a federal agency within the Executive Branch that 
regularly deals with national security risks create and maintain such a 
list? As an alternative, should the Commission or USAC, under the 
direction of the Commission, do so? What are the benefits and drawbacks 
of the Commission or another federal agency creating and maintaining 
such a list?
    23. We note that it is not uncommon for federal agencies to 
maintain a list of prohibited providers. For example, the General 
Services Administration maintains a public System for Award Management 
(SAM) database, although it does not include some of the foreign 
telecommunications equipment providers that Congress has identified as 
potential threats to national security, and also includes companies 
barred from federal contracting for reasons other than national 
security. And while other agencies, including the State Department, the 
Commerce Department, and the Treasury Department, maintain publicly-
accessible databases which may be more focused than the SAM on 
companies identified as threats to national security, the databases are 
generally designed for export controls, rather than for domestic 
considerations. Therefore, are there other sources that would be 
instructive here?
    24. Compliance Matters. Regardless of which approach we adopt, we 
seek comment on how to ensure that USF recipients (especially smaller 
USF recipients, including schools, libraries, and rural health care 
facilities) can learn which companies fall within the scope of our 
proposed rule. Are there other compliance issues we should consider, 
particularly for smaller USF recipients?
    25. Application of Proposed Rule to Subsidiaries, Parents, and/or 
Affiliates. Should a covered company's subsidiaries, parents, and/or 
affiliates be treated as covered, too? If so, how should we define 
parents, subsidiaries, and affiliates? What are the arguments for and 
against treating a covered company's subsidiaries, parents, and/or 
affiliates as covered by our proposed rule? How should we treat 
instances of ``white labeling,'' where a covered company may provide 
equipment or services to a third-party entity for sale under that third 
party's brand?

C. Enforcement

    26. We seek comment on how to enforce our proposed rule. We expect 
that USF recipients would comply with the rule and that USAC, through 
periodic audits, would be able to confirm such compliance. We also note 
that all USF recipients are required to maintain records demonstrating 
that they use the support in the manner in which it is intended to be 
used. If a recipient of USF support is found to have violated our 
proposed rule, what steps should we take in response? Are there any 
mitigating factors we should consider when taking such responsive 
steps?
    27. We seek comment on how USAC should recover funds disbursed in 
violation of the proposed rule. While under the High-Cost, Lifeline, 
and Rural Health Care programs funds are always disbursed to service 
providers, support disbursed under the E-Rate program may be 
distributed to either a service provider or to an eligible school or 
library. When USAC determines that E-Rate funding has been improperly 
disbursed and should be recovered, USAC must consider which party was 
in a better position to prevent a violation of E-Rate program rules, 
and which party committed the act or omission that forms the basis for 
the violation. For some rule violations, the beneficiary and service 
provider may share responsibility. We seek comment on which party, in 
the E-Rate context, is in the best position to anticipate and prevent 
violations of our proposed rule, and thus, which party should be held 
liable for the recovery of disbursed funds should such a violation 
occur. Should providers be held liable for the recovery of disbursed 
funds in all instances when a violation of our proposed rule has 
occurred? How can non-provider recipients of USF support, such as 
school districts or libraries, determine whether their service

[[Page 19201]]

provider has purchased prohibited services or equipment?
    28. Upon finding a violation, are there additional penalties we 
should impose beyond loss of funding and potential forfeitures under 
Section 503 of the Act? What form would such penalties take? For 
instance, should parties who are found to have violated our proposed 
rule be suspended or permanently barred from receiving USF support? 
What other considerations should we take into account in the context of 
enforcing our proposed rule?
    29. Notwithstanding these safeguards, we seek comment on any other 
steps we should take to ensure compliance with our proposed rule. For 
example, should we make changes to any of the relevant forms submitted 
by USF applicants or recipients (e.g., by adding a certification)? Or 
should we require a separate certification? Who should make the 
certification and how often should it be filed? In instances where an 
applicant for USF support is not a service provider--such as when 
eligible schools and libraries receive discounts under the E-Rate 
program, or when health care providers receive support via the Rural 
Health Care program--should the applicant be required to make such a 
certification, or should the certification be made by the service 
provider that has knowledge of and control over its network? Does it 
matter whether the applicant is seeking to purchase and install 
equipment itself or whether it is purchasing services from another 
entity?
    30. We also seek comment on how potential bidders complied with the 
national security certification required by the Spectrum Act and the 
Commission's implementing regulations. While those provisions do not 
apply here, the experience of potential bidders may nevertheless be 
instructive. Are there practical lessons to be learned from that 
process? How did the certification requirement affect smaller and 
first-time bidders? Should we require a certification by USF recipients 
that they are not using USF support to pay for services or equipment 
from covered sources, analogous to the Commission's certification 
requirements for bidders in the broadcast incentive auction?

D. Other National Security Steps

    31. We also seek comment on other steps we should consider taking 
to the extent we identify companies that pose a national security 
threat to the integrity of communications networks or the 
communications supply chain. Should we consider actions targeted not 
only at the USF-funded equipment or services of those companies, but 
also non USF-funded equipment or services produced or provided by those 
companies that might pose the same or similar national security threats 
to the nation's communications networks? Should we consider actions in 
addition or as an alternative to restricting the use of USF support? 
For instance, do commenters believe that there are testing regimes, 
showings, or steps concerning the removal or prospective deployment of 
equipment that we should consider? If so, we seek comment on the scope 
and extent of our legal authority to take any such actions to address 
national security threats to the integrity of communications networks 
and the communications supply chain.

E. Waiver

    32. We seek comment on whether and how applicants for USF support 
may seek a waiver of our proposed rule. In general, the Commission's 
rules may be waived for ``good cause.'' Should we establish a separate 
process from our general waiver provision for waivers of our proposed 
rule? If we provide such a waiver process, how should it function? 
Should we require a higher standard than good cause for granting 
waivers, such as ``extraordinary circumstances?'' The Commission has 
required a higher standard for waiver in certain circumstances. For 
example, the E-Rate program invoicing rules may only be waived ``in 
extraordinary circumstances.'' Who should have the authority to grant a 
waiver, and under what circumstances?

F. Costs and Benefits

    33. We seek comment on the costs and benefits of our proposed rule. 
Does our proposed rule promote our goals of ensuring that USF funds are 
used consistently with our national security interests while 
simultaneously continuing our universal service mission of making 
communications services available to all Americans? Does this proposed 
rule improve our ability to safeguard the country's telecommunications 
networks from potential security risks? How can we quantify any such 
benefit to national security? Are there alternative approaches that 
would better protect the security of the nation's communications 
networks at a lower cost?
    34. What are the potential costs associated with our proposed rule 
to USF recipients, the Fund, end users, consumers, the public safety 
and law enforcement community, the Commission, or other federal 
agencies? Does this proposed rule affect our continuing goal of 
ensuring that all Americans have access to communications services? If 
so, how? How do covered companies' equipment and services perform 
relative to equipment and services of companies unaffected by the 
proposed rule? What is the cost difference to USF recipients between 
equipment and services that may be covered by the proposed rule and 
those that are not? How many USF recipients purchase equipment or 
services from companies that pose a threat to our national security? Do 
the potential benefits of our proposal to national security outweigh 
any possible costs? How can we achieve our goal of addressing national 
security threats to communications networks and the communications 
supply chain while minimizing the impact on carriers seeking to deploy 
broadband to unserved or underserved areas? Specifically, we seek 
comment on the impact of our proposed rule on small businesses, as well 
as any modifications or alternatives that might ease the burden of this 
proposed rule on small businesses. We seek comment on the impact of our 
proposed rule on small and rural carriers in particular. Commenters 
should discuss the effectiveness of the proposed rule or any 
alternative and provide any quantitative or qualitative data to 
demonstrate the potential impact of the proposed rule or any 
alternative on network deployment and services offered by small and 
rural carriers and on their subscribers. Additionally, one important 
element of our cost-benefit analysis is understanding how widely the 
equipment and services that may be covered by our proposed rule are 
deployed. Therefore, we seek comment on this issue. For example, to 
what extent have small and rural carriers relied on equipment or 
services from companies that may be covered by our proposed rule? If 
so, we seek comment on specific instances and details on the use of 
equipment or services from such companies.

G. Legal Authority

    35. We believe that Sections 201(b) and 254 of the Act provide 
ample legal authority for the rule we propose today. Section 201(b) 
gives the Commission the authority to promulgate ``such rules and 
regulations as may be necessary in the public interest to carry out the 
provisions of this Act.'' And Section 254 requires that USF recipients 
``shall use that support only for the provision, maintenance, and 
upgrading of facilities and services for which the support is 
intended.'' In the USF/ICC Transformation Order, the Commission 
interpreted this language as providing it

[[Page 19202]]

with the authority to designate the services for which USF support will 
be provided and to ``encourage the deployment of the types of 
facilities that will best achieve the principles set forth in section 
254(b).'' The Tenth Circuit affirmed this interpretation in In re FCC 
11-161, 753 F.3d 1015, 1046-47 (10th Cir. 2014). Among these principles 
are ``[q]uality services . . . available at just, reasonable, and 
affordable rates,'' ``[a]ccess to advanced telecommunications and 
information services . . . in all regions of the Nation,'' and ``other 
principles'' that are ``necessary and appropriate for the protection of 
the public interest, convenience, and necessity. . . .'' Moreover, the 
Commission has the discretion to define the services supported by USF, 
and to ``consider the extent to which such telecommunications services 
. . . are consistent with the public interest, convenience, and 
necessity.'' As the Tenth Circuit has explained, ``nothing in the 
statute limits the FCC's authority to place conditions . . . on the use 
of USF funds.'' As such, we believe the condition on the use of USF 
funds that we propose here is within our authority. We seek comment on 
this view.
    36. We believe that the promotion of national security is 
consistent with the public interest, and that USF funds should be used 
to deploy infrastructure and provide services that do not undermine our 
national security. Indeed, Congress similarly determined that promoting 
the national defense is an important public interest in Section 1 of 
the Act, which describes the development of a ``Nation-wide . . . wire 
and radio communication service, for the purpose of the national 
defense'' as one of the reasons for establishing the Commission. Would 
adopting our proposed rule be equivalent to establishing a new 
definition of the ``evolving level of telecommunications services'' 
that are supported by USF mechanisms under Section 254(c)(1)? Are there 
other statutory provisions that affect USF recipients' obligations with 
respect to the security of their networks, or other sources of legal 
authority on which we should rely?

IV. Initial Regulatory Flexibility Analysis

    37. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) of the possible significant economic impact 
on a substantial number of small entities by the policies and rules 
proposed in the Notice of Proposed Rulemaking (NPRM). Written comments 
are requested on this IRFA. Comments must be identified as responses to 
the IRFA and must be filed by the deadlines for comments on the NPRM 
provided in the DATES section of the item. The Commission will send a 
copy of the NPRM, including this IRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration (SBA).

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

    38. Consistent with our obligation to be responsible stewards of 
the public funds used in the Universal Service Fund (USF) programs and 
increasing concern about ensuring communications supply chain 
integrity, the NPRM proposes and seeks comment on a rule designed to 
ensure that USF support is not spent on equipment or services from 
companies that pose a national security threat to communications 
networks or the communications supply chain.

B. Legal Basis

    39. The proposed action is authorized under Sections 1-4, 201(b), 
and 254 of the Communications Act of 1934, as amended, 47 U.S.C. 151-
154, 201(b), and 254.

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

    40. 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 Small Business 
Administration (SBA).
    41. 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 broad groups of small entities 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.
    42. 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).
    43. 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. 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. 
The 2012 U.S. Census Bureau data for most types of governments in the 
local government category show that the majority of these 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.''
    44. Small entities potentially affected by the proposals herein 
include eligible schools and libraries, eligible rural non-profit and 
public health care providers, and the eligible service providers 
offering them services, including telecommunications service providers, 
internet Service Providers (ISPs), and vendors of the services and 
equipment used for telecommunications and broadband networks.
1. Schools and Libraries
    45. As noted, ``small entity'' includes non-profit and small 
government entities. Under the schools and libraries universal service 
support mechanism, which provides support for elementary and secondary 
schools and libraries, an elementary school is generally ``a non-profit 
institutional day or residential school, that provides elementary 
education, as determined under state

[[Page 19203]]

law.'' A secondary school is generally 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. A library includes ``(1) a public library, (2) a 
public elementary school or secondary school library, (3) an academic 
library, (4) a research library . . . , and (5) a private library, but 
only if the state in which such private library is located determines 
that the library should be considered a library for the purposes of 
this definition.'' For-profit schools and libraries, and schools and 
libraries with endowments in excess of $50,000,000, 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 for-profit, elementary 
and secondary schools and libraries having $6 million or less in annual 
receipts as small entities. In funding year 2007, approximately 105,500 
schools and 10,950 libraries received funding under the schools and 
libraries universal service mechanism. Although we are unable to 
estimate with precision the number of these entities that would qualify 
as small entities under SBA's size standard, we estimate that fewer 
than 105,500 schools and 10,950 libraries might be affected annually by 
our action, under current operation of the program.
2. Healthcare Providers
    46. Offices of Physicians (except Mental Health Specialists). This 
U.S. industry comprises establishments of health practitioners having 
the degree of M.D. (Doctor of Medicine) or D.O. (Doctor of Osteopathy) 
primarily engaged in the independent practice of general or specialized 
medicine (except psychiatry or psychoanalysis) or surgery. These 
practitioners operate private or group practices in their own offices 
(e.g., centers, clinics) or in the facilities of others, such as 
hospitals or HMO medical centers. The SBA has created a size standard 
for this industry, which is annual receipts of $11 million or less. 
According to 2012 U.S. Economic Census, 152,468 firms operated 
throughout the entire year in this industry. Of that number, 147,718 
had annual receipts of less than $10 million, while 3,108 firms had 
annual receipts between $10 million and $24,999,999. Based on this 
data, we conclude that a majority of firms operating in this industry 
are small under the applicable size standard.
    47. Offices of Physicians, Mental Health Specialists. This U.S. 
industry comprises establishments of health practitioners having the 
degree of M.D. (Doctor of Medicine) or D.O. (Doctor of Osteopathy) 
primarily engaged in the independent practice of psychiatry or 
psychoanalysis. These practitioners operate private or group practices 
in their own offices (e.g., centers, clinics) or in the facilities of 
others, such as hospitals or HMO medical centers. The SBA has 
established a size standard for businesses in this industry, which is 
annual receipts of $11 million dollars or less. The U.S. Economic 
Census indicates that 8,809 firms operated throughout the entire year 
in this industry. Of that number 8,791 had annual receipts of less than 
$10 million, while 13 firms had annual receipts between $10 million and 
$24,999,999. Based on this data, we conclude that a majority of firms 
in this industry are small under the applicable standard.
    48. Offices of Dentists. This U.S. industry comprises 
establishments of health practitioners having the degree of D.M.D. 
(Doctor of Dental Medicine), D.D.S. (Doctor of Dental Surgery), or 
D.D.Sc. (Doctor of Dental Science) primarily engaged in the independent 
practice of general or specialized dentistry or dental surgery. These 
practitioners operate private or group practices in their own offices 
(e.g., centers, clinics) or in the facilities of others, such as 
hospitals or HMO medical centers. They can provide either comprehensive 
preventive, cosmetic, or emergency care, or specialize in a single 
field of dentistry. The SBA has established a size standard for that 
industry of annual receipts of $7.5 million or less. The 2012 U.S. 
Economic Census indicates that 115,268 firms operated in the dental 
industry throughout the entire year. Of that number 114,417 had annual 
receipts of less than $5 million, while 651 firms had annual receipts 
between $5 million and $9,999,999. Based on this data, we conclude that 
a majority of businesses in the dental industry are small under the 
applicable standard.
    49. Offices of Chiropractors. This U.S. industry comprises 
establishments of health practitioners having the degree of DC (Doctor 
of Chiropractic) primarily engaged in the independent practice of 
chiropractic. These practitioners provide diagnostic and therapeutic 
treatment of neuromusculoskeletal and related disorders through the 
manipulation and adjustment of the spinal column and extremities, and 
operate private or group practices in their own offices (e.g., centers, 
clinics) or in the facilities of others, such as hospitals or HMO 
medical centers. The SBA has established a size standard for this 
industry, which is annual receipts of $7.5 million or less. The 2012 
U.S. Economic Census statistics show that 33,940 firms operated 
throughout the entire year. Of that number 33,910 operated with annual 
receipts of less than $5 million per year, while 26 firms had annual 
receipts between $5 million and $9,999,999. Based on that data, we 
conclude that a majority of chiropractors are small.
    50. Offices of Optometrists. This U.S. industry comprises 
establishments of health practitioners having the degree of OD (Doctor 
of Optometry) primarily engaged in the independent practice of 
optometry. These practitioners examine, diagnose, treat, and manage 
diseases and disorders of the visual system, the eye and associated 
structures as well as diagnose related systemic conditions. Offices of 
optometrists prescribe and/or provide eyeglasses, contact lenses, low 
vision aids, and vision therapy. They operate private or group 
practices in their own offices (e.g., centers, clinics) or in the 
facilities of others, such as hospitals or HMO medical centers, and may 
also provide the same services as opticians, such as selling and 
fitting prescription eyeglasses and contact lenses. The SBA has 
established a size standard for businesses operating in this industry, 
which is annual receipts of $7.5 million or less. The 2012 Economic 
Census indicates that 18,050 firms operated the entire year. Of that 
number, 17,951 had annual receipts of less than $5 million, while 70 
firms had annual receipts between $5 million and $9,999,999. Based on 
this data, we conclude that a majority of optometrists in this industry 
are small.
    51. Offices of Mental Health Practitioners (except Physicians). 
This U.S. industry comprises establishments of independent mental 
health practitioners (except physicians) primarily engaged in (1) the 
diagnosis and treatment of mental, emotional, and behavioral disorders 
and/or (2) the diagnosis and treatment of individual or group social 
dysfunction brought about by such causes as mental illness, alcohol and 
substance abuse, physical and emotional trauma, or stress. These 
practitioners operate private or group practices in their own offices 
(e.g., centers, clinics) or in the facilities of others, such as 
hospitals or HMO medical centers. The SBA has created a size standard 
for this industry, which is annual receipts of $7.5 million or less. 
The 2012 U.S. Economic Census indicates that 16,058 firms operated 
throughout the entire year. Of that number, 15,894 firms received 
annual receipts of less than $5 million, while 111 firms had annual 
receipts between

[[Page 19204]]

$5 million and $9,999,999. Based on this data, we conclude that a 
majority of mental health practitioners who do not employ physicians 
are small.
    52. Offices of Physical, Occupational and Speech Therapists and 
Audiologists. This U.S. industry comprises establishments of 
independent health practitioners primarily engaged in one of the 
following: (1) Providing physical therapy services to patients who have 
impairments, functional limitations, disabilities, or changes in 
physical functions and health status resulting from injury, disease or 
other causes, or who require prevention, wellness or fitness services; 
(2) planning and administering educational, recreational, and social 
activities designed to help patients or individuals with disabilities, 
regain physical or mental functioning or to adapt to their 
disabilities; and (3) diagnosing and treating speech, language, or 
hearing problems. These practitioners operate private or group 
practices in their own offices (e.g., centers, clinics) or in the 
facilities of others, such as hospitals or HMO medical centers. The SBA 
has established a size standard for this industry, which is annual 
receipts of $7.5 million or less. The 2012 U.S. Economic Census 
indicates that 20,567 firms in this industry operated throughout the 
entire year. Of that number, 20,047 had annual receipts of less than $5 
million, while 270 firms had annual receipts between $5 million and 
$9,999,999. Based on this data, we conclude that a majority of 
businesses in this industry are small.
    53. Offices of Podiatrists. This U.S. industry comprises 
establishments of health practitioners having the degree of D.P.M. 
(Doctor of Podiatric Medicine) primarily engaged in the independent 
practice of podiatry. These practitioners diagnose and treat diseases 
and deformities of the foot and operate private or group practices in 
their own offices (e.g., centers, clinics) or in the facilities of 
others, such as hospitals or HMO medical centers. The SBA has 
established a size standard for businesses in this industry, which is 
annual receipts of $7.5 million or less. The 2012 U.S. Economic Census 
indicates that 7,569 podiatry firms operated throughout the entire 
year. Of that number, 7,545 firms had annual receipts of less than $5 
million, while 22 firms had annual receipts between $5 million and 
$9,999,999. Based on this data, we conclude that a majority of firms in 
this industry are small.
    54. Offices of All Other Miscellaneous Health Practitioners. This 
U.S. industry comprises establishments of independent health 
practitioners (except physicians; dentists; chiropractors; 
optometrists; mental health specialists; physical, occupational, and 
speech therapists; audiologists; and podiatrists). These practitioners 
operate private or group practices in their own offices (e.g., centers, 
clinics) or in the facilities of others, such as hospitals or HMO 
medical centers. The SBA has established a size standard for this 
industry, which is annual receipts of $7.5 million or less. The 2012 
U.S. Economic Census indicates that 11,460 firms operated throughout 
the entire year. Of that number, 11,374 firms had annual receipts of 
less than $5 million, while 48 firms had annual receipts between $5 
million and $9,999,999. Based on this data, we conclude the majority of 
firms in this industry are small.
    55. Family Planning Centers. This U.S. industry comprises 
establishments with medical staff primarily engaged in providing a 
range of family planning services on an outpatient basis, such as 
contraceptive services, genetic and prenatal counseling, voluntary 
sterilization, and therapeutic and medically induced termination of 
pregnancy. The SBA has established a size standard for this industry, 
which is annual receipts of $11 million or less. The 2012 Economic 
Census indicates that 1,286 firms in this industry operated throughout 
the entire year. Of that number 1,237 had annual receipts of less than 
$10 million, while 36 firms had annual receipts between $10 million and 
$24,999,999. Based on this data, we conclude that the majority of firms 
in this industry are small.
    56. Outpatient Mental Health and Substance Abuse Centers. This U.S. 
industry comprises establishments with medical staff primarily engaged 
in providing outpatient services related to the diagnosis and treatment 
of mental health disorders and alcohol and other substance abuse. These 
establishments generally treat patients who do not require inpatient 
treatment. They may provide a counseling staff and information 
regarding a wide range of mental health and substance abuse issues and/
or refer patients to more extensive treatment programs, if necessary. 
The SBA has established a size standard for this industry, which is $15 
million or less in annual receipts. The 2012 U.S. Economic Census 
indicates that 4,446 firms operated throughout the entire year. Of that 
number, 4,069 had annual receipts of less than $10 million while 286 
firms had annual receipts between $10 million and $24,999,999. Based on 
this data, we conclude that a majority of firms in this industry are 
small.
    57. HMO Medical Centers. This U.S. industry comprises 
establishments with physicians and other medical staff primarily 
engaged in providing a range of outpatient medical services to the 
health maintenance organization (HMO) subscribers with a focus 
generally on primary health care. These establishments are owned by the 
HMO. Included in this industry are HMO establishments that both provide 
health care services and underwrite health and medical insurance 
policies. The SBA has established a size standard for this industry, 
which is $32.5 million or less in annual receipts. The 2012 U.S. 
Economic Census indicates that 14 firms in this industry operated 
throughout the entire year. Of that number, 5 firms had annual receipts 
of less than $25 million, while 1 firm had annual receipts between $25 
million and $99,999,999. Based on this data, we conclude that 
approximately one-third of the firms in this industry are small.
    58. Freestanding Ambulatory Surgical and Emergency Centers. This 
U.S. industry comprises establishments with physicians and other 
medical staff primarily engaged in (1) providing surgical services 
(e.g., orthoscopic and cataract surgery) on an outpatient basis or (2) 
providing emergency care services (e.g., setting broken bones, treating 
lacerations, or tending to patients suffering injuries as a result of 
accidents, trauma, or medical conditions necessitating immediate 
medical care) on an outpatient basis. Outpatient surgical 
establishments have specialized facilities, such as operating and 
recovery rooms, and specialized equipment, such as anesthetic or X-ray 
equipment. The SBA has established a size standard for this industry, 
which is annual receipts of $15 million or less. The 2012 U.S. Economic 
Census indicates that 3,595 firms in this industry operated throughout 
the entire year. Of that number, 3,222 firms had annual receipts of 
less than $10 million, while 289 firms had annual receipts between $10 
million and $24,999,999. Based on this data, we conclude that a 
majority of firms in this industry are small.
    59. All Other Outpatient Care Centers. This U.S. industry comprises 
establishments with medical staff primarily engaged in providing 
general or specialized outpatient care (except family planning centers, 
outpatient mental health and substance abuse centers, HMO medical 
centers, kidney dialysis centers, and freestanding ambulatory surgical 
and emergency centers). Centers or clinics of health

[[Page 19205]]

practitioners with different degrees from more than one industry 
practicing within the same establishment (i.e., Doctor of Medicine and 
Doctor of Dental Medicine) are included in this industry. The SBA has 
established a size standard for this industry, which is annual receipts 
of $20.5 million or less. The 2012 U.S. Economic Census indicates that 
4,903 firms operated in this industry throughout the entire year. Of 
this number, 4,269 firms had annual receipts of less than $10 million, 
while 389 firms had annual receipts between $10 million and 
$24,999,999. Based on this data, we conclude that a majority of firms 
in this industry are small.
    60. Blood and Organ Banks. This U.S. industry comprises 
establishments primarily engaged in collecting, storing, and 
distributing blood and blood products and storing and distributing body 
organs. The SBA has established a size standard for this industry, 
which is annual receipts of $32.5 million or less. The 2012 U.S. 
Economic Census indicates that 314 firms operated in this industry 
throughout the entire year. Of that number, 235 operated with annual 
receipts of less than $25 million, while 41 firms had annual receipts 
between $25 million and $49,999,999. Based on this data, we conclude 
that approximately three-quarters of firms that operate in this 
industry are small.
    61. All Other Miscellaneous Ambulatory Health Care Services. This 
U.S. industry comprises establishments primarily engaged in providing 
ambulatory health care services (except offices of physicians, 
dentists, and other health practitioners; outpatient care centers; 
medical and diagnostic laboratories; home health care providers; 
ambulances; and blood and organ banks). The SBA has established a size 
standard for this industry, which is annual receipts of $15 million or 
less. The 2012 U.S. Economic Census indicates that 2,429 firms operated 
in this industry throughout the entire year. Of that number, 2,318 had 
annual receipts of less than $10 million, while 56 firms had annual 
receipts between $10 million and $24,999,999. Based on this data, we 
conclude that a majority of the firms in this industry are small.
    62. Medical Laboratories. This U.S. industry comprises 
establishments known as medical laboratories primarily engaged in 
providing analytic or diagnostic services, including body fluid 
analysis, generally to the medical profession or to the patient on 
referral from a health practitioner. The SBA has established a size 
standard for this industry, which is annual receipts of $32.5 million 
or less. The 2012 U.S. Economic Census indicates that 2,599 firms 
operated in this industry throughout the entire year. Of this number, 
2,465 had annual receipts of less than $25 million, while 60 firms had 
annual receipts between $25 million and $49,999,999. Based on this 
data, we conclude that a majority of firms that operate in this 
industry are small.
    63. Diagnostic Imaging Centers. This U.S. industry comprises 
establishments known as diagnostic imaging centers primarily engaged in 
producing images of the patient generally on referral from a health 
practitioner. The SBA has established size standard for this industry, 
which is annual receipts of $15 million or less. The 2012 U.S. Economic 
Census indicates that 4,209 firms operated in this industry throughout 
the entire year. Of that number, 3,876 firms had annual receipts of 
less than $10 million, while 228 firms had annual receipts between $10 
million and $24,999,999. Based on this data, we conclude that a 
majority of firms that operate in this industry are small.
    64. Home Health Care Services. This U.S. industry comprises 
establishments primarily engaged in providing skilled nursing services 
in the home, along with a range of the following: Personal care 
services; homemaker and companion services; physical therapy; medical 
social services; medications; medical equipment and supplies; 
counseling; 24-hour home care; occupation and vocational therapy; 
dietary and nutritional services; speech therapy; audiology; and high-
tech care, such as intravenous therapy. The SBA has established a size 
standard for this industry, which is annual receipts of $15 million or 
less. The 2012 U.S. Economic Census indicates that 17,770 firms 
operated in this industry throughout the entire year. Of that number, 
16,822 had annual receipts of less than $10 million, while 590 firms 
had annual receipts between $10 million and $24,999,999. Based on this 
data, we conclude that a majority of firms that operate in this 
industry are small.
    65. Ambulance Services. This U.S. industry comprises establishments 
primarily engaged in providing transportation of patients by ground or 
air, along with medical care. These services are often provided during 
a medical emergency but are not restricted to emergencies. The vehicles 
are equipped with lifesaving equipment operated by medically trained 
personnel. The SBA has established a size standard for this industry, 
which is annual receipts of $15 million or less. The 2012 U.S. Economic 
Census indicates that 2,984 firms operated in this industry throughout 
the entire year. Of that number, 2,926 had annual receipts of less than 
$15 million, while 133 firms had annual receipts between $10 million 
and $24,999,999. Based on this data, we conclude that a majority of 
firms in this industry are small.
    66. Kidney Dialysis Centers. This U.S. industry comprises 
establishments with medical staff primarily engaged in providing 
outpatient kidney or renal dialysis services. The SBA has established a 
size standard for this industry, which is annual receipts of $38.5 
million or less. The 2012 U.S. Economic Census indicates that 396 firms 
operated in this industry throughout the entire year. Of that number, 
379 had annual receipts of less than $25 million, while 7 firms had 
annual receipts between $25 million and $49,999,999. Based on this 
data, we conclude that a majority of firms in this industry are small.
    67. General Medical and Surgical Hospitals. This U.S. industry 
comprises establishments known and licensed as general medical and 
surgical hospitals primarily engaged in providing diagnostic and 
medical treatment (both surgical and nonsurgical) to inpatients with 
any of a wide variety of medical conditions. These establishments 
maintain inpatient beds and provide patients with food services that 
meet their nutritional requirements. These hospitals have an organized 
staff of physicians and other medical staff to provide patient care 
services. These establishments usually provide other services, such as 
outpatient services, anatomical pathology services, diagnostic X-ray 
services, clinical laboratory services, operating room services for a 
variety of procedures, and pharmacy services. The SBA has established a 
size standard for this industry, which is annual receipts of $38.5 
million or less. The 2012 U.S. Economic Census indicates that 2,800 
firms operated in this industry throughout the entire year. Of that 
number, 877 has annual receipts of less than $25 million, while 400 
firms had annual receipts between $25 million and $49,999,999. Based on 
this data, we conclude that approximately one-quarter of firms in this 
industry are small.
    68. Psychiatric and Substance Abuse Hospitals. This U.S. industry 
comprises establishments known and licensed as psychiatric and 
substance abuse hospitals primarily engaged in providing diagnostic, 
medical treatment, and monitoring services for inpatients who suffer 
from mental illness or substance abuse disorders. The

[[Page 19206]]

treatment often requires an extended stay in the hospital. These 
establishments maintain inpatient beds and provide patients with food 
services that meet their nutritional requirements. They have an 
organized staff of physicians and other medical staff to provide 
patient care services. Psychiatric, psychological, and social work 
services are available at the facility. These hospitals usually provide 
other services, such as outpatient services, clinical laboratory 
services, diagnostic X-ray services, and electroencephalograph 
services. The SBA has established a size standard for this industry, 
which is annual receipts of $38.5 million or less. The 2012 U.S. 
Economic Census indicates that 404 firms operated in this industry 
throughout the entire year. Of that number, 185 had annual receipts of 
less than $25 million, while 107 firms had annual receipts between $25 
million and $49,999,999. Based on this data, we conclude that more than 
one-half of the firms in this industry are small.
    69. Specialty (Except Psychiatric and Substance Abuse) Hospitals. 
This U.S. industry consists of establishments known and licensed as 
specialty hospitals primarily engaged in providing diagnostic, and 
medical treatment to inpatients with a specific type of disease or 
medical condition (except psychiatric or substance abuse). Hospitals 
providing long-term care for the chronically ill and hospitals 
providing rehabilitation, restorative, and adjustive services to 
physically challenged or disabled people are included in this industry. 
These establishments maintain inpatient beds and provide patients with 
food services that meet their nutritional requirements. They have an 
organized staff of physicians and other medical staff to provide 
patient care services. These hospitals may provide other services, such 
as outpatient services, diagnostic X-ray services, clinical laboratory 
services, operating room services, physical therapy services, 
educational and vocational services, and psychological and social work 
services. The SBA has established a size standard for this industry, 
which is annual receipts of $38.5 million or less. The 2012 U.S. 
Economic Census indicates that 346 firms operated in this industry 
throughout the entire year. Of that number, 146 firms had annual 
receipts of less than $25 million, while 79 firms had annual receipts 
between $25 million and $49,999,999. Based on this data, we conclude 
that more than one-half of the firms in this industry are small.
    70. Emergency and Other Relief Services. This industry comprises 
establishments primarily engaged in providing food, shelter, clothing, 
medical relief, resettlement, and counseling to victims of domestic or 
international disasters or conflicts (e.g., wars). The SBA has 
established a size standard for this industry which is annual receipts 
of $32.5 million or less. The 2012 U.S. Economic Census indicates that 
541 firms operated in this industry throughout the entire year. Of that 
number, 509 had annual receipts of less than $25 million, while 7 firms 
had annual receipts between $25 million and $49,999,999. Based on this 
data, we conclude that a majority of firms in this industry are small.
3. Providers of Telecommunications and Other Services
a. Telecommunications Service Providers
    71. Incumbent Local Exchange Carriers (LECs). Neither the 
Commission nor the SBA has developed a small business size standard 
specifically for incumbent local exchange services. The closest 
applicable NAICS Code category is Wired Telecommunications Carriers and 
under the SBA size standard, such a business is small if it has 1,500 
or fewer employees. U.S. Census Bureau data for 2012 indicates that 
3,117 firms operated during 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 our actions. According to Commission 
data, 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. Thus using the SBA's size standard the majority of 
Incumbent LECs can be considered small entities.
    72. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a definition of small entities specifically 
applicable to providers of interexchange services (IXCs). The closest 
NAICS Code category is Wired Telecommunications Carriers and the 
applicable size standard under SBA rules consists of all such companies 
having 1,500 or fewer employees. U.S. Census Bureau data for 2012 
indicates that 3,117 firms operated during that year. Of that number, 
3,083 operated with fewer than 1,000 employees. According to internally 
developed 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. Consequently, the Commission estimates that the majority of 
interexchange service providers that may be affected are small 
entities.
    73. 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 Wired Telecommunications 
Carriers and under the size standard, such a business is small if it 
has 1,500 or fewer employees. U.S. Census Bureau data for 2012 
indicates that 3,117 firms operated during that year. Of that number, 
3,083 operated with fewer than 1,000 employees. Consequently, the 
Commission estimates that most competitive access providers are small 
businesses that may be affected by our actions. According to Commission 
data the 2010 Trends in Telephone Report, 1,442 CAPs and competitive 
local exchange carriers (competitive LECs) reported that they were 
engaged in the provision of competitive local exchange services. Of 
these 1,442 CAPs and competitive LECs, an estimated 1,256 have 1,500 or 
fewer employees and 186 have more than 1,500 employees. Consequently, 
the Commission estimates that most providers of competitive exchange 
services are small businesses.
    74. Operator Service Providers (OSPs). Neither the Commission nor 
the SBA has developed a small business size standard specifically for 
operator service providers. The appropriate category for Operator 
Service Providers is the category Wired Telecommunications Carriers. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. Census Bureau 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. 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 rules proposed.
    75. Local Resellers. The SBA has not developed a small business 
size standard specifically for Local Resellers.

[[Page 19207]]

The SBA category of Telecommunications Resellers is the closest NAICs 
code category for local resellers. The Telecommunications Resellers 
industry comprises establishments engaged in purchasing access and 
network capacity from owners and operators of telecommunications 
networks and reselling wired and wireless telecommunications services 
(except satellite) to businesses and households. Establishments in this 
industry resell telecommunications; they do not operate transmission 
facilities and infrastructure. Mobile virtual network operators (MVNOs) 
are included in this industry. Under the SBA's size standard, such a 
business is small if it has 1,500 or fewer employees. 2012 Census 
Bureau data show that 1,341 firms provided resale services during that 
year. Of that number, all operated with fewer than 1,000 employees. 
Thus, under this category and the associated small business size 
standard, the majority of these resellers can be considered small 
entities. According to Commission data, 213 carriers have reported that 
they are engaged in the provision of local resale services. Of these, 
an estimated 211 have 1,500 or fewer employees and two have more than 
1,500 employees. Consequently, the Commission estimates that the 
majority of local resellers are small entities that may be affected by 
the rules adopted.
    76. Toll Resellers. The Commission has not developed a definition 
for Toll Resellers. The closest NAICS Code Category is 
Telecommunications Resellers. The Telecommunications Resellers industry 
comprises establishments engaged in purchasing access and network 
capacity from owners and operators of telecommunications networks and 
reselling wired and wireless telecommunications services (except 
satellite) to businesses and households. Establishments in this 
industry resell telecommunications; they do not operate transmission 
facilities and infrastructure. MVNOs are included in this industry. The 
SBA has developed a small business size standard for the category of 
Telecommunications Resellers. Under that size standard, such a business 
is small if it has 1,500 or fewer employees. 2012 Census Bureau data 
show that 1,341 firms provided resale services during that year. Of 
that number, 1,341 operated with fewer than 1,000 employees. Thus, 
under this category and the associated small business size standard, 
the majority of these resellers can be considered small entities. 
According to Commission data, 881 carriers have reported that they are 
engaged in the provision of toll resale services. Of this total, an 
estimated 857 have 1,500 or fewer employees. Consequently, the 
Commission estimates that the majority of toll resellers are small 
entities.
    77. 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. U.S. 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.
    78. Wireless Telecommunications Carriers (except Satellite). This 
industry comprises establishments engaged in operating and maintaining 
switching and transmission facilities to provide communications via the 
airwaves. Establishments in this industry have spectrum licenses and 
provide services using that spectrum, 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, U.S. 
Census Bureau data for 2012 show that there were 967 firms that 
operated for the entire year. Of this total, 955 firms had employment 
of 999 or fewer employees and 12 had employment of 1,000 employees or 
more. Thus under this category and the associated size standard, the 
Commission estimates that the majority of wireless telecommunications 
carriers (except satellite) are small entities.
    79. The Commission's own data--available in its Universal Licensing 
System--indicate that, as of October 25, 2016, there are 280 Cellular 
licensees that will be affected by our actions today. The Commission 
does not know how many of these licensees are small, as the Commission 
does not collect that information for these types of 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) Telephony services. Of this 
total, an estimated 261 have 1,500 or fewer employees, and 152 have 
more than 1,500 employees. Thus, using available data, we estimate that 
the majority of wireless firms can be considered small.
    80. Common Carrier Paging. As noted, since 2007 the Census Bureau 
has placed paging providers within the broad economic census category 
of Wireless Telecommunications Carriers (except Satellite).
    81. In addition, in the Paging Second Report and Order, the 
Commission adopted a size standard for ``small businesses'' for 
purposes of determining their eligibility for special provisions such 
as bidding credits and installment payments. A small business is an 
entity that, together with its affiliates and controlling principals, 
has average gross revenues not exceeding $15 million for the preceding 
three years. The SBA has approved this definition. An initial auction 
of Metropolitan Economic Area (``MEA'') licenses was conducted in the 
year 2000. Of the 2,499 licenses auctioned, 985 were sold. Fifty-seven 
companies claiming small business status won 440 licenses. A subsequent 
auction of MEA and Economic Area (``EA'') licenses was held in the year 
2001. Of the 15,514 licenses auctioned, 5,323 were sold. One hundred 
thirty-two companies claiming small business status purchased 3,724 
licenses. A third auction, consisting of 8,874 licenses in each of 175 
EAs and 1,328 licenses in all but three of the 51 MEAs, was held in 
2003. Seventy-seven bidders claiming small or very small business 
status won 2,093 licenses.
    82. Currently, there are approximately 74,000 Common Carrier Paging 
licenses. According to the most recent Trends in Telephone Service, 291 
carriers reported that they were engaged in the provision of ``paging 
and messaging'' services. Of these, an estimated 289 have 1,500 or 
fewer employees and two have more than 1,500 employees. We estimate 
that the majority of common carrier paging

[[Page 19208]]

providers would qualify as small entities under the SBA definition.
    83. Wireless Telephony. Wireless telephony includes cellular, 
personal communications services, and specialized mobile radio 
telephony carriers. The closest applicable SBA category is Wireless 
Telecommunications Carriers (except Satellite) and the appropriate size 
standard for this category under the SBA rules is that such a business 
is small if it has 1,500 or fewer employees. For this industry, U.S. 
Census Bureau 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 and 12 firms has 1,000 employees or more. Thus under 
this category and the associated size standard, the Commission 
estimates that a majority of these entities can be considered small. 
According to Commission data, 413 carriers reported that they were 
engaged in wireless telephony. Of these, an estimated 261 have 1,500 or 
fewer employees and 152 have more than 1,500 employees. Therefore, more 
than half of these entities can be considered small.
    84. Satellite Telecommunications. This category comprises firms 
``primarily engaged in providing telecommunications services to other 
establishments in the telecommunications and broadcasting industries by 
forwarding and receiving communications signals via a system of 
satellites or reselling satellite telecommunications.'' Satellite 
telecommunications service providers include satellite and earth 
station operators. The category has a small business size standard of 
$32.5 million or less in average annual receipts, under SBA rules. For 
this category, U.S. Census Bureau data for 2012 show that there were a 
total of 333 firms that operated for the entire year. Of this total, 
299 firms had annual receipts of less than $25 million. Consequently, 
we estimate that the majority of satellite telecommunications providers 
are small entities.
    85. All Other Telecommunications. The ``All Other 
Telecommunications'' category 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, U.S. 
Census Bureau data for 2012 show that there were 1,442 firms that 
operated for the entire year. Of these firms, a total of 1,400 had 
gross annual receipts of less than $25 million and 42 firms had gross 
annual receipts of $25 million to $49, 999,999. Thus, the Commission 
estimates that a majority of ``All Other Telecommunications'' firms 
potentially affected by our action can be considered small.
b. Internet Service Providers
    86. Internet Service Providers (Broadband). Broadband internet 
service providers include wired (e.g., cable, DSL) and VoIP service 
providers using their own operated wired telecommunications 
infrastructure fall in the category of Wired Telecommunication 
Carriers. Wired Telecommunications Carriers are comprised of 
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 telecommunications networks. Transmission facilities may be based 
on a single technology or a combination of technologies. The SBA size 
standard for this category classifies a business as small if it has 
1,500 or fewer employees. U.S. Census Bureau 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. Consequently, under this size 
standard the majority of firms in this industry can be considered 
small.
    87. Internet Service Providers (Non-Broadband). internet access 
service providers such as Dial-up internet service providers, VoIP 
service providers using client-supplied telecommunications connections 
and internet service providers using client-supplied telecommunications 
connections (e.g., dial-up ISPs) fall in the category of All Other 
Telecommunications. 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, U.S. Census Bureau data for 2012 show that there were 1,442 
firms that operated for the entire year. Of these firms, a total of 
1,400 had gross annual receipts of less than $25 million. Consequently, 
under this size standard a majority of firms in this industry can be 
considered small.
c. Vendors and Equipment Manufacturers
    88. Vendors of Infrastructure Development or ``Network Buildout.'' 
The Commission has not developed a small business size standard 
specifically directed toward manufacturers of network facilities. There 
are two applicable SBA categories in which manufacturers of network 
facilities could fall and each have different size standards under the 
SBA rules. The SBA categories are ``Radio and Television Broadcasting 
and Wireless Communications Equipment'' with a size standard of 1,250 
employees or less and ``Other Communications Equipment Manufacturing'' 
with a size standard of 750 employees or less.'' U.S. Census Bureau 
data for 2012 show that for Radio and Television Broadcasting and 
Wireless Communications Equipment firms 841 establishments operated for 
the entire year. Of that number, 828 establishments operated with fewer 
than 1,000 employees, 7 establishments operated with between 1,000 and 
2,499 employees and 6 establishments operated with 2,500 or more 
employees. For Other Communications Equipment Manufacturing, U.S. 
Census Bureau data for 2012 show that 383 establishments operated for 
the year. Of that number 379 firms operated with fewer than 500 
employees and 4 had 500 to 999 employees. Based on this data, we 
conclude that the majority of Vendors of Infrastructure Development or 
``Network Buildout'' are small.
    89. Telephone Apparatus Manufacturing. This industry comprises 
establishments primarily engaged in manufacturing wire telephone and 
data communications equipment. These products may be standalone or 
board-level components of a larger system. Examples of products made by 
these establishments are central office switching equipment, cordless 
telephones (except cellular), PBX equipment, telephones, telephone 
answering machines, LAN modems, multi-user modems, and other data 
communications equipment, such as bridges, routers, and gateways.'' The 
SBA size standard for Telephone Apparatus Manufacturing is all such 
firms having 1,250 or fewer employees. According to U.S. Census Bureau 
data for 2012, there were a total of 266 establishments in this 
category that operated for the entire year. Of this

[[Page 19209]]

total, 262 had employment of under 1,000, and an additional 4 had 
employment of 1,000 to 2,499. Thus, under this size standard, the 
majority of firms can be considered small.
    90. Radio and Television Broadcasting and Wireless Communications 
Equipment Manufacturing. This industry comprises establishments 
primarily engaged in manufacturing radio and television broadcast and 
wireless communications equipment. Examples of products made by these 
establishments are: Transmitting and receiving antennas, cable 
television equipment, GPS equipment, pagers, cellular phones, mobile 
communications equipment, and radio and television studio and 
broadcasting equipment. The SBA has established a small business size 
standard for this industry of 1,250 employees or less. U.S. Census 
Bureau data for 2012 show that 841 establishments operated in this 
industry in that year. Of that number, 828 establishments operated with 
fewer than 1,000 employees, 7 establishments operated with between 
1,000 and 2,499 employees and 6 establishments operated with 2,500 or 
more employees. Based on this data, we conclude that a majority of 
manufacturers in this industry are small.
    91. Other Communications Equipment Manufacturing. This industry 
comprises establishments primarily engaged in manufacturing 
communications equipment (except telephone apparatus, and radio and 
television broadcast, and wireless communications equipment). Examples 
of such manufacturing include fire detection and alarm systems 
manufacturing, Intercom systems and equipment manufacturing, and 
signals (e.g., highway, pedestrian, railway, traffic) manufacturing. 
The SBA has established a size for this industry as all such firms 
having 750 or fewer employees. U.S. Census Bureau data for 2012 show 
that 383 establishments operated in that year. Of that number 379 
operated with fewer than 500 employees and 4 had 500 to 999 employees. 
Based on this data, we conclude that the majority of Other 
Communications Equipment Manufacturers are small.

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

    92. The NPRM proposes a rule that no universal service support may 
be used to purchase or obtain any equipment or services produced or 
provided by any company posing a national security threat to the 
integrity of communications networks or the communications supply 
chain. We seek comment on this proposal, and its likely costs and 
benefits, as well as on alternative approaches and any other steps we 
should consider taking. The NPRM also seeks comment on how broadly this 
proposed rule should apply, and how it should be implemented. We seek 
comment on how to enforce the proposed rule, including who should be 
held liable for the recovery of disbursed funds, and whether and how 
applicants for USF support may seek a waiver to purchase or continue to 
use equipment or services provided by a covered entity. Lastly, we seek 
comment on whether Sections 201(b) and 254 provide legal authority for 
the proposed rule.

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

    93. The RFA requires an agency to describe any significant, 
specifically small business, alternatives that it has considered in 
reaching its proposed approach, which may include the following four 
alternatives (among others): ``(1) the establishment of differing 
compliance or reporting requirements or timetables that take into 
account the resources available to small entities; (2) the 
clarification, consolidation, or simplification of compliance 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.''
    94. In this NPRM, we propose to adopt a rule that no universal 
service support may be used to purchase or obtain any equipment or 
services produced or provided by any company posing a national security 
threat to the integrity of communications networks or the 
communications supply chain.
    95. The NPRM specifically seeks comment on the impact of such a 
rule on small entities, particularly small and rural carriers. The NPRM 
also seeks comment on whether there are any compliance issues we should 
consider, particularly for smaller USF recipients. The NPRM seeks 
comment on whether, as a practical matter, USF recipients will be able 
to purchase equipment and services from non-covered companies that can 
interoperate with any existing, installed equipment from covered 
companies.
    96. As the Spectrum Act and its implementing regulations included 
similar provisions, the NPRM seeks comment on how small businesses 
complied with those regulations in the context of spectrum auctions 
administered by the Commission.
    97. The NPRM asks whether there are modifications to our proposed 
rules that would achieve similar national security objectives, while 
reducing burdens on small entities. For example, the NPRM asks whether 
there should be a later effective date for the rule as applied to 
smaller recipients of USF support. We seek comment on any potential 
modifications and alternatives that would ease the burden of our 
proposed rules on small entities.
    98. We expect to take into account the economic impact on small 
entities, as identified in comments filed in response to the NPRM and 
this IRFA, in reaching our final conclusions and promulgating rules in 
this proceeding.

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

    99. None.

V. Procedural Matters

    100. Ex Parte Rules.--This proceeding shall be treated as a 
``permit-but-disclose'' proceeding in accordance with the Commission's 
ex parte rules. Persons making ex parte presentations must file a copy 
of any written presentation or a memorandum summarizing any oral 
presentation within two business days after the presentation (unless a 
different deadline applicable to the Sunshine period applies). Persons 
making oral ex parte presentations are reminded that memoranda 
summarizing the presentation must (1) list all persons attending or 
otherwise participating in the meeting at which the ex parte 
presentation was made, and (2) summarize all data presented and 
arguments made during the presentation. If the presentation consisted 
in whole or in part of the presentation of data or arguments already 
reflected in the presenter's written comments, memoranda or other 
filings in the proceeding, the presenter may provide citations to such 
data or arguments in his or her prior comments, memoranda, or other 
filings (specifying the relevant page and/or paragraph numbers where 
such data or arguments can be found) in lieu of summarizing them in the 
memorandum. Documents shown or given to Commission staff during ex 
parte meetings are deemed to be written ex parte presentations and must 
be filed consistent with Rule 1.1206(b). In proceedings governed by 
Rule 1.49(f) or for which the Commission has made available a method of 
electronic filing, written ex

[[Page 19210]]

parte presentations and memoranda summarizing oral ex parte 
presentations, and all attachments thereto, must be filed through the 
electronic comment filing system available for that proceeding, and 
must be filed in their native format (e.g., .doc, .xml, .ppt, 
searchable .pdf). Participants in this proceeding should familiarize 
themselves with the Commission's ex parte rules.
    101. Initial Regulatory Flexibility Analysis.--Pursuant to the 
Regulatory Flexibility Act (RFA), the Commission has prepared an 
Initial Regulatory Flexibility Analysis (IRFA) of the possible 
significant economic impact on small entities of the policies and 
actions considered in this NPRM. The text of the IRFA is set forth 
above. Written public comments are requested on this IRFA. Comments 
must be identified as responses to the IRFA and must be filed by the 
deadlines for comments on the NPRM. The Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, will send a 
copy of the NPRM, including the IRFA, to the Chief Counsel for Advocacy 
of the Small Business Administration.
    102. Paperwork Reduction Act.--This document contains proposed new 
information collection requirements. The Commission, as part of its 
continuing effort to reduce paperwork burdens, invites the general 
public and the Office of Management and Budget to comment on the 
information collection requirements contained in this document, as 
required by the Paperwork Reduction Act of 1995, Public Law 104-13. In 
addition, pursuant to the Small Business Paperwork Relief Act of 2002, 
Public Law 107-198, see 44 U.S.C. 3506(c)(4), we seek specific comment 
on how we might further reduce the information collection burden for 
small business concerns with fewer than 25 employees.

VI. Ordering Clauses

    104. Accordingly, it is ordered that, pursuant to the authority 
contained in Sections 1-4, 201(b), and 254 of the Communications Act of 
1934, as amended, 47 U.S.C. 151-54, 201(b), and 254, this Notice of 
Proposed Rulemaking is adopted.
    105. It is further ordered that the Commission's Consumer & 
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.

List of Subjects in 47 CFR Part 54

    Communications common carriers, Reporting and recordkeeping 
requirements, Telecommunications.


Federal Communications Commission.
Marlene Dortch,
Secretary. Office of the Secretary.

Proposed Rule

    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR part 54 as follows:

PART 54--UNIVERSAL SERVICE

0
1. The authority citation for part 54 continues to read as follows:

    Authority: 47 U.S.C. 151, 154(i), 155, 201, 205, 214, 219, 220, 
254, 303(r), 403, and 1302 unless otherwise noted.

0
2. Add Sec.  54.9 to read as follows:


Sec.  54.9  Prohibition on use of funds.

    No universal service support may be used to purchase or obtain any 
equipment or services produced or provided by any company posing a 
national security threat to the integrity of communications networks or 
the communications supply chain.

[FR Doc. 2018-09090 Filed 5-1-18; 8:45 am]
BILLING CODE 6712-01-P