[Federal Register Volume 83, Number 205 (Tuesday, October 23, 2018)]
[Rules and Regulations]
[Pages 53377-53396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-22674]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 52
[WC Docket No. 17-192, CC Docket No. 95-155; FCC 18-137]
Toll Free Assignment Modernization; Toll Free Service Access
Codes
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: In this document, the Federal Communications Commission
(Commission) revises its rules to allow the Commission to assign
numbers by competitive bidding, on a first-come, first-served basis, by
an alternative assignment methodology, or by a combination of
methodologies. The Commission further establishes a single round,
sealed-bid Vickrey auction for roughly 17,000 mutually exclusive
numbers in the 833 code, set aside in the process of opening that code.
Government and non-profit entities may file a petition seeking that a
number be set aside from the auction for use for public health and
safety purposes, and net proceeds from the auction will offset the
costs of toll free numbering administration. Full auction procedures
will be established in subsequent public notices. The Commission also
revises its toll free rules to allow for the development of a secondary
market for toll free numbers assigned in an auction, and to modernize
its toll free rules to make them consistent with the other revisions
adopted in this document and with industry terminology and practice.
DATES: Effective November 23, 2018.
FOR FURTHER INFORMATION CONTACT: Wireline Competition Bureau,
Competition Policy Division, Matthew Collins, at (202) 418-7141,
[email protected].
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order in WC Docket No. 17-192, CC Docket No. 95-155, FCC 18-137,
adopted September 26, 2018, and released September 27, 2018. The full
text of this document is available for public inspection during regular
business hours in the FCC Reference Information Center, Portals II, 445
12th Street SW, Room CY-A257, Washington, DC 20554. It is available on
the Commission's website at https://docs.fcc.gov/public/attachments/FCC-18-137A1.pdf.
Synopsis
I. Introduction
1. Today, we demonstrate our continued commitment to modernize the
way we assign toll free numbers by adopting an additional assignment
methodology that is both market-based and equitable. Based on the
Federal Communications Commission's success using competitive bidding
to assign spectrum licenses and award universal service support, we
adopt new measures to explore the use of competitive bidding for the
assignment of toll free numbers. To further evaluate this approach, as
an experiment we establish the framework in this Report and Order for
an auction of the rights to use certain numbers in the recently-opened
833 toll free code. After the release of this Report and Order, we will
initiate the pre-auction phase of this proceeding to seek input on the
procedures for the auction. This experiment will help us determine how
best to use competitive bidding to most effectively assign toll free
numbers, as well as provide experience in applying auction procedures
to the toll-free numbering assignment process.
II. Background
2. Toll free calling and texting remains an important part of our
communications system. Even as websites and smartphone apps have
provided new avenues for public engagement, businesses, government
entities, and non-profit organizations alike continue to make use of
toll free services to keep an open line to the public, and enterprising
subscribers put toll free numbers to use in creative new ways. Toll
free services rely on toll free numbers--a limited resource the
Commission is charged by statute with making available ``on an
equitable basis.''
3. Toll free calling began in 1967, with the introduction of the
800 toll free code. The 800 code was established by AT&T, and the
Commission's role in the toll free service market increased over the
following 30 years. In 1997, faced with the possibility of exhaust of
the 800 code, the Commission concluded that the Communications Act of
1934, as amended, ``require[s] the Commission to ensure the efficient,
fair, and orderly allocation of toll free numbers.'' Thirty years
later, when the Commission opened the second toll free code--888--it
addressed an age-old question for the first time in the context of toll
free numbers: How can limited resources be most fairly and efficiently
allocated when some of those resources are more desirable than others?
Whether they
[[Page 53378]]
were desirable because they were easy to remember, because they could
spell a name or common word, or because a subscriber had built up good
will in that number in the 800 code, some 888 numbers were likely to be
highly desirable while others might draw no interest at all.
4. Congress has given the Commission only one guideline regarding
the allocation of toll-free numbers: Do so ``on an equitable basis.''
Interpreting this guideline after opening the 888 code, the Commission
understood ``equitable'' to include two prongs: ``orderly and
efficient'' and ``fair.'' After considering multiple methodologies to
assign toll free numbers, the Commission settled on a first-come,
first-served approach. The Commission also offered a limited right of
first refusal to subscribers of 800 numbers that expressed an interest
in subscribing to that number in the 888 code. Inspired by its low cost
and simplicity, the Commission found such an approach to be ``orderly
and efficient''; it also concluded that it was ``fair'' because it did
not discriminate on its face against any potential subscribers.
5. Among the alternate methodologies the Commission considered when
it opened the 888 code was competitive bidding. The Commission observed
the fairness of this approach, stating that it ``would offer all
participants an equal opportunity to obtain a particular . . .
number''; it also described auctions as ``generally efficient.''
Although the Commission had conducted spectrum auctions prior to the
888 code opening, the Commission concluded that an auction of toll free
numbers presented ``practical difficulties''--not only could it cost
more than a first-come, first-served approach, but it could also
require oversight to ensure that bidders met requirements and followed
auction procedures.
6. When the Commission decided how to assign certain 888 toll free
numbers, the Commission's auctions program was still in its relatively
early stages. The Commission's first spectrum auction was held in July
1994. The Notice of Proposed Rulemaking for the 888 toll free code was
adopted in October 1995, and the 1998 Toll Free Order was adopted in
March 1998. In the 20 years since that decision, the Commission has
conducted over 70 spectrum auctions, including those for commercial
wireless licenses and broadcast construction permits, using various
auction formats. More recently, the Commission has begun using auctions
as a mechanism for distributing universal service high-cost support.
7. During this same period, the first-come, first-served approach
to toll free number assignment--which was used with some modification
for the 877, 866, 855, and 844 code openings--has been subject to
scrutiny by the Wireline Competition Bureau (Bureau) for falling short
of expectations in several ways. For example, first-come, first-served
assignment has rewarded actors that have invested in systems to
increase the chances that their choices are received first in the
Service Management System Database (the Toll Free Database, the
``database system for toll free numbers,'' in which entities reserve
numbers and ``enter and amend the data about toll free numbers within
their control''); and, by assigning numbers at no cost, it has allowed
accumulation of numbers without ensuring those numbers are being put to
their most efficient use. The Bureau addressed this latter issue, and
the issue of some registrants having enhanced connectivity to the toll
free database, by limiting registrants to 100 numbers per day for a
month after the opening of the last two codes, 844 and 855.
8. 833 Code Opening. In April 2017, the Bureau authorized Somos,
Inc. (Somos), the Toll Free Numbering Administrator, to open the 833
toll free code. To facilitate the exploration of alternative assignment
methodologies, the Bureau took steps in the pre-code opening process to
identify numbers that could be part of an experiment regarding the use
of an alternative assignment process, such as an auction. Specifically,
the Bureau authorized Responsible Organizations (RespOrgs, which are
``entit[ies] chosen by a toll free subscriber to manage and administer
the appropriate records in the toll free Service Management System for
the toll free subscriber'') to identify up to 2,000 desired numbers in
the 833 code and submit a request for those numbers to Somos. The
Bureau directed Somos to review these requests, identify numbers
subject to multiple requests, and place these ``mutually exclusive''
numbers in unavailable status (which means ``[t]he toll free number is
not available for assignment due to an unusual condition'') pending the
outcome of this proceeding. Numbers that were not requested by multiple
RespOrgs were made available on a first-come, first-served basis.
9. Nearly 150 RespOrgs participated in the 833 pre-code opening
process, requesting over 72,000 numbers. Somos identified over 17,000
mutually exclusive numbers--including `` `repeaters' (833-333-3333,
833-888-8888, 833-800-0000, etc.) and numbers that spell memorable
words or phrases (833-DENTIST, 833-DOCTORS, 833-FLOWERS . . . etc.)''--
and placed those numbers in unavailable status. Ten or more RespOrgs
requested over 1,800 mutually exclusive numbers, and 65 or more
RespOrgs requested the ten most popular numbers.
10. Notice of Proposed Rulemaking. In September 2017, the
Commission released the Toll Free Assignment NPRM, which proposed and
sought comment on steps to better promote the equitable and efficient
assignment and use of toll free numbers. Specifically, the Commission
proposed expanding the existing toll free number assignment rule to
include assignment by auction or other equitable assignment
methodologies, and assigning the over 17,000 mutually exclusive numbers
in the 833 toll free code through competitive bidding. (The Commission
also proposed and sought comment on various specific auction rules and
mechanisms.) The Commission also sought comment on eliminating the
brokering (under our rules, the selling of numbers by a subscriber for
a fee), warehousing (the reservation of numbers by a RespOrg without an
actual subscriber for whom the numbers are being reserved), and
hoarding (the acquisition of more numbers by a subscriber than it
intends to use) prohibitions; setting aside numbers for use for public
interest purposes; options to address abuse of toll free numbers; and
changes to overall toll free numbering administration. The Commission
received comments from various stakeholders including RespOrgs, service
providers, and companies that have built their businesses around toll
free calling.
III. Discussion
11. Given the passage of time since adopting the first-come, first-
served methodology, and experience gained in opening five toll free
codes, we modify our toll free number assignment rule to give the
Commission flexibility to implement alternative approaches to assigning
numbers. As an experiment in using such an alternative approach, we
establish an auction to assign the over 17,000 identified mutually
exclusive numbers in the 833 code (the 833 Auction). We also designate
Somos as the auctioneer. While this Report and Order provides Somos
with the general framework for the 833 Auction, we also provide for a
pre-auction process to establish detailed auction procedures after
additional notice and comment, as is typical in all Commission
auctions. We require Somos to implement the established procedures to
conduct the auction and, after the bidding has
[[Page 53379]]
ended, to provide the Commission with all data and information gained
from the auction. Moreover, consistent with our goal of assigning
numbers via a market mechanism, we create an exception to our
brokering, warehousing, and hoarding prohibitions for numbers acquired
through competitive bidding.
A. The Toll Free Assignment Rule
1. Adopting a Revised Toll Free Assignment Rule
12. We adopt the toll free assignment revision of section 52.111 of
our rules that the Commission proposed in the Toll Free Assignment
NPRM. (We adopt the proposed rule revision with two minor changes.
First, we make our rule consistent with the rules governing spectrum
and universal service support competitive bidding, by using the phrase
``competitive bidding'' rather than ``auction.'' Second, we improve the
clarity of our rule by removing proposed language providing that the
Commission will assign numbers through an assignment methodology ``as
circumstances require.'' We further make administrative revisions to
our toll free rules, consistent with the recommendations of the North
American Numbering Council (NANC) Toll Free Assignment Modernization
Working Group Report.) Our revised rule allows the Commission to direct
the assignment of toll free telephone numbers to RespOrgs and
subscribers on an equitable basis by competitive bidding, on a first-
come, first-served basis, by using an alternative assignment
methodology, or by a combination of these approaches. We find that our
experience assigning toll free numbers since the original rule's
adoption 20 years ago--in which time certain entities have undertaken
efforts to increase their chances that desirable numbers are assigned
to them through the first-come, first-served system--supports the
revised rule's flexible approach to number assignment and is supported
by the record.
13. With our revised rule, we increase our options to assign toll
free numbers in a way that accounts for valuable social use. The
revised rule provides us greater flexibility to explore alternative
assignment mechanisms in addition to the current first-come, first-
served methodology. By revising our rule to permit--but not obligate--
the Commission to assign toll free numbers by auction, we add a
valuable tool to our tool chest while maintaining the flexibility to
craft assignment mechanisms suited to the nature of different
inventories of numbers. One commenter argues that, in so doing we are
``upending'' the toll free market to address demand for a
``statistically insignificant'' amount of toll free numbers. But the
demand for those specific numbers is not insignificant and, in fact,
demonstrates the need to reconcile the demand with the assignment
mechanism. Our rule does not mandate the use of a new assignment
mechanism, instead allowing for targeted modifications to the
assignment process going forward as circumstances require.
2. Considerations of Assignment Methodologies
14. We find that revising our rules to allow alternative means of
toll free number assignment is consistent with our statutory obligation
to distribute numbers on an equitable basis. Section 251(e)(1) of the
Communications Act of 1934, as amended (the Act), directs the
Commission to make numbers available on an equitable basis. We find
that the revised rule adopted today facilitates assignment of numbers
equitably, per the standards of our precedent. The flexibility of our
rule, including the option to use competitive bidding to assign toll
free numbers, increases the likelihood that, as limited resources, toll
free numbers will be assigned to parties that value the numbers most.
15. In considering whether number distribution means are equitable
under section 251(e)(1), we consider the principles of order,
efficiency, and fairness. In so doing, the Commission has allowed
exceptions to the assignment of numbers by the first-come, first-served
approach, with the intent to serve the broader public interest of
equitably distributing the finite resource of toll free numbers. (For
example, the Wireline Competition Bureau allowed a right of first
refusal in 1997 for 800 number subscribers seeking corresponding 888
code numbers. The Bureau has also rationed the release of disconnected
800 code numbers, and the release of 844 and 855 numbers upon opening
of those codes. Aside from modifications of first-come, first-served,
assignment, the Bureau has also assigned numbers upon request for
reasons of national defense and public safety.) When it established the
first-come, first-served assignment method in the 1998 Toll Free Order,
the Commission opined that pursuant to section 251(e)(1), the
Commission must apply a two-part test to determine if any given
assignment methods were ``1) orderly and efficient, and 2) fair.'' When
it first applied this test over twenty years ago, based on certain
limitations and unknown factors with respect to number auctions, the
Commission found that ``the use of a first-come, first-served
assignment method is a more equitable method of allocating these
numbers.'' With the benefit of some twenty years' of additional
experience in toll free number allocation, in addition to extensive use
of the auction mechanism in various contexts, we now reassess this
conclusion.
16. Section 251(e)(1) Test for Assigning Toll Free Numbers. We
reapply the 251(e)(1) two-part test and conclude that the use of
competitive bidding, like the other assignment methodologies in revised
rule section 52.111, will result in an orderly, efficient, and fair
assignment of toll free resources. The Commission has explained that an
orderly toll free number assignment mechanism ``will simplify the
administrative requirements necessary to assign toll free numbers and
avoid the need to resolve competing claims among subscribers to
particular numbers.'' Additionally, an efficient toll free number
assignment mechanism will minimize exhaust of the toll free numbering
resource.
17. After reevaluating the criteria in the 1998 Toll Free Order, we
conclude that assigning toll free numbers through the use of
competitive bidding is orderly; any entity interested in a toll free
number can, through an auction, express the value it places on a
particular number, in a clear, transparent, and relatively simple
manner. Moreover, assigning a number to the entity that places the
highest bid is easy to understand and avoids the need to resolve
competing claims among potential subscribers to particular numbers.
Further, the first-come, first-served approach has not always resulted
in an orderly and efficient distribution of highly-valued--i.e.,
mutually exclusive--numbers. Since the Commission's adoption of this
approach in the 1998 Toll Free Order, the Bureau has intervened to
withhold or ration highly desired numbers in subsequent code openings
due to concerns with the first-come, first-served assignment process.
The Bureau, expressing concern that RespOrgs were inefficiently
warehousing numbers, implemented conservation plans for four out of the
seven presently available toll free number codes.
18. Given the Commission's considerable experience with auctions
since 1998 and the ability of an entity to bid the value it places on a
particular number in a clear, transparent, and relatively simple
manner, we believe any administrative costs and ``practical
difficulties'' in holding an auction would be significantly lower than
[[Page 53380]]
previously believed, making it more likely that the efficiencies of
competitive bidding will outweigh such costs. Therefore, we conclude
that adding competitive bidding as one possible assignment method meets
the first prong of our established test, namely, that an assignment
mechanism be orderly and efficient.
19. We also find that the market-based assignment methodologies in
revised rule 52.111 are fair, meeting the second part of the section
251(e)(1) test. The Commission has explained that a fair toll free
number assignment mechanism is one that gives ``[a]ll subscribers . . .
an equal opportunity to reserve desirable toll free numbers as new
codes are opened.'' Using a competitive bidding process to assign
mutually exclusive toll free numbers can provide interested parties
with a level playing field, on which everyone has the same ability to
express their valuation for specific numbers in a clear, transparent
manner, using an equally accessible method. Based on our experience
with auctions in other contexts, we find that we are more likely to
achieve our stated objective of assigning mutually exclusive toll-free
numbers on an equitable basis by allowing all qualified bidders the
same opportunity to express their value for a number and assigning the
numbers to the party that values it the most, than if we use a method
by which a number is assigned to the party that employs the most
advanced access system. (We expect that the experimental use of an
auction for mutually exclusive 833 toll free numbers (as adopted in
this item) will yield additional insight into whether auctions are the
best methodology for assigning toll free numbers and, if so, how best
to use competitive bidding in the future.) Moreover, the current method
leads to unnecessary expenditure on equipment to gain a timing
advantage, whereas the proceeds from a toll free number auction will go
towards the administration of the toll free system.
20. While in its 1998 application of this test, the Commission
stated that auctions ``offer all participants an equal opportunity to
obtain a particular . . . number,'' it also concluded that a first-
come, first-served assignment mechanism was also fair and selected that
approach due to its then perceived benefits of order and efficiency. We
find that the Commission's prior conclusion has not borne out for
highly desired toll free numbers; indeed, the Bureau has intervened in
the last four toll free code openings, altering the first-come, first-
served methodology precisely to ensure fairness in the toll free number
assignment methodology.
21. Since the 1998 Toll Free Order was adopted, the Commission has
observed that the underlying numbering access technology has evolved:
Certain automated systems now used to access the Toll Free Database
have placed smaller RespOrgs at a competitive disadvantage because they
do not have the capacity to quickly reserve sought-after vanity
numbers. Enhanced connectivity gives larger, more sophisticated
entities the incentive to invest in these systems to increase the
chances that their number requests are processed. This situation
undermines a key rationale for the first-come, first-served approach:
That all interested parties have an equal chance of getting a number.
And while it advances the separate goal of ensuring a number is quickly
allocated to the party that values it most highly--a differential
willingness to invest indicates an underlying differential in the value
the investing party sees in numbers--it does so only loosely, since
there is no direct mechanism that allows potential subscribers to bid
in their valuation. In the absence of conservation controls, the Bureau
has seen evidence of unfair access following new toll free code
openings. For example, following the 877 and 866 code openings, the
Commission received reports from RespOrgs suggesting that during
database ``timeouts,'' only RespOrgs with more advanced access systems
were able to reserve numbers, while RespOrgs not using those advanced
systems were ``locked out'' and unable to reserve their desired
numbers. For the 855 and 844 toll free code openings, the Bureau
directed the toll free database administrator to limit the quantity of
toll free numbers a RespOrg may reserve to 100 per day for the first 30
days--``larger RespOrgs with enhanced connectivity to the [toll free]
database'' would otherwise be able to more quickly to reserve sought-
after numbers than smaller RespOrgs without enhanced connectivity.
22. We reject commenters' arguments that an auction is unfair
because it favors parties with deep pockets. An auction allocates the
number to the bidder willing to pay the most, but that willingness may
derive from expected future revenues from a profitable business case,
rather than from the bidders' current finances. Moreover, auctions
should reflect the value of the toll free number in the marketplace and
a bidder may be able to obtain financing based on anticipated
profitability. We anticipate that a first-come, first-served approach
will continue to be an appropriate assignment methodology in some
circumstances, however. For instance, first-come, first-served
assignment may be appropriate for less desirable numbers, or in
instances where numbers made available via an auction are not assigned
thereby. We expect that our experience with the 833 Auction will
provide us with insight we can use when determining the best mechanism
for assignment of a given set of numbers.
23. Effective Assignment of Toll Free Resources. Our revised
assignment rule gives us a new option for the assignment of numbers,
without removing currently available options. The Commission has
extensive experience in public outreach and education about the auction
process, including online tutorials for the auction application and
bidding processes. Based on this experience, we disagree with the
argument that providing adequate notice to the public about auction
procedures will be unreasonably costly. Nor do we agree with commenters
who argue that preparing for and participating in the auction will be
unduly burdensome to participants. We recognize that individual
subscribers or RespOrgs acquiring toll free numbers through an auction
may incur some costs relating to the participation in the auction that
they did not incur through the first-come, first-served process, but we
believe those costs are outweighed by the benefits to the toll free
system at large when toll free numbers are put to their highest-valued
use. Many toll free numbers have a much greater value for certain
subscribers. Some 150 RespOrgs participated in the 833 pre-code opening
process, requesting over 72,000 numbers. This fact undermines the basic
rationales on the effectiveness of first-come, first-served for
mutually exclusive numbers--that first-come, first-served allocation
requires less oversight, and avoids ``the need to resolve competing
claims among subscribers to assignment of particular numbers.'' On the
contrary, the Commission has been compelled to provide increased
oversight by intervening multiple times to ensure new code openings are
``orderly and efficient'' and ``fair,'' and adjudicated numbering
conflicts in at least two notable cases. Our practice of resolving
competing claims has previously been resolved inefficiently in favor of
the party most privileged with access to the faster reservation system.
Instead of the number going to whichever entity happens to be first in
the door (thereby preventing others, who may value it more, from
getting it), use of
[[Page 53381]]
competitive bidding will give all entities an equal opportunity to
express the value they place on any particular number. By increasing
the likelihood that mutually exclusive toll free numbers are assigned
to parties that will use the resource in the most productive way, we in
turn increase the efficiency and equity of our number assignment
process.
24. Revising the Commission's rules to allow us to assign numbers
by auction, on a first-come, first-served basis, an alternative
assignment methodology, or by a combination of the forgoing as
circumstances require, gives the Commission the flexibility to adapt
our assignment procedures to the circumstances and characteristics of
the specific toll free numbers to be assigned. In any future toll free
code release, the revised rule will not require the Commission to use
competitive bidding and, if it decides to use competitive bidding, the
Commission will not be confined to a specific auction design, or the
designation of a particular auctioneer. Instead, for new toll free code
openings, the Commission can determine the best method to proceed for
assigning numbers, armed with the data collected in the 833 Auction.
B. The 833 Auction
1. The 833 Auction Established as an Experiment
25. We establish the 833 Auction as an experiment to analyze the
most efficient way to use competitive bidding as a toll free number
assignment method. We agree with one commenter who argues that, as a
first step, the Commission should assign toll free numbers by auction
on a ``limited, trial basis,'' which will allow us to ``study the
impact of this new allocation method and make any necessary changes to
serve the public interest.'' (By adopting the 833 Auction as an
experiment, the actions we take today are also consistent with the
recommendation of the Administrative Conference of the United States
(ACUS) that agencies adopt pilot programs and learn from regulatory
experience.) Thus, we will offer in this auction only the rights to use
the 17,000 mutually exclusive numbers in the 833 toll free code that
were identified pursuant to the 833 Code Opening Order. Once the
auction is complete, we direct Somos to assign those numbers to winning
bidders based on the auction's results. We will continue to assign 833
numbers that are not part of the 833 Auction using our first-come,
first-served approach.
26. After completion of the 833 Auction, and subsequent number
assignments, the Bureau will issue a report outlining the outcomes of
the 833 Auction, lessons learned, and future recommendations for toll
free number assignment methodologies.
27. We intend to use this experiment as an opportunity to evaluate
the contours of using competitive bidding for toll free assignments and
to determine how to best use a market-based assignment to effectively
assign toll free numbers. We also underscore the need to reform the
current method of assigning highly desired toll free numbers. We
envision that the experiment, as designed in this Report and Order and
forthcoming Auction Procedures Public Notice, will meet our goals of
equitable distribution and be used, as designed, for certain future
toll free number assignments or be used for future assignments with
refinements.
2. General Framework for the 833 Auction
28. In the Toll Free Assignment NPRM, the Commission ``invite[d]
parties to . . . offer further economic, legal, or logistical insights
about . . . auction designs and procedures.'' Given the experimental
nature of using competitive bidding as a mechanism for assigning toll
free numbers, we outline here a general framework for the 833 Auction
and require a pre-auction proceeding in which we will seek public input
on the procedures for the auction after the release of this Report and
Order. We expect that our approach to the 833 Auction will be modeled
on the rules and procedures governing auctions for wireless spectrum
licenses, broadcast permits, and universal service support, where
appropriate, given the success and familiar nature of those auctions.
29. Specifically, we will issue an Auction Comment Public Notice
after the release of this Report and Order and will solicit public
input on proposed application and bidding procedures, including
specific proposals for application requirements and bidding mechanisms,
such as bid processing and determining payments. Thereafter, we will
release an Auction Procedures Public Notice, and will specify final
auction procedures, including dates, deadlines, and other final details
of the application and bidding processes. We require the auctioneer to
implement the auction pursuant to the procedures specified in the
Auction Procedures Public Notice. We conclude that, in addition to the
general framework we provide here, the Commission's practice of
finalizing auction procedures in the pre-auction process will give
interested participants sufficient time and opportunity both to comment
on the final procedures and to develop business plans in advance of the
auction.
a. Auction Design
30. We adopt the proposal in the Toll Free Assignment NPRM to
conduct the 833 Auction as a Vickrey single round, sealed-bid auction.
In this type of auction, a qualified bidder can submit a sealed-bid for
each available toll free number that the bidder wants. The 833 Auction
will consist of only a single round of bidding, and the highest bidder
for each toll free number will win the rights to that number, but will
generally only pay the second highest bid for them. In the case of tied
bids, a winning bidder may end up paying the tied bid amount. For the
833 Auction, we defer to the pre-auction process, the detailed
procedures for bid processing and payment determination, including,
among other things, how winners and payments will be determined in the
case of tied bids and what to do if a toll free number receives only
one bid in the single round of bidding.
31. A Vickrey auction can yield an equitable and efficient
assignment of mutually exclusive toll free numbers as it incentivizes
bidders to bid their true valuation. In particular, the amount paid by
the winner (i.e., the bidder with the highest bid) is determined by the
second highest bid and does not depend on the exact amount of the
winning bidder's own bid. This payment rule results in the winning
bidder essentially receiving what it might view as a ``surplus,'' i.e.,
the difference between its own bid and the second highest bid. A
Vickrey auction thus encourages bidders to bid the true maximum they
are willing to pay, while at the same time efficiently assigns the
numbers to the bidders who have the highest valuations for the numbers.
(As a first approximation, it is likely that individual valuations for
toll free numbers are not dependent on another's valuation, at least
beyond a broker's desire to purchase for resale. Moreover, to the
extent that this is not the case, auction theory does not provide
unambiguous direction as to optimal auction design. Thus, for our
opening experiment in assigning toll free numbers via competitive
bidding, we adopt the simple and transparent Vickrey auction.)
32. We conclude that the 833 Auction should use a single round
rather than multiple rounds to keep the auction process for this
experiment as simple and cost-effective as possible. As the
[[Page 53382]]
Commission observed in the Toll Free Assignment NPRM, a single round,
sealed-bid auction is relatively easy for both the auctioneer (to
implement) and participants (to participate in). In addition, a single
round auction will be completed more quickly than a multi-round
auction, and comes at a lower cost to the auctioneer and the
participants. In fact, we do not believe that auction participants will
be required to incur substantial time or expense to prepare for the
auction. They have already determined which 833 numbers to reserve,
thus spending some time and expense in reaching those determinations;
the incremental effort on their part to participate in the auction is
unlikely to impose an additional time or cost burden on them. And
because of the lower cost of a single round Vickrey auction, we reject
commenters' concerns that the costs to implement and run the auction
will be excessive.
33. We also reject the notion that a Vickrey single round, sealed-
bid auction will result in a scenario where inexperienced bidders will
overbid and be unwilling or unable to pay the winning bid. A second-
price auction encourages bidders to bid the true maximum that they are
willing to pay, knowing they will not actually pay more than needed to
outbid the second highest bidder. Also, we note that each bid is a
binding commitment, so bidders know in advance that they should only
submit bids that they are willing to pay. (This is true even in a
Vickery auction, where the winning bidder will only pay the second
highest bid, because the second highest bid price may be equal to (in
case of a tie) or just slightly less than the winning bidder's
submitted bid. As Power Auction notes, ``[i]t is important for bids to
be binding commitments, because the lack of binding commitments could
cause the auction process to be manipulated or to unravel.'') In
addition, as discussed further below, entities interested in
participating in an auction generally have to submit some form of
financial security in order to participate. Further, consistent with
the Commission's standard practice, we will ensure that prospective
auction participants have an opportunity to become fully informed about
the auction through public outreach and education, including online
tutorials about the application and bidding processes.
34. Alternative Auction Methodologies. Although the Commission
sought comment on alternative auction methodologies to consider for
assigning the mutually exclusive 833 numbers, we decline to employ any
such methodologies for the 833 Auction. (For example, the Toll Free
Assignment NPRM sought comment on a pay-your-bid auction, whereby the
highest bidder wins and pays its bid, and an open auction, such as a
simultaneous multi-round auction used by the Commission for our
spectrum auctions.) One commenter suggested that we use what it calls
an ``open'' auction, specifically ``a simultaneous ascending clock
auction with multiple independent clocks.'' While this type of auction
has certain advantages over a single round, sealed-bid, Vickrey
auction, we conclude that these advantages do not justify the
additional complexity and expense of a multiple round auction at this
time. (Power Auctions enumerates several advantages of an ``open''
auction, including (1) permitting bidders the opportunity of price
discovery; (2) permitting bidders more control over the money spent on
winning bids; (3) permitting bidders some ability to handle bids for
numbers that may be viewed as substitutes; (4) maintaining privacy of
auction participants' bids; and (5) potentially resulting in higher
auction revenues and more efficient results.) While the Commission uses
multiple round auctions and will continue to do so, the 833 Auction
will be the Commission's first auction of the rights to use toll free
numbers, and our intent for this experiment is to gather data to help
inform future toll free assignment decisions while minimizing the
complexity and cost to the Commission, auctioneer, and participants
during the experiment. We also have limited information on which to
base any estimate of the dollar amounts potential subscribers are
willing to bid. Also, the relatively modest nature of the items to be
auctioned--the rights to use toll free numbers, as opposed to spectrum
licenses or Universal Service Fund support--seems at this juncture to
warrant a less complex and costly type of auction. Thus, we do not want
to create a more complex and costly auction than necessary at this
early stage.
35. One commenter argues that a single round, sealed-bid Vickrey
auction limits the ability of a bidder to develop a bidding strategy
involving substitute numbers vis-[agrave]-vis an ``open'' auction. That
commenter does not, however, provide a basis for its position that
bidders in the 833 Auction will have a need for such a complex auction,
or how such a need outweighs the impact to cost and complexity for this
experimental auction. Further, unlike other auctions the Commission has
conducted, such as auctions for spectrum and Universal Service Fund
support, where some items may be substitutable, this auction allocates
items for which managing bids across substitutes is less important.
Similarly, there are important complementarities in bids for spectrum
and Universal Service Fund support which we have no reason to believe
apply to the toll free number market.
36. More specifically, the Commission has historically used
multiple round bidding as the primary auction methodology in spectrum
auctions. When implementing its spectrum auction authority, the
Commission found that multiple round auctions provide needed
information about the value of substitutable and complementary licenses
and allows participants the flexibility to pursue back-up strategies
during an auction, allowing the spectrum to go to its highest value
use. The Commission recognized, however, that while multiple round
auctions are preferable, if the value of the licenses or the number of
bidders would be so low that the administrative costs of a multiple
round auction may exceed its benefits, other auction methods are
available. Our spectrum auctions, generally, involve many entities
pursuing complex strategies weighing the cost of various quantities of
spectrum within and between markets. Similarly, in competitive bidding
for Universal Service Fund support, many participants are contemplating
multiple markets that they are willing to serve based on the price of
the subsidy. In the case of toll free numbers, there is limited
information in the record that one number is a substitute for another
or on how bidders will view the relative values of the available
numbers. The Commission hopes to obtain such information through this
auction.
37. In sum, because the Vickrey single round, sealed-bid auction
should demand fewer resources from the Commission, the auctioneer, and
the auction participants while still yielding an efficient allocation
of toll free numbers, we believe it will help achieve our objectives
for this experiment. We note, however, that we are not intending to
foreclose the use of an ``open'' auction--or another auction
methodology--in any future toll free number auctions. (To the contrary,
we recognize that there are cases where an open auction may perform
better than a sealed-bid auction.) We expect that the Bureau's report
will address the success of the Vickrey single round, sealed-bid
auction methodology, and compare it to alternative methodologies.
[[Page 53383]]
b. Auction Eligibility
38. Deciding which parties can participate in an auction is an
integral part of the process. Although we generally require applicants
for our auctions to demonstrate certain qualifications consistent with
the regulatory objectives of a particular auction, it is also true that
the broader the participation, the more likely it is that 833 numbers
will be assigned to the highest-valuing bidders. For the 833 Auction,
we will allow any party interested in obtaining an 833 number
(potential subscriber) to participate directly in the auction or
indirectly through a RespOrg. We also will not limit the 833 Auction to
only those RespOrgs that participated in the 833 pre-code opening; any
RespOrg may participate. We believe allowing all interested parties to
participate directly in the auction will provide them with greater
flexibility and control to accurately express their level of interest
and will allow the Commission to glean as much information from the
experiment as possible to better inform future toll free code opening
assignments.
39. 833 Auction Not Limited to RespOrgs. We will permit any
potential subscriber to participate directly in the 833 Auction or
indirectly through a RespOrg. (A toll free ``subscriber,'' per the rule
revision we adopt today, is ``The entity that has been assigned a toll
free number.'' Because we do not intend to limit auction participation
to entities that already have been assigned numbers, we establish that
``potential subscribers''--any parties interested in subscribing to a
toll free number--may participate in the 833 Auction. As auction
participants, these parties will be obligated to comply with the
Auctions Procedures Public Notice in this proceeding.) In the Toll Free
Assignment NRPM, the Commission proposed to permit only RespOrgs to
participate in the proposed auction, based on RespOrgs' role as manager
and administrator of toll free records in the Toll Free Database. (The
Commission also recognized ``the importance of RespOrgs as market
makers'' and noted that RespOrgs ``may have strengths in maximizing the
valuation of certain numbers, for example, by piecing together
geographic coalitions of subscribers who may be unable to coordinate
themselves.'') After reviewing the record, we conclude that allowing
potential subscribers to directly participate will likely increase the
efficiency of the auction while also addressing possible conflicts of
interest between RespOrgs and potential subscribers. We agree with 800
Response, who argues that allowing potential subscribers to participate
will minimize opportunities for participants to engage in undesirable
and/or anticompetitive strategic behavior that could occur if a RespOrg
and one or more of its subscribers were interested in the same 833
numbers. (If a RespOrg and one or more of its subscribers do not have
an interest in the same 833 numbers, permitting RespOrgs to participate
in the auction gives subscribers to option to have their RespOrgs bid
on their behalf.) Therefore, we find it appropriate to allow potential
subscribers to act on their own behalf and represent their own
interests in the auction. (Potential subscribers also have the option
to become a RespOrg by meeting various requirements for certification.
By formally allowing potential subscribers the option to participate
directly, non-RespOrg participants will not need to spend resources to
become a RespOrg if they are concerned that current RespOrgs would not
fully represent their interests.) We stress that if a potential
subscriber directly participates in and is assigned a number via the
833 Auction, it must still work with a RespOrg after the auction to
reserve the number in the Toll Free Database in accordance with our
rules.
40. We do not go so far as to remove RespOrgs from the process of
acquiring toll free numbers in the 833 Auction, as one commenter
suggests. Because subscribers are familiar with working with RespOrgs
to acquire toll free numbers and may prefer to continue to take
advantage of RespOrg expertise here, we conclude that we should allow
subscribers the choice of working with a RespOrg in the 833 Auction.
41. Some commenters oppose permitting potential subscribers to
participate in the auction. For example, Somos claims that allowing
subscribers to participate ``would introduce unnecessary and
potentially costly administrative problems'' and Power Auctions
advocates allowing only RespOrgs to participate since they can maximize
valuations of certain numbers and including subscribers would increase
the costs of running the auction. On the other hand, one commenter
advocates excluding RespOrgs completely, and allowing only end-user
customers to participate. We recognize the value added by RespOrgs as
``market makers'' (as the Commission recognized in the Toll Free
Assignment NPRM, RespOrgs ``may have strengths in maximizing the
valuation of certain numbers, for example, by piecing together
geographic coalitions of subscribers who may be unable to coordinate
themselves''), but find that allowing potential subscribers to
participate in the auction will likely increase the efficiency of the
auction, by increasing competition and reducing the likelihood of tacit
collusion and other undesirable strategic behavior that can occur when
there are very few auction participants. Although we recognize there
may be additional cost in auction overhead by allowing more
participants, we believe that the benefits to auction efficiency
created by expanding the pool of potential participants identified
above are worth the minimal expense in determining whether the
additional participants are qualified to bid in the auction. And by
allowing potential subscribers to bid on their own, we lower
administrative costs for participants who choose not to place a bid
through a RespOrg.
42. Maximizing Auction Participation. We will not otherwise limit
the number of participants in the auction, such as by limiting RespOrg
eligibility to participate in the 833 Auction only to those RespOrgs
that participated in the 833 pre-code opening process. Permitting the
maximum number of eligible participants to bid in the 833 Auction
ensures a robust auction and results in the bidders with the highest
willingness to pay being assigned a number, which is in the public
interest. The inclusion of all RespOrgs and potential subscribers in
the pool of eligible participants will also provide the Commission with
greater information about the value of toll free numbers, increasing
the value of the experiment. In furtherance of this goal, the
Commission, along with Somos in its role as auctioneer, will undertake
outreach efforts to promote maximum participation among RespOrgs and
potential subscribers.
c. Application Process
43. In Commission auctions, interested parties must disclose
certain information and make certain certifications in an application
or series of applications. In the Commission auctions, we typically
have a two-stage application filing process. In the pre-auction
``short-form'' application, a potential bidder will need to establish
its eligibility to participate, providing, among other things, basic
ownership information. After the auction, the Commission conducts a
more extensive review of the winning bidders' qualifications to receive
support through ``long-form'' applications. This information helps
promote auction transparency and integrity and assists us in monitoring
compliance with our
[[Page 53384]]
auction rules and procedures, including, for example, the prohibition
against certain communications. We find it is necessary to qualify
entities to participate in the auction, and therefore require
interested entities to submit a short-form application to participate
in the auction. The information and certification required in the
short-form application, along with an upfront payment, will help
determine if an applicant is qualified to bid in the 833 Auction. We
will not require applicants to submit a long-form application after the
conclusion of this auction, given the lack of need to verify winning
bidders' qualifications in this context and to limit the administrative
burden on bidders, the auctioneer, and the Commission.
(i) Short-Form Application Requirements
44. We establish here some basic requirements and limitations
regarding applications to participate. We expect that each entity
interested in bidding in the 833 Auction will be required to disclose
certain information and make certain certifications to promote
compliance with the framework we outline here and protect auction
integrity. These submissions will promote the transparency and
efficiency of the auction and reduce the instances of conflicts of
interest and the likelihood of undesirable and/or anticompetitive
strategic behavior by participants.
45. A Potential Subscriber May Participate Through Only a Single
Auction Applicant and Submit a Single Application. Potential
subscribers can participate in the 833 Auction through only a single
auction applicant. In particular, a potential subscriber may not engage
multiple applicants to bid for a particular number in which it is
interested. This prohibition assures a level playing field for all
bidders and prevents distortions in the information on bidder
interests, by assuring that each auction participant has at most one
bid per number in the single round.
46. We likewise prohibit a single party, or multiple parties with a
controlling interest in common, from becoming qualified to bid based on
multiple applications. While we will seek comment and decide how to
define parties with common controlling interests in our pre-auction
process, we anticipate utilizing the Commission's definitions adopted
for similar purposes in our spectrum auctions. We employ this same
prohibition in spectrum auctions to ensure that auction participants
bid in a straightforward manner. We believe that this type of
restriction is warranted in the 833 Auction and will address concerns
raised in the record regarding the potential for undesirable strategic
bidding behavior, which could harm other bidders.
47. A RespOrg Can Apply on Behalf of Only a Single Potential
Subscriber (Including Itself) per Number. We recognize that allowing
RespOrgs to serve as bidders for potential subscribers of toll free
numbers may present the opportunity for certain auction participants to
have more information about the competition for certain numbers. Such
asymmetric information could be used in ways that adversely affect some
potential subscribers. To mitigate the potential anticompetitive
effects of RespOrgs bidding for potential subscribers, we will limit a
RespOrg to representing a single potential subscriber (including
itself) for the rights to use a particular number. We note that, under
a different auction design (e.g., in a multiple round auction) or with
different eligibility requirements, a different limitation may be
appropriate to help ensure that RespOrgs fully represent subscriber
interests, but, for the 833 Auction, we find this limitation to be
appropriate.
48. Disclosures and Certifications. To promote transparency as well
as compliance with the limitations discussed above, we establish
certain general requirements for applicant disclosures and
certifications. Specifically, we expect that each auction participant--
whether a potential subscriber or a RespOrg serving as a bidding
agent--will be required to certify, as applicable, that it is not
bidding on behalf of multiple interested parties (including itself) for
the same toll free numbers or that it is only bidding through one
entity for a given number. A RespOrg can bid on behalf of multiple
subscribers, as long the subscribers it represents, as well as itself,
are not bidding on the rights to use the same number(s). We will also
require the applicants that have overlapping non-controlling interests
to certify, during the application process, that they have established
internal control procedures to preclude any person acting on behalf of
an applicant from possessing information about the bids or bidding
strategies of more than one applicant or communicating such information
with respect to either applicant to another person acting on behalf of
and possessing such information regarding another applicant. To enforce
this prohibition, we expect that applicants will need to disclose the
party on whose behalf it is bidding, for each toll free number that it
selects. To enforce the prohibition, and to allow entities to comply
with the prohibition on certain communications discussed below, we also
expect that any entity wishing to participate in the 833 Auction will
have to fully disclose information regarding the real party- or
parties-in-interest in the applicant or application and the ownership
structure of the applicant, including both direct and indirect
ownership interests of 10 percent or more. We also will also require
applicants to provide additional information and make additional
certifications in the application, as may be found in the pre-auction
process to be necessary to implement our decisions in this Report and
Order. By requiring these certifications and disclosures, we guard
against potential conflicts of interest between a RespOrg and its
customer subscriber(s), between a RespOrg's customer subscribers, and
between RespOrgs with overlapping controlling interests seeking the
rights to use the same toll free numbers. Moreover, such actions will
help implement our overriding principle that each entity should
participate through only one bidder, thus encouraging sincere bidding
and enhancing the integrity of the auction.
(ii) Procedures for Processing Pre-Auction Applications
49. For the 833 Auction, we expect that applications to participate
in the auction will be processed in a manner similar to applications to
participate in spectrum license auctions. Specifically, no application
will be accepted if, by the initial deadline, the applicant has failed
to make the required certifications, e.g., no additional applications
will be accepted after the initial deadline. Put differently, no
additional applications will be accepted after the deadline. Moreover,
applicants will be afforded an opportunity to cure any identified minor
defects after an initial review of the application. Applications to
which major modifications are made after the deadline for submitting
applications shall be denied. Major modifications include, but are not
limited to, any changes in the ownership of the applicant that
constitute an assignment or change of control of the applicant (pro
forma transfers and assignments have not generally been considered to
be major modifications), or the certifications required in the
application. If an applicant fails to make necessary corrections before
a resubmission deadline, the applicant would be found not qualified to
bid.
[[Page 53385]]
d. Other Competitive Bidding Considerations for the 833 Auction
50. Prohibition on Certain Communications. For spectrum and
universal service auctions, the Commission has adopted rules
prohibiting an applicant from communicating certain auction-related
information to another applicant from the auction application filing
deadline until the post-auction deadline for winning bidders to file
long-form applications. In these rules, ``applicant'' is defined
broadly to include ``all controlling interest in the entity submitting
a short-form application to participate in an auction . . . as well as
all holders of partnership and other ownership interests and any stock
interest amounting to 10 percent or more of the entity, or outstanding
stock, or outstanding voting stock of the entity submitting a short-
form application, and all officers and directors of that entity.'' This
prohibition on certain communications is intended to reinforce existing
antitrust laws, facilitate detection of collusive conduct, and deter
anticompetitive behavior. While we believe the 833 Auction should have
a similar prohibition on certain communications, we defer until the
pre-auction process the details of the prohibition on certain
communications, but absent unique factors that may be applicable to the
833 Auction we expect the prohibition to be generally consistent with
our rule in spectrum auctions. Regardless of the procedures ultimately
decided upon for the 833 Auction, participants will be subject to
antitrust laws, which are designed to prevent anticompetitive behavior
in the marketplace.
51. Availability of Auction-Related Information During and After
the Auction Process. It is our objective that the 833 Auction be
transparent and objective. Consistent with that objective, we conclude
that the procedures to be established in the pre-auction process should
address what auction-related information will be available to bidders
and to the public during the auction process, and when any information
withheld during the auction will be made publicly available.
52. Upfront Payments and Default Payments. Entities that are
interested in participating in the 833 Auction will be required to
demonstrate an ability to pay for the rights to use the numbers for
which they intend to bid by submitting an upfront payment. Moreover,
since bids are binding commitments, if a bidder fails to make full
payment on its bid, or otherwise defaults, it should be subject to a
default payment. We defer to the pre-auction process what the upfront
payments and default payments for the 833 Auction should be, but we
generally expect the approach to be modeled on those used in the
Commission's spectrum auctions.
53. Bidding Credits. We will not adopt bidding credits for the 833
Auction. We recognize that bidding credits can provide economic
opportunity for a wide range of participants. Given the experimental
nature of this auction, however, we conclude bidding credits are not
appropriate at this time. No commenters who advocate we incorporate
bidding credits in the 833 Auction provide specifics about the size
standards or size of the bidding credits that might be employed, and we
have no prior basis for determining the appropriate amount of any such
bidding credit. We further do not wish to confuse the lessons we take
away from this experiment by including bidding credits, which would
influence bidder behavior. Instead, we will consider all of the data
collected from the 833 Auction to determine if bidding credits should
be offered in any possible toll free number auctions in the future.
54. Reserve Prices. We also decline to establish reserve prices for
the 833 Auction. (By ``reserve price,'' we refer to a minimum amount
that must be reached in order for a number to be assigned after the
auction closes.) Most commenters oppose establishing reserve prices,
arguing that reserves may discourage entities from bidding. Our goal
for this auction is to gain as much information as possible about the
effectiveness of a market-based approach to toll free number
assignment, and we are convinced by the record that a reserve price may
discourage auction participation and, thereby, decrease the amount of
information we gain from the auction. And because this is our first
time using competitive bidding to assign toll free numbers, we have a
limited basis on which to establish a reasonable and efficient reserve
price.
55. Bidding on Multiple Numbers. Consistent with our proposal in
the Toll Free Assignment NPRM, we will not limit the overall quantity
of toll free numbers the rights to which can be acquired by an auction
participant. Establishing such a limit could hamper the efficiency of
the auction by constraining bidders who hold the highest valuations.
Moreover, we wish to obtain as much information as possible from this
experiment and believe any such constraint would limit the information
derived from this experiment.
56. Similarly, we find it is unnecessary to permit package bidding
(i.e., single bids for the rights to groups of numbers) in the
experiment. As the Commission stated in the Toll Free Assignment NPRM,
though it is likely some bidders will demand the rights to multiple
numbers, we do not believe valuation synergies warrant the additional
complexity that package bidding brings. We desire to minimize the
auctioneer's development costs for the auction interface and to
simplify the bidding process for the auction participants. We expect
the Bureau's post-auction report to address the auction's
effectiveness, and to recommend whether any of the measures we have
declined to adopt in the Report and Order--including package bidding--
could be useful in deciding on future toll free assignment methods.
57. Post-Auction Winning Bidder Public Notice. Once the auction has
been completed, we will release a public notice identifying the winning
bidders and establishing the deadline for making final payment for
winning bids. This public notice will also explain how unsold
inventory--numbers that received no bids--will be assigned after the
833 Auction. As we have explained, any potential subscriber that
participates directly in the auction and wins the rights to a number
must still work through a RespOrg after the auction to reserve the
number in the Toll Free Database in accordance with our rules.
3. Somos as Auctioneer for the 833 Auction
58. We establish Somos, the Toll Free Numbering Administrator, as
the auctioneer for the 833 Auction. We believe this role is
commensurate with its present statutory and regulatory duties and its
responsibilities. The Commission established Somos as the Toll Free
Numbering Administrator in the 2013 Toll Free Governance Order. There,
we determined that Somos met the impartiality requirement of section
251(e)(1) of the Act--codified in section 52.12 of our rules--and was
``eligible to serve as neutral SMS administrator.'' As the auctioneer
for the 833 Auction, Somos shall continue to implement impartially toll
free number assignments, consistent with the Act and our implementing
rules.
59. In its role as auctioneer, we require Somos to provide the
infrastructure and software for online bidding and carry out other
activities necessary to implement the auction. These activities include
performing bidder education and other outreach;
[[Page 53386]]
accepting and reviewing applications to participate in the auction;
accepting upfront payments; announcing qualified bidders and those not
qualified to bid; accepting bids during a single round of bidding;
accepting final payments for winning bids and distributing refunds for
any upfront payments not applied to winning bids; activating in the
toll free database the numbers won at auction and for which final
payment has been made; and undertaking any other tasks in furtherance
of the 833 Auction that the Commission deems appropriate and as
elaborated in the Auction Procedures Public Notice. The Commission will
maintain oversight of Somos's implementation of the 833 Auction and
will re-direct it as necessary to most effectively execute the 833
Auction. To maintain oversight, the Commission will review tariff
filings, issue specific instruction in the Auction Procedures Public
Notice, and direct Somos under our broad authority over the Toll Free
Numbering Administrator.
60. One commenter posits that the present Toll Free Numbering
Administrator should not serve as the toll free number auctioneer
because Somos ``has no experience in conducting auctions'' and it
``would be called upon to develop entirely new [auction] processes.''
We disagree. Somos has asserted that it is fully capable of executing
the Commission's proposed auction, and we have no basis on which to
question its assertion. Moreover, given the considerable expertise in
number assignment and administration that Somos has gained since the
Commission formally designated it as the Toll Free Numbering
Administrator, we are confident that Somos will perform its auctioneer
duties in accordance with the procedures established by the Auction
Procedures Public Notice.
61. We also agree with Somos that it is critical ``to maintain
continuity and stability in TFN [toll free number] administration.'' In
contrast, were we to establish an independent auctioneer, the
independent auctioneer would have to first coordinate with Somos to
verify that the numbers available in the 833 Auction are indeed
available. The independent auctioneer would then have to direct Somos
to assign the number to the winning bidder. We find this step in the
process unnecessary as Somos is capable to serve as auctioneer in
accord with the specific and direct instruction to be set forth in the
Auction Procedures Public Notice.
62. While we appreciate the novelty of our experiment in using
competitive bidding in the toll free context, the Commission itself has
a vast amount of experience in conducting auctions in other contexts.
We will oversee Somos's implementation of the 833 Auction, along with
our general oversight of numbering, to alleviate any concerns about
auction execution. Moreover, a single-round, sealed-bid auction should
not require complex software or administration.
63. For these reasons, we direct Somos to serve as the auctioneer
of the 833 Auction. In the event Somos seeks to add outside personnel
to assist with the auction in any way, it may do so provided that it
retains the overall administrative responsibility and neutrality.
(Section 251(e) requires the Commission to ``create or designate one or
more impartial entities to administer telecommunications numbering and
to make such numbers available on an equitable basis.'') We further
direct Somos to obtain an independent audit of the 833 Auction,
including Somos's performance as auctioneer, after completion of the
auction. In the event that the Bureau determines, and announces in a
Public Notice, that the costs of conducting such an audit are unlikely
to exceed the benefits--for example, because of low auction revenue--
Somos need not obtain an audit.
64. In designating Somos as the auctioneer of the 833 Auction, we
do not foreclose the Commission's ability to assign this role to a
different entity, or through a different method, such as a competitive
process, in a future toll free number auction. In its report on the
outcomes of the 833 Auction, we direct the Bureau to evaluate Somos'
performance as the auctioneer, including its technical execution and
cost-effectiveness in conducting the auction. The results of the 833
Auction, including its costs and the degree of its financial success,
ought to inform the Commission's method for assigning the role of
auctioneer in future toll free number auctions.
65. Auction Information. To allow the Commission to make a fair and
accurate assessment of the results and consequences of the 833 Auction,
we require Somos to retain and make available to the Commission all
data and information about the auction and its administration, gathered
before, during, and after the auction. Such information includes, but
is not limited to, information on the following: Winning and losing
bids, bidders, administrative costs (including detailed costs to design
the auction user interface, auction platform, and software to evaluate
the auction results), and post-auction secondary market transfers. (Per
the exception we establish today, the secondary market is limited to
numbers assigned via competitive bidding. The mutually exclusive
numbers in the 833 code assigned in the 833 Auction will therefore be
eligible for secondary market transfers.) We also require Somos to make
available to the Commission information on 833 numbers not included in
the auction for comparison purposes. This data will enable us to get a
complete picture of the viability of the 833 Auction and on competitive
bidding as an assignment method for future toll free code openings.
4. 833 Auction Proceeds
66. We will use any net positive proceeds from the 833 Auction to
defray the costs of administering toll free numbering incurred by the
Toll Free Numbering Administrator \1\ (i.e., costs beyond conducting
the auction) and, potentially, the North American Numbering Plan
Administrator (NANPA). (The NANPA is currently Neustar, Inc. The Toll
Free Numbering Administrator is Somos, a not-for-profit corporation
that provides the Toll Free Numbering Administrator function pursuant
to FCC tariff, subject to section 61.38 of the Commission's rules.) By
``net positive proceeds,'' we mean any amount by which revenues from
the auction exceed the costs of conducting the auction. (Because Somos
will also be developing and conducting the auction, the administrator's
costs for the auction will be paid first from auction revenues.)
Applying net positive proceeds in this manner is consistent with our
authority in section 251(e) to administer numbering, and its
requirement that the costs of administration be borne by carriers on a
competitively neutral basis. As discussed in the Toll Free Assignment
NPRM, it will benefit all toll free
[[Page 53387]]
subscribers and RespOrgs, as well as potentially all stakeholders in
the 20 countries that are members of the NANP. (The NANP member
countries are Anguilla, Antigua and Barbuda, Bahamas, Barbados,
Bermuda, British Virgin Islands, Canada, Cayman Islands, Dominica,
Dominican Republic, Grenada, Jamaica, Montserrat, Sint Maarten, St.
Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Trinidad
and Tobago, Turks and Caicos Islands, and the United States (including
American Samoa, Puerto Rico, U.S. Virgin Islands, Guam, and the
Commonwealth of the Northern Mariana Islands). NANP toll free numbers
are allotted to all member countries. The Toll Free Numbering
Administrator administers the pool of toll free number resources
allotted to Canada, Sint Maarten, and the United States. Other NANP
member countries administer toll free numbering outside of the Toll
Free Numbering Administrator and its Toll Free Database.)
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\1\ Somos is a not-for-profit corporation that provides the Toll
Free Numbering Administrator function pursuant to FCC tariff,
subject to section 61.38 of the Commission's rules. 47 CFR 61.38.
Somos must file annual tariff revisions pursuant to the applicable
part 61 rules for a dominant carrier, subject to the tariff
requirements and enforcement of the Commission pursuant to the Act
and the Commission's rules. SMS/800 Order, 28 FCC Rcd at 15342,
paragraphs. 37 through38; see also generally Somos, Inc., Tariff
F.C.C. No. 1 (2018), https://s3.amazonaws.com/files-prod.somos.com/documents/SMS800FunctionsTariff.pdf (Toll Free Tariff). Previous
tariff information is available at https://apps.fcc.gov/etfs/public/tariff.action?idTariff=787. Tariff modifications must be filed each
January 31 (following the close of its fiscal year, which is the
calendar year) updating the rates for its services, effective during
the next tariff year that begins in February. Each such filing must
contain an updated cost of service study pursuant to section 61.38.
Id. Based upon that cost study, Somos's rates and charges are
adjusted to recover those forecasted costs over the ensuing tariff
year.
---------------------------------------------------------------------------
67. Disbursement of 833 Auction Revenues That Exceed Somos's
Auction Costs. We conclude that net positive proceeds from the 833
Auction should be used to defray toll free numbering administration
costs. We establish a methodology that will benefit Toll Free Numbering
Administrator users while tempering resulting year-over-year change of
administrative rates and charges. We therefore tie our disbursement to
the ratio between net positive proceeds and Somos's revenue
requirements. In the present tariff year, Somos's revenue requirement
for toll free numbering administration services is $56.9 million. (The
revenue requirement to cover forecasted costs for toll free numbering
administration (referenced in the Tariff as ``SMS/800'') services in
the current tariff period, covering February 15, 2018--February 14,
2019, is $56,933,855.) If net positive proceeds are less than five
percent of Somos's then-current annual revenue requirement, then the
net positive proceeds should be used only to defray toll free numbering
administration costs for the tariff period immediately following the
close of the 833 Auction. (Somos would make this determination based on
its cost study for the ensuing tariff year, with and without cost
reduction by offset of auction proceeds. Should there be any further
auction proceeds received after such determination (e.g., delayed
payments accepted by the Commission), those proceeds will be applied/
remitted in accordance with the manner set forth herein based on the
then-cumulative amount of all auction proceeds from that auction,
inclusive of such further auction proceeds. Auction proceeds amounting
to five percent or less of the current annual revenue requirement
applied to that single tariff year would likely have a de minimis
effect on administrative rates and charges.) In the event that net
positive proceeds exceed five percent of Somos's costs, then the net
positive proceeds should be distributed evenly across five years for
cost recovery under the tariff to minimize the impact on the
administrative rates and charges. This approach avoids substantial
year-over-year changes in administrative rates and charges, and allows
RespOrgs and toll free subscribers to receive the cost reduction over
an extended period if net positive proceeds are large enough to
warrant. (The Commission has long sought to ``smooth'' the impact of
its actions on telephony rates and charges.)
68. If net positive proceeds from the 833 Auction are large enough
that applying them to defray toll free numbering administration costs
over five years would result in a greater than 25 percent decrease in
the revenue requirement for the Toll Free Numbering Administrator over
the five-year period, then the excess of net positive proceeds beyond
that amount will be remitted to the Billing and Collection (B&C) Agent
for the NANP to be applied to defray the costs of NANP administration
on behalf of its 20 member countries. (The present B&C Agent is Welch
LLP. The B&C Agent will apply such funds prior to application of the
various contribution factors and billing and collections processes.) We
find that directing funds in excess of 25 percent for the benefit of
the NANP strikes an appropriate balance, avoiding excessive
fluctuations in the toll free tariff structure and benefitting both
numbering administrations upon which toll free calling is dependent.
The toll free numbers administered by the Toll Free Numbering
Administrator are numbers within the NANP; it is therefore appropriate
that such funds potentially go to defray the costs of the administering
the NANP, which are borne by the countries served by the Toll Free
Numbering Administrator and the other NANP member countries. In the
event proceeds remitted to the B&C Agent exceed five percent of NANPA
costs, then the net positive proceeds should be distributed evenly by
the B&C Agent across five fiscal years of the NANPA, to minimize the
impact on the NANPA rates and charges. If proceeds remitted to the B&C
Agent are large enough that applying them to defray NANPA costs over
five years would result in a greater than 25 percent decrease in the
revenue requirement for the NANPA over the five-year period, then the
excess of net positive proceeds beyond that amount will be distributed
evenly by the B&C Agent across the next ten fiscal years of the NANPA.
69. Recovery of 833 Auction Costs That Exceed Auction Revenues. In
the event the costs of the 833 Auction exceed its revenues, Somos may
recover the resulting deficit in the same manner as other costs of toll
free number administration: By incorporating them into the cost
recovery mechanism in its tariff. These auction costs would be
recovered along with all other allowable costs as part of the Toll Free
Numbering Administrator's revenue requirement for the ensuing tariff
year(s). This means that all RespOrgs and their underlying toll free
subscribers will bear the auction's costs, just as they would share the
benefit of any net auction proceeds. This approach is consistent with
the cost-recovery system whereby all RespOrgs, and ultimately all toll
free subscribers, bear the costs of numbering administration
collectively. (Toll free numbering administration costs are recovered
via the Toll Free Numbering Administrator's rates and charges, in the
form of both transaction-specific fees, and monthly and other charges
that are not tied to any specific transaction of number acquisition or
change.)
70. We anticipate that the 833 Auction will benefit the entire
toll-free industry by potentially lowering the monthly fees associated
with toll free reservations. Accordingly, we reject the suggestion that
equitable and efficient distribution of numbers requires that any costs
of the 833 Auction exceeding auction revenues should be imposed only
upon auction winners, or auction participants, under ``competitively
neutral'' and ``cost-causer'' approaches. The 833 Auction is open to
all RespOrgs and all potential subscribers. Moreover, the sharing of
any net auction proceeds--or any auction deficit--does not of itself
distort the toll free market in any fashion or favor one competitor in
that marketplace over any other. As one commenter notes, consumers
benefit directly from the use of toll free numbers, and ``reducing the
input costs proportionally across RespOrgs will benefit all
participants at their level of participation, thereby not distorting
the toll-free market. The method proposed by the FCC is an efficient
and effective mechanism for achieving that goal.''
71. Finally, for the reasons discussed above, if the deficit
exceeds five percent of the forecasted cost of the Toll Free Numbering
Administrator's services for
[[Page 53388]]
the next tariff year, we will require the recovery of any deficit over
the ensuing five years of cost recovery under the tariff. Such a
deficit will be divided equally among each of those five years, and
incorporated into the administrator's cost studies and revenue
requirements for each of those years. By this approach, we seek to
avoid or reduce any substantial increases or fluctuations in the Toll
Free Number Administrator's rates and charges due to any deficit.
72. International Considerations. One commenter notes the
international nature of the NANP and asks ``what right does US, or its
agencies, have to unilaterally benefit from an auction?'' This concern
is misplaced. The United States will not unilaterally benefit from the
833 Auction's proceeds. Rather, as explained, net positive proceeds
will be used to defray the costs of toll free number administration,
benefitting all RespOrgs (and ultimately toll free subscribers) in
those countries served by the Toll Free Numbering Administrator
(Canada, Sint Maarten and the United States), and may also be used to
defray the cost of NANP administration, benefitting all of its member
countries. Even if the 833 Auction does not meet the 25 percent
threshold, RespOrgs from these countries will benefit from lowered
charges from the Toll Free Numbering Administrator. We note that a
coalition of 10 Canadian RespOrgs, including major Canadian
telecommunications service providers, supports our proposal to apply
net auction proceeds to the Toll Free Numbering Administrator's
administration costs. Applying net auction proceeds as set forth herein
is consistent with the way Somos applies RespOrg fee proceeds, and the
NANPA collects fees, through the B&C Agent, from member countries and
service providers.
73. Somos Tariff Implications. We direct Somos to reflect any net
positive proceeds or deficit related to the 833 Auction in the section
61.38 cost support filed with the Toll Free Tariff. We have previously
said that Somos must support the costs of its Toll Free Database
administration as part of its tariff filing with the Commission. The
present Toll Free Tariff ``contains regulations, rates and charges''
applicable to administration of the Toll Free Database. As explained
above, any auction proceeds will be applied to decrease Toll Free
Database administration costs. This will allow Somos to lower certain
of its charges, such as the monthly customer record administration
charge. On the other hand, any auction deficit, i.e., auction costs
that exceed revenues from the auction, will be recovered via the
tariff's cost recovery mechanism along with any other costs associated
with administering the database. Inclusion of auction-related costs in
the tariff's cost justification is necessary to show the impact of the
833 Auction on the tariffed charges to RespOrgs for use of the Toll
Free Database.
5. Toll Free Numbers Used for Public Purposes
74. To ensure that the public interest is protected in the 833
Auction, we will set aside numbers in the 833 code that have been
identified as mutually exclusive upon reasonable request by government
entities and non-profit health and safety organizations. (Government
entities include federal, state, local, and Tribal governments, and
includes any such entities in all countries served by the Toll Free
Numbering Administrator. Non-profit health and safety organizations
must be 26 U.S.C. 501(c)(3) organizations.) In the Toll Free Assignment
NPRM, the Commission sought comment on whether certain desirable toll
free numbers should be set aside for use, without cost, by government
agencies or by non-profit health, safety, education, or other non-
profit public interest organizations. After reviewing the record, we
find that ``[c]ertain desirable toll free numbers that promote health
and safety should be set aside for use by government, without cost,''
as well as for use by non-profit health and safety organizations that
meet the standard of our precedent.
75. Government (federal, state, local and Tribal) entities as well
non-profit health and safety organizations have a unique relationship
with toll free numbers. Not only do they use numbers to provide service
to the public, but they also face unique budgeting challenges that may
place toll free numbers assigned at auction out of reach. We disagree
with commenters who argue that the public interest nature of non-profit
organizations can be practically difficult to identify, and that
setting aside numbers for non-profits presents a greater possibility of
fraud and abuse. We further disagree with the suggestion that allowing
private non-profit organizations to petition for numbers to be set
aside is an act of ``eminent domain.'' This claim is fundamentally at
odds with the toll free numbering scheme, which vests the Commission
with authority to assign numbers ``equitabl[y].'' Further, subscribers
have no property interest in toll free numbers. The Commission will use
the 501(c)(3) designation as well our existing standard for public
health and safety use to limit set-asides to those legitimate public
interest organizations that truly promote public health and safety.
This process is consistent with the way the Commission has considered
petitions for reassignment of toll free numbers in the past.
76. We disagree with the arguments in the record that offering any
public interest-related number set aside for governmental or non-profit
entities is inherently not ``equitable'' under section 251(e)(1) of the
Act. To the contrary, this set aside works to assuage concerns that
some bidders--government and non-profit entities--may be precluded from
obtaining desired numbers by our auction experiment. However, we are
sympathetic to the argument that the public should have an opportunity
to object to requests that numbers be set aside. For this reason, while
we will consider requests from government and non-profit entities to
set aside numbers in the 833 code that are already considered mutually
exclusive, in order for a request to be considered, the government or
non-profit entity must file a ``Petition for an 833 Toll Free Number''
with the Bureau in accordance with the Auction Procedures Public
Notice. The Bureau will then solicit public comment prior to making its
decision on the number request based on the public interest. (Petitions
must be filed in ECFS in Docket No. WC 17-192 and CC Docket No. 95-155.
Filing the petition does not guarantee the request will be granted.) We
intend to maintain our standard for review consistent with the unusual
and compelling public health and safety standards in Commission
precedent and direct the Bureau to consider each application
individually, on a case-by-case basis, as it is filed with the
Commission. We note that while being a government entity or a 501(c)(3)
organization is a necessary condition for a set aside, it is not in and
of itself a sufficient condition and the Bureau must apply the unusual
and compelling public health and safety standards discussed above. If,
however, multiple government or non-profit entities file petitions
requesting the same number for public health and safety purposes which
meet the standard of our precedent, we direct Somos to conduct a
lottery for the number among the requesting applicants. We believe a
lottery is both an equitable and expedient way to resolve competing
requests for the same number. The Commission will use the information
obtained from this number set aside process to determine whether
[[Page 53389]]
we should continue to use it in future code openings.
6. Treatment of Trademark Holders
77. We decline to adopt proposals in the record to provide special
treatment for trademark-holders. Specifically, commenters have
suggested that we provide trademark-holders a right of first refusal or
adopt new ``procedures'' to address instances of abuse of a number
desired by a trademark-holder. We find that, as under the first-come,
first-served methodology, ``concerns regarding trademark infringement
and unfair competition . . . should be addressed by the courts under
the trademark protection and unfair competition laws, rather than by
the Commission.''
78. We disagree with commenters who argue that failing to provide
special treatment for trademark-holders is contrary to the public
interest. As 1-800-CONTACTS admits, the Lanham Act already serves to
``protect consumers by preventing confusion and unfair competition,''
and 1-800-FLOWERS has acknowledged its success policing use that
infringes on its trademarks under the first-come, first-served
methodology. Some commenters argue that a market-based approach to
number assignment will encourage ``extortion'' of trademark-holders by
bad actors, but we see no reason to diverge from our position that
number assignment should be trademark-agnostic. An auction mechanism
assigns numbers to those who value them most highly, and a secondary
market--which we adopt on a limited basis below--only facilitates this
assignment. Subscribers remain bound by trademark law once a number has
been assigned. We also disagree with the argument of 1-800-CONTACTS
that auctioning numbers without special protection for trademark
holders ``would conflict with the statutory requirements of the Lanham
Act.'' 1-800-CONTACTS does not identify with specificity which
requirements the Commission would violate, or provide support for its
argument. The United States Court of Appeals for the Sixth Circuit has
found, in the context of an internet domain name registrar, that
assigning an item to a third party is not ``use'' for purposes of a
trademark infringement claim.
C. Secondary Markets for Toll Free Numbers
79. To fully realize the effectiveness of assigning numbers via
competitive bidding, we allow for a secondary market of toll free
numbers won at auction. In the Toll Free Assignment NPRM, the
Commission sought comment on revising our rules to promote development
of a secondary market for toll free numbers. We have reviewed the
record, and agree with commenters who argue that our current rules may
have a ``chilling impact . . . on private enterprise.'' Consistent with
our goal of making the rights to use numbers available on an equitable
basis by assigning them to those who can put the numbers to their best
use, and with the record, we now allow for the development of a
secondary market for numbers assigned via competitive bidding.
80. The Commission's current rules prevent three types of conduct
that limit or preclude the development of a secondary market. First,
the rules prevent brokering--``the selling of a toll free number by a
private entity for a fee.'' Second, the rules prevent hoarding, which
is the ``acquisition by a toll free subscriber . . . of more toll free
numbers than the toll free subscriber intends to use for the provision
of toll free service.'' Third, the rules prevent warehousing, a
practice in which a RespOrg reserves toll free numbers ``without having
an actual toll free subscriber for whom the numbers are being
reserved.'' These rules not only preclude the sale of the rights to use
toll free numbers--central to a secondary market--but also frustrate
number sales by placing obligations on potential sellers.
81. As the Commission explained in the Toll Free Assignment NPRM, a
secondary market appears to be ``an efficient and productive use of
numbers'' because it ``permit[s] subscribers to legally obtain numbers
which they value.'' It also promotes the efficient operation of an
auction: Permitting the free acquisition and transfer of the rights to
use numbers allows subscribers to purchase or sell numbers in response
to the outcome of the auction, and limits pre-auction costs associated
with estimating which--and how many--numbers a bidder may win. It
further encourages value-creating entities to promote efficiency by
procuring rights to numbers with an intent to sell those rights to
other interested subscribers. The secondary market thus ensures that
numbers are assigned to those parties who can most efficiently use
them. Under our current system, by contrast, a party that desires a
number most cannot ensure that it is assigned that number; and if it
fails to be assigned that number, it has no mechanism to procure it
after the initial assignment. An auction mechanism with a robust
secondary market not only ensures that numbers are assigned to the
bidder that values them most at the time of assignment, but also allows
the rights to numbers to be reassigned when valuations change.
82. We disagree with commenters who claim that permitting a robust
secondary market will lead to undesirable conduct and extortion. With
an auction and secondary market, the rights to numbers will be assigned
to those entities who value them most; differences in valuation do not
reflect undesirable conduct or extortion. To the extent there is
genuine misconduct, trademark and competition law serves to protect
parties from bad actors. Further, the argument that allowing a
secondary market will ``lead to premature exhaust'' is minimized by our
decision to allow a secondary market only for those numbers assigned by
auction. In the present experiment, the 833 Auction includes
approximately 17,000 numbers--under one percent of all 833 numbers. To
the extent our rules preventing a secondary market were adopted to
limit exhaust, we do not believe this limited exception will
significantly affect the exhaust of the entire pool of 833 numbers.
Because creating this limited secondary market will not lead to
premature exhaust, we see no need to adopt the proposal in the record
that we ``assess[ ] a fixed monthly direct contribution from all toll-
free number holders [to] discourage hoarding and warehousing'' in order
to combat exhaust. Further, we disagree with CenturyLink's argument
that we should not combine a secondary market with the 833 Auction
experiment so that an auction ``may be adequately evaluated without the
influence of other variables.'' As we have explained, a secondary
market is an important component to a successful auction, because it
allows auction participants to later transfer numbers in response to
information learned at the auction. And exploring these two changes
simultaneously will allow us to see how they work in conjunction with
one another.
83. We also disagree with the argument that ``abandoning the
brokering rule . . . violates the statutory mandate of equitable
distribution of numbers.'' The secondary market is both ``orderly and
efficient'' and ``fair.'' The secondary market is ``orderly'' because
it is simple: Competing claims are resolved by assigning rights to a
number to the party who values it most. The secondary market is
``efficient,'' as that term is interpreted under our precedent in this
context, in that it will minimize number exhaust by allowing rights to
numbers to be obtained without requiring the opening of a new code.
Finally, the secondary market is ``fair''
[[Page 53390]]
because no potential subscribers are discriminated against; there is
equal opportunity to participate in the secondary market.
84. To allow for a secondary market to develop, we adopt exceptions
to the Commission's rules prohibiting the brokering, hoarding, and
warehousing of toll free numbers for numbers acquired in an auction.
(We also modify our rule limiting how long a number may remain in
``reserved'' status in order to harmonize that rule with the exceptions
we adopt today.) Because, as explained, a secondary market can promote
the efficiency of an auction, we find that it is appropriate that we
apply our exceptions to numbers assigned via competitive bidding.
Numbers which are eligible for this exception by virtue of having been
assigned via competitive bidding do not lose their eligibility if they
are sold or otherwise transferred to another subscriber. Numbers which
are returned to the spare pool, however, do not retain eligibility for
the exception simply because they were once assigned in an auction.
85. We decline, at this time, to mandate that fees associated with
the sale of numbers on the secondary market go to the cost of toll free
numbering administration borne by Somos. We are convinced by the record
that our rules should not ``increase the costs to subscribers.''
However, as we have explained previously, in order to evaluate the
operation of the secondary market, we direct Somos to maintain data on
secondary market transactions and make that data available to the
Commission. To facilitate the collection of data, RespOrgs will be
required to provide subscriber information to Somos, including the new
subscriber's name and contact information, and other limited
information Somos deems necessary.
D. Other Toll Free Rule Revisions
86. To further modernize our decades-old toll free numbering rules,
we adopt several definitional and technical updates to improve clarity
and flexibility in toll free number assignment. We also incorporate
recommendations of the North American Numbering Council (NANC, the
Commission's Federal Advisory Committee on numbering matters) to revise
our definitions and lag time rules to be consistent with our new
market-based toll free assignment rule.
87. NANC Report. In the Toll Free Assignment NPRM, the Commission
sought comment on whether to ``eliminate or revise any other toll free
rules'' and specifically suggested sections 52.101(d) and 52.103 as
potential targets for revision. After the release of the NPRM, the
Bureau directed the NANC to recommend possible rule changes to promote
a market-based approach to the assignment of toll free numbers. In
response to this direction, the NANC Toll Free Number Assignment
Modernization Working Group recommended revisions to sections 52.101
and 52.103 of our rules regarding general definitions and lag times.
88. General Definitions. We revise section 52.101(a) to replace the
term ``Number Administration and Service Center'' (NASC) with the term
``Toll Free Numbering Administrator.'' (Section 52.101(a) currently
defines ``Number Administration and Service Center'' as ``The entity
that provides user support for the Service Management System and
administers the Service Management System database on a day-to-day
basis.'') Despite the fact that the Commission has used the term Toll
Free Numbering Administrator for several years, our rules have not
reflected that terminology. Our rules' reference to the NASC is now
outdated, and this revision will update the Commission's rules to
reflect current industry terminology. We further modify our definition,
consistent with the NANC's recommendation, to reflect that the Toll
Free Numbering Administrator role is filled by an entity appointed
under our authority pursuant to section 251(e)(1) of the Act. Because
the Toll Free Numbering Administrator serves the same purpose as the
former NASC, however, we otherwise retain the same definition as to the
role of the toll free administrator.
89. We further revise section 52.101(e) to expand the definition of
``Toll Free Subscriber.'' The Commission's rules currently define a
Toll Free Subscriber as ``[T]he entity that requests a Responsible
Organization to reserve a toll free number from the SMS database.'' Our
revised rule establishes that a Toll Free Subscriber is ``The entity
that has been assigned a toll free number.'' This change will make our
definition consistent with our revised rule section 52.111, which
allows for assignment via a market-based methodology, by making clear
that a subscriber is not limited to requesting a toll free number be
reserved in the toll free database. For example, a subscriber can be
assigned a number through the competitive bidding process.
90. Lag Times. We make multiple revisions to section 52.103, which
sets forth the various statuses of toll free numbers in the Toll Free
Database. First, we adopt a new section 52.103(a)(10) to create a
``Transitional Status'' category for numbers that have been
disconnected for less than four months, but for which no service
provider intercept recording (also known as Exchange Carrier Intercept
Recording) is being provided. (Transitional Status is thus distinct
from Disconnect Status, where a service provider intercept recording
(i.e., a recording explaining that a number has been disconnected) is
being provided.) The NANC comments, and we agree, that adding this
Transitional Status will better align the Commission's rules with
current industry practice.
91. Second, we modify section 52.103(d) to make the existing
Disconnect Status rule compatible with a market-based number assignment
approach. Section 52.103(d) requires disconnected numbers to stay in
Disconnect Status for a period of up to four months, and then go to
Spare Status at the end of that period. The NANC Report recommends
amending the rule to allow numbers that have been in Disconnect Status
for up to four months to go directly to Unavailable or Spare Status.
(We note that numbers set-aside for a market-based assignment are
placed in unavailable status.) We conclude, and the NANC agrees, that
allowing numbers to go from Disconnect Status to Unavailable--rather
than directly to Spare Status--will ensure that any number can be
assigned by a market-based mechanism. This change will allow the Toll
Free Numbering Administrator to send numbers that have been selected
for market-based assignment directly into Unavailable rather than into
Spare Status. We thus adopt this change, which will allow greater
flexibility and further modernize the toll free assignment process.
92. Finally, we also adopt a change to section 52.103(f),
``Unavailable Status.'' The description of ``Unavailable Status'' in
that section references DSMI, which has since been replaced by Somos as
the Toll Free Numbering Administrator. The definition should be updated
to refer to the Toll Free Numbering Administrator. This revision will
ensure that the Commission's rules reflect current industry
terminology. We also revise rule section 52.109(c) to change spare
``poll'' to spare ``pool,'' thus correcting a typographical error in
this rule.
93. The ministerial revisions we adopt today are a logical
outgrowth of the proposals in the Toll Free Assignment NPRM. As the
Commission has previously explained, ``[a]n NPRM satisfies the logical
outgrowth test if it `expressly ask[s] for comment on a particular
issue or otherwise ma[kes]
[[Page 53391]]
clear that the agency [is] contemplating a particular change.''' That
test is satisfied here. The Toll Free Assignment NPRM expressly
proposed a revision to the rules governing toll free number assignment
to allow for assignment via competitive bidding. It further sought
comment on whether to ``eliminate or revise any other toll free
rules,'' with specific reference to sections 52.101(d) and 52.103 of
the rules. Our ministerial revisions, with one minor exception, apply
to sections 52.101 and 52.103. (The exception is our revision to
section 52.109(c), correcting a typographical error in that rule.)
Further, the revisions operate to harmonize those rules with the
competitive bidding assignment methodology expressly noticed in the
Toll Free Assignment NPRM. We find that ``parties should have
anticipated that the rule [revisions] ultimately adopted [were]
possible.'' We also find good cause, to the extent necessary, to adopt
these ministerial changes. These revisions are insignificant and
inconsequential to the industry and the public. Our revisions to
sections 52.101(a), 52.103(a)(10), 52.103(f), and 52.109(c) either
correct typographical errors or bring our rules into line with
contemporary practice and do not increase or otherwise modify any
entities' regulatory burden. Our revisions to sections 52.101(e) and
52.103(d) similarly do not impact any entities' regulatory burden, and
only harmonize our rules to allow for the successful operation of the
competitive bidding assignment methodology we adopt today.
E. Legal Authority
94. The Commission has found section 251(e)(1) of the Act ``to
empower the Commission to ensure that toll free numbers, which are a
scarce and valuable national public resource, are allocated in an
equitable and orderly manner that serves the public interest.''
Pursuant to these statutory mandates, the Commission has the
``authority to set policy with respect to all facets of numbering
administration in the United States,'' and a ``require[ment] . . . to
ensure the efficient, fair, and orderly allocation of toll free
numbers.'' The actions we take today meet the statutory requirement
that numbers be made ``available on an equitable basis''--an auction
and secondary market are both efficient and orderly, and fair. We also
have clear authority to require Somos to serve as the auctioneer for
833 numbers and to comply with requirements adopted in this order.
Section 251(e)(1) obligates the Commission to ensure its Toll Free
Numbering Administrator administers ``telecommunications numbering and
to make such numbers available on an equitable basis.'' And section
201(b) authorizes the Commission to ``prescribe such rules and
regulations as may be necessary in the public interest to carry out the
provisions of this [Act].''
95. CenturyLink argues that we do not have authority to assign toll
free numbers through competitive bidding because, unlike in the context
of spectrum auctions, Congress did not specifically task the Commission
with using competitive bidding for toll free numbers. Since the Act was
adopted in 1934, however, Congress has stated with particularity the
various means for assignment of spectrum licenses; the specific
addition of an assignment via competitive bidding supplemented the
previous Congressional direction to make licenses available via an
application process or random assignment. By contrast, Congress has
used much more general language in section 251 and thus given us broad
discretion to administer numbering. In Congress's grant of ``exclusive
jurisdiction over those portions of the North American Numbering Plan
that pertain to the United States'' in section 251(e)(1), we find
authority to employ any number assignment mechanisms which meet the
statute's ``equitable basis'' requirement, including competitive
bidding.
IV. Final Regulatory Flexibility Analysis
1. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated into the Notice of Proposed Rulemaking (Toll Free
Assignment NPRM) for the Toll Free Assignment Modernization proceeding.
The Commission sought written public comment on the proposals in the
Toll Free Assignment NPRM, including comment on the IRFA. The
Commission received no comments on the IRFA. Because the Commission
amends its rules in this Order, the Commission has included this Final
Regulatory Flexibility Analysis (FRFA). This present FRFA conforms to
the RFA.
A. Need for, and Objectives of, the Rules
2. In the Toll Free Assignment NPRM, the Commission reconsidered
how to best meet the statutory mandate that it make toll free numbers
``available on an equitable basis.'' To this end, the Commission
proposed and sought comment on numerous regulatory reforms to existing
rules regarding toll free number assignment.
3. Pursuant to the objectives set forth in the Toll Free Assignment
NPRM, this Report and Order (Order) adopts changes to Commission rules
regarding toll free number assignment. Specifically, the Order (1)
revises the Commission's toll free assignment rule to allow for the use
of competitive bidding for toll free numbers; (2) establishes the use
of competitive bidding to assign the over 17,000 mutually exclusive
numbers in the 833 toll free code, identified pursuant to the 833 Code
Opening Order; (3) exempts numbers assigned via competitive bidding
from the rules preventing the development of a secondary market; and
(4) makes ministerial changes to our toll free number assignment rules.
These modifications to our toll free number assignment rules will
create a more efficient method of toll free number assignment,
consistent with our statutory mandate. Ultimately, these reforms will
ensure the equitable and efficient assignment of toll free numbers.
B. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA
4. The Commission did not receive comments addressing the rules and
policies proposed in the IRFAs in the Toll Free Assignment NPRM.
C. Response to Comments by the Chief Counsel for Advocacy of the SBA
5. Pursuant to the Small Business Jobs Act of 2010, which amended
the RFA, the Commission is required to respond to any comments filed by
the Chief Counsel for Advocacy of the Small Business Administration
(SBA), and to provide a detailed statement of any change made to the
proposed rules as a result of those comments.
6. The Chief Counsel did not file any comments in response to this
proceeding.
D. Description and Estimate of the Number of Small Entities to Which
the Rules Will Apply
7. The RFA directs agencies to provide a description and, where
feasible, an estimate of the number of small entities that may be
affected by the final rules adopted pursuant to the Order. The RFA
generally defines the term ``small entity'' as having the same meaning
as the terms ``small business,'' ``small organization,'' and ``small
governmental jurisdiction.'' In addition, the term ``small business''
has the same meaning as the term ``small-business concern'' under the
Small Business Act. (Pursuant to 5 U.S.C. 601(3), the statutory
definition of a small business
[[Page 53392]]
applies ``unless an agency, after consultation with the Office of
Advocacy of the Small Business Administration and after opportunity for
public comment, establishes one or more definitions of such term which
are appropriate to the activities of the agency and publishes such
definition(s) in the Federal Register.'') A ``small-business concern''
is one which: (1) Is independently owned and operated; (2) is not
dominant in its field of operation; and (3) satisfies any additional
criteria established by the SBA.
8. The changes to our toll free number assignment rules affect
obligations on wired and wireless telecommunications carriers, local
exchange and interexchange carriers, local and toll resellers, prepaid
calling card providers, and cable operators.
9. Small Businesses, Small Organizations, Small Governmental
Jurisdictions. Our actions, over time, may affect small entities that
are not easily categorized at present. We therefore describe here, at
the outset, three comprehensive small entity size standards that could
be directly affected herein. First, while there are industry specific
size standards for small businesses that are used in the regulatory
flexibility analysis, according to data from the SBA's Office of
Advocacy, in general a small business is an independent business having
fewer than 500 employees. These types of small businesses represent
99.9% of all businesses in the United States which translates to 28.8
million businesses. 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 2007, there were approximately 1,621,215
small organizations. Finally, the small entity described as a ``small
governmental jurisdiction'' is defined generally as ``governments of
cities, towns, townships, villages, school districts, or special
districts, with a population of less than fifty thousand.'' U.S. Census
Bureau data published in 2012 indicate that there were 89,476 local
governmental jurisdictions in the United States. We estimate that, of
this total, as many as 88,761 entities may qualify as ``small
governmental jurisdictions.'' (The 2012 U.S. Census Bureau data for
small governmental organizations are not presented based on the size of
the population in each organization. There were 89,476 local
governmental organizations in the Census Bureau data for 2012, which is
based on 2007 data. As a basis of estimating how many of these 89,476
local government organizations were small, we note that there were a
total of 715 cities and towns (incorporated places and minor civil
divisions) with populations over 50,000 in 2011. If we subtract the 715
cities and towns that meet or exceed the 50,000 population threshold,
we conclude that approximately 88,761 are small.) Thus, we estimate
that most governmental jurisdictions are small.
10. Wired Telecommunications Carriers. The U.S. Census Bureau
defines this industry as ``establishments primarily engaged in
operating and/or providing access to transmission facilities and
infrastructure that they own and/or lease for the transmission of
voice, data, text, sound, and video using wired communications
networks. Transmission facilities may be based on a single technology
or a combination of technologies. Establishments in this industry use
the wired telecommunications network facilities that they operate to
provide a variety of services, such as wired telephony services,
including VoIP services, wired (cable) audio and video programming
distribution, and wired broadband internet services. By exception,
establishments providing satellite television distribution services
using facilities and infrastructure that they operate are included in
this industry.'' The SBA has developed a small business size standard
for Wired Telecommunications Carriers, which consists of all such
companies having 1,500 or fewer employees. Census data for 2012 show
that there were 3,117 firms that operated that year. Of this total,
3,083 operated with fewer than 1,000 employees. Thus, under this size
standard, the majority of firms in this industry can be considered
small.
11. Local Exchange Carriers (LECs). Neither the Commission nor the
SBA has developed a size standard for small businesses specifically
applicable to local exchange services. The closest applicable NAICS
Code category is Wired Telecommunications Carriers as defined above.
Under the applicable SBA size standard, such a business is small if it
has 1,500 or fewer employees. According to Commission data, census data
for 2012 shows that there were 3,117 firms that operated that year. Of
this total, 3,083 operated with fewer than 1,000 employees. The
Commission therefore estimates that most providers of local exchange
carrier service are small entities that may be affected by the rules
adopted.
12. Incumbent LECs. Neither the Commission nor the SBA has
developed a small business size standard specifically for incumbent
local exchange services. The closest applicable NAICS Code category is
Wired Telecommunications Carriers as defined above. Under that size
standard, such a business is small if it has 1,500 or fewer employees.
According to Commission data, 3,117 firms operated in that year. Of
this total, 3,083 operated with fewer than 1,000 employees.
Consequently, the Commission estimates that most providers of incumbent
local exchange service are small businesses that may be affected by the
rules and policies adopted. Three hundred and seven (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.
13. Competitive Local Exchange Carriers (Competitive LECs),
Competitive Access Providers (CAPs), Shared-Tenant Service Providers,
and Other Local Service Providers. Neither the Commission nor the SBA
has developed a small business size standard specifically for these
service providers. The appropriate NAICS Code category is Wired
Telecommunications Carriers, as defined above. Under that size
standard, such a business is small if it has 1,500 or fewer employees.
U.S. Census data for 2012 indicate that 3,117 firms operated during
that year. Of that number, 3,083 operated with fewer than 1,000
employees. Based on this data, the Commission concludes that the
majority of Competitive LECS, CAPs, Shared-Tenant Service Providers,
and Other Local Service Providers, are small entities. According to
Commission data, 1,442 carriers reported that they were engaged in the
provision of either competitive local exchange services or competitive
access provider services. Of these 1,442 carriers, an estimated 1,256
have 1,500 or fewer employees. In addition, 17 carriers have reported
that they are Shared-Tenant Service Providers, and all 17 are estimated
to have 1,500 or fewer employees. Also, 72 carriers have reported that
they are Other Local Service Providers. Of this total, 70 have 1,500 or
fewer employees. Consequently, based on internally researched FCC data,
the Commission estimates that most providers of competitive local
exchange service, competitive access providers, Shared-Tenant Service
Providers, and Other Local Service Providers are small entities.
14. We have included small incumbent LECs in this present RFA
analysis. As noted above, a ``small business'' under the RFA is one
that, inter alia, meets the pertinent small business size standard
(e.g., a telephone
[[Page 53393]]
communications business having 1,500 or fewer employees), and ``is not
dominant in its field of operation.'' The SBA's Office of Advocacy
contends that, for RFA purposes, small incumbent LECs are not dominant
in their field of operation because any such dominance is not
``national'' in scope. (The Small Business Act contains a definition of
``small business concern,'' which the RFA incorporates into its own
definition of ``small business.'' SBA regulations interpret ``small
business concern'' to include the concept of dominance on a national
basis.) We have therefore included small incumbent LECs in this RFA
analysis, although we emphasize that this RFA action has no effect on
Commission analyses and determinations in other, non-RFA contexts.
15. Interexchange Carriers (IXCs). Neither the Commission nor the
SBA has developed a definition for Interexchange Carriers. The closest
NAICS Code category is Wired Telecommunications Carriers as defined
above. The applicable size standard under SBA rules is that such a
business is small if it has 1,500 or fewer employees. U.S. Census 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 IXCs are small entities that may be affected by our
proposed rules.
16. Local Resellers. The SBA has developed a small business size
standard for the category of 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. Mobile
virtual network operators (MVNOs) are included in this industry. Under
that size standard, such a business is small if it has 1,500 or fewer
employees. Census data for 2012 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 prepaid calling card
providers can be considered small entities.
17. 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. Mobile virtual network operators (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. Census data for 2012 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.
18. Other Toll Carriers. Neither the Commission nor the SBA has
developed a definition for small businesses specifically applicable to
Other Toll Carriers. This category includes toll carriers that do not
fall within the categories of interexchange carriers, operator service
providers, prepaid calling card providers, satellite service carriers,
or toll resellers. The closest applicable NAICS Code category is for
Wired Telecommunications Carriers as defined above. Under the
applicable SBA size standard, such a business is small if it has 1,500
or fewer employees. Census data for 2012 shows that there were 3,117
firms that operated that year. Of this total, 3,083 operated with fewer
than 1,000 employees. Thus, under this category and the associated
small business size standard, the majority of Other Toll Carriers can
be considered small. According to internally developed Commission data,
284 companies reported that their primary telecommunications service
activity was the provision of other toll carriage. Of these, an
estimated 279 have 1,500 or fewer employees. Consequently, the
Commission estimates that most Other Toll Carriers are small entities
that may be affected by rules adopted pursuant to the Report and Order.
19. Prepaid Calling Card Providers. The SBA has developed a
definition for small businesses within the category of
Telecommunications Resellers. Under that SBA definition, such a
business is small if it has 1,500 or fewer employees. According to the
Commission's Form 499 Filer Database, 500 companies reported that they
were engaged in the provision of prepaid calling cards. The Commission
does not have data regarding how many of these 500 companies have 1,500
or fewer employees. Consequently, the Commission estimates that there
are 500 or fewer prepaid calling card providers that may be affected by
the rules.
20. 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 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 1000 employees or more.
(Available census data do not provide a more precise estimate of the
number of firms that have employment of 1,500 or fewer employees; the
largest category provided is for firms with ``1000 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.
21. 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. (For the purposes
of this FRFA, consistent with Commission practice for wireless
services, the Commission estimates the number of licensees based on the
number of unique FCC Registration Numbers.) The Commission does not
know how many of these licensees are small, as the Commission
[[Page 53394]]
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,
and Specialized Mobile Radio 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.
22. Wireless Communications Services. This service can be used for
fixed, mobile, radiolocation, and digital audio broadcasting satellite
uses. The Commission defined ``small business'' for the wireless
communications services (WCS) auction as an entity with average gross
revenues of $40 million for each of the three preceding years, and a
``very small business'' as an entity with average gross revenues of $15
million for each of the three preceding years. The SBA has approved
these definitions.
23. Wireless Telephony. Wireless telephony includes cellular,
personal communications services, and specialized mobile radio
telephony carriers. As noted, the SBA has developed a small business
size standard for Wireless Telecommunications Carriers (except
Satellite). Under the SBA small business size standard, a business is
small if it has 1,500 or fewer employees. 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, a little less than one third of these
entities can be considered small.
24. Cable and Other Subscription Programming. This industry
comprises establishments primarily engaged in operating studios and
facilities for the broadcasting of programs on a subscription or fee
basis. The broadcast programming is typically narrowcast in nature
(e.g., limited format, such as news, sports, education, or youth-
oriented). These establishments produce programming in their own
facilities or acquire programming from external sources. The
programming material is usually delivered to a third party, such as
cable systems or direct-to-home satellite systems, for transmission to
viewers. The SBA has established a size standard for this industry
stating that a business in this industry is small if it has 1,500 or
fewer employees. The 2012 Economic Census indicates that 367 firms were
operational for that entire year. Of this total, 357 operated with less
than 1,000 employees. Accordingly we conclude that a substantial
majority of firms in this industry are small under the applicable SBA
size standard.
25. Cable Companies and Systems (Rate Regulation). The Commission
has developed its own small business size standards for the purpose of
cable rate regulation. Under the Commission's rules, a ``small cable
company'' is one serving 400,000 or fewer subscribers nationwide.
Industry data indicate that there are currently 4,600 active cable
systems in the United States. (This figure was derived from a August
15, 2015 report from the FCC Media Bureau, based on data contained in
the Commission's Cable Operations and Licensing System (COALS).) Of
this total, all but eleven cable operators nationwide are small under
the 400,000-subscriber size standard. In addition, under the
Commission's rate regulation rules, a ``small system'' is a cable
system serving 15,000 or fewer subscribers. Current Commission records
show 4,600 cable systems nationwide. Of this total, 3,900 cable systems
have fewer than 15,000 subscribers, and 700 systems have 15,000 or more
subscribers, based on the same records. Thus, under this standard as
well, we estimate that most cable systems are small entities.
26. Cable System Operators (Telecom Act Standard). The
Communications Act also contains a size standard for small cable system
operators, which is ``a cable operator that, directly or through an
affiliate, serves in the aggregate fewer than 1 percent of all
subscribers in the United States and is not affiliated with any entity
or entities whose gross annual revenues in the aggregate exceed
$250,000,000.'' There are approximately 52,403,705 cable video
subscribers in the United States today. Accordingly, an operator
serving fewer than 524,037 subscribers shall be deemed a small operator
if its annual revenues, when combined with the total annual revenues of
all its affiliates, do not exceed $250 million in the aggregate. Based
on available data, we find that all but nine incumbent cable operators
are small entities under this size standard. We note that the
Commission neither requests nor collects information on whether cable
system operators are affiliated with entities whose gross annual
revenues exceed $250 million. (The Commission does receive such
information on a case-by-case basis if a cable operator appeals a local
franchise authority's finding that the operator does not qualify as a
small cable operator pursuant to section 76.901(f) of the Commission's
rules.) Although it seems certain that some of these cable system
operators are affiliated with entities whose gross annual revenues
exceed $250 million, we are unable at this time to estimate with
greater precision the number of cable system operators that would
qualify as small cable operators under the definition in the
Communications Act.
27. All Other Telecommunications. The ``All Other
Telecommunications'' industry is comprised of establishments that are
primarily engaged in providing specialized telecommunications services,
such as satellite tracking, communications telemetry, and radar station
operation. This industry also includes establishments primarily engaged
in providing satellite terminal stations and associated facilities
connected with one or more terrestrial systems and capable of
transmitting telecommunications to, and receiving telecommunications
from, satellite systems. Establishments providing internet services or
voice over internet protocol (VoIP) services via client-supplied
telecommunications connections are also included in this industry. The
SBA has developed a small business size standard for ``All Other
Telecommunications,'' which consists of all such firms with gross
annual receipts of $32.5 million or less. For this category, U.S.
Census 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. Thus a majority of ``All Other
Telecommunications'' firms potentially affected by our action can be
considered small.
E. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements for Small Entities
28. Auction Applications and Certifications. The Order establishes
the use competitive bidding to assign the over 17,000 mutually
exclusive numbers in the 833 toll free code, identified pursuant to the
833 Code Opening Order. In order to participate in the competitive
bidding process, a potential participant will be obligated to submit an
application including information regarding, but not limited to,
ownership information. Potential participants will also be required to
submit certifications stating that they will follow certain auction
rules and requirements, including the limitation that each auction
participant bid on behalf of only one interested party (including
itself) for the same toll free numbers.
29. Secondary Market Transfers. The Order exempts numbers assigned
via competitive bidding from the rules
[[Page 53395]]
preventing the development of a secondary market. We require Somos,
Inc., the Toll Free Numbering Administrator, to maintain information
regarding post-auction secondary market transfers. Entities will be
required to provide transaction information to Somos, including the new
subscriber's name and contact information and other limited information
as necessary.
F. Steps Taken To Minimize the Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
30. In this Order, the Commission modifies its toll free number
assignment rules to promote the efficient and equitable assignment of
toll free numbers. Overall, we believe the actions in this document
will reduce burdens on toll free number subscribers, potential
subscribers, and Responsible Organizations, including any small
entities.
31. In the Order, we find that revising our rule to allow for an
auction-based assignment methodology will benefit smaller entities. Our
first-come, first-served assignment methodology has allowed larger,
more sophisticated entities to invest in systems that provided enhanced
connectivity to the Toll Free Database, allowing these entities to be
assigned desirable numbers before smaller competitors. An auction-based
assignment methodology, by contrast, does not allow sophisticated
entities this advantage.
32. In the Order, we also establish the use of a Vickrey single
round, sealed-bid auction to assign the over 17,000 mutually exclusive
numbers in the 833 toll free code, identified pursuant to the 833 Code
Opening Order. We conclude that the use of this type of auction is
appropriate because it is simple to participate in, addressing concerns
that an auction-based assignment methodology is more complicated than
the first-come, first-served approach.
G. Report to Congress
33. The Commission will send a copy of the Report and Order,
including this FRFA, in a report to be sent to Congress pursuant to the
Congressional Review Act. In addition, the Commission will send a copy
of the Report and Order, including this FRFA, to the Chief Counsel for
Advocacy of the SBA. A copy of the Order and FRFA (or summaries
thereof) will also be published in the Federal Register.
V. Procedural Matters
34. Congressional Review Act. The Commission will send a copy of
this Report and Order, to Congress and the Government Accountability
Office pursuant to the Congressional Review Act, see 5 U.S.C.
801(a)(1)(A).
35. Paperwork Reduction Act of 1995 Analysis. This Order contains
new or modified information collection requirements subject to the
Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. It will be
submitted to the Office of Management and Budget (OMB) for review under
section 3507(d) of the PRA, 44 U.S.C. 3507. OMB, the general public,
and other Federal agencies will be invited to comment on the revised
information collection requirements contained in this proceeding. In
addition, we note that pursuant to the Small Business Paperwork Relief
Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), we
previously sought specific comment on how the Commission might further
reduce the information collection burden for small business concerns
with fewer than 25 employees.
36. Final Regulatory Flexibility Analysis. As required by the
Regulatory Flexibility Act of 1980, see 5 U.S.C. 604, the Commission
has prepared a Final Regulatory Flexibility Analysis (FRFA) of the
possible significant economic impact on small entities of the policies
and rules, as proposed, addressed in this Order. The FRFA is contained
in Section IV above.
VI. Ordering Clauses
37. Accordingly, it is ordered that, pursuant to sections 1, 4(i),
201(b), and 251(e)(1) of the Communications Act of 1934, as amended, 47
U.S.C. 151, 154(i), 201(b), and 251(e)(1), this Order is adopted.
38. It is further ordered that Part 52 of the Commission's rules
are amended as set forth in Appendix A, and such rule amendments shall
be effective thirty (30) days after publication of the rule amendments
in the Federal Register.
39. It is further ordered that, pursuant to sections 1, 4(i), 5(c),
and 251(e)(1) of the Communications Act of 1934, as amended, 47 U.S.C.
151, 154(i), 155(c), 251(e)(1), Somos, Inc., the Toll Free Numbering
Administrator, is directed to retain and make available to the
Commission all data and information about the auction and its
administration gathered before, during, and after the auction.
40. It is further ordered that, pursuant to section 251(e)(1) of
the Communications Act of 1934, as amended, the Wireline Competition
Bureau is directed to review specific petitions and, as necessary and
after a notice and comment period, grant toll free numbers to
governmental and non-profit entities where such grant is consistent
with the public health and safety standards in Commission precedent.
41. It is further ordered that the Commission's Consumer &
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Report and Order to Congress and the Government
Accountability Office pursuant to the Congressional Review Act, see 5
U.S.C. 801(a)(1)(A).
List of Subjects in 47 CFR Part 52
Communications common carriers, Telecommunications, Telephone.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Final Rules
For the reasons set forth above, part 52 of Title 47 of the Code of
Federal Regulations is amended as follows:
PART 52--NUMBERING
0
1. The authority citation for part 52 continues to read as follows:
Authority: 47 U.S.C. 151, 152, 153, 154, 155, 201-205, 207-209,
218, 225-227, 251-252, 271, 332, unless otherwise noted.
Subpart D--Toll Free Numbers
0
2. Amend Sec. 52.101 by revising paragraphs (a) and (e) to read as
follows:
Sec. 52.101 General definitions.
* * * * *
(a) Toll Free Numbering Administrator (TFNA). The entity appointed
by the Commission under its authority pursuant to 47 U.S.C. 251(e)(1)
that provides user support for the Service Management System database
and administers the Service Management System database on a day-to-day
basis.
* * * * *
(e) Toll Free Subscriber. The entity that has been assigned a toll
free number.
* * * * *
0
3. Amend Sec. 52.103 by adding paragraphs (a)(10) and (b)(1); adding
and reserving paragraph (b)(2); and revising paragraphs (d) and (f) to
read as follows:
Sec. 52.103 Lag times.
(a) * * *
(10) Transitional Status. Toll free numbers that have been
disconnected for less than four months, but for which no Exchange
Carrier Intercept Recording is being provided.
(b) * * *
[[Page 53396]]
(1) Toll free numbers assigned via competitive bidding may remain
in reserved status for a period of unlimited duration.
(2) [Reserved]
* * * * *
(d) Disconnect Status. Toll free numbers must remain in disconnect
or a combination of disconnect and transitional status for up to 4
months. No requests for extension of the 4-month disconnect or
transitional interval will be granted. All toll free numbers in
disconnect status must go directly into the spare or unavailable
category upon expiration of the 4-month disconnect interval. A
Responsible Organization may not retrieve a toll free number from
disconnect or transitional status and return that number directly to
working status at the expiration of the 4-month disconnect interval.
* * * * *
(f) Unavailable Status. (1) Written requests to make a specific
toll free number unavailable must be submitted to the Toll Free
Numbering Administrator (TFNA) by the Responsible Organization managing
the records of the toll free number. The request shall include the
appropriate documentation of the reason for the request. The Toll Free
Numbering Administrator (TFNA) is the only entity that can assign this
status to or remove this status from a number. Responsible
Organizations that have a Toll Free Subscriber with special
circumstances requiring that a toll free number be designated for that
particular subscriber far in advance of its actual usage may request
that the Toll Free Numbering Administrator (TFNA) place such a number
in unavailable status.
(2) Seasonal numbers shall be placed in unavailable status. The
Responsible Organization for a Toll Free Subscriber who does not have a
year round need for a toll free number shall follow the procedures
outlined in Sec. 52.103(f)(1) of these rules if it wants the Toll Free
Numbering Administrator (TFNA) to place a particular toll free number
in unavailable status.
0
4. Amend Sec. 52.105 by adding paragraph (f) to read as follows:
Sec. 52.105 Warehousing.
* * * * *
(f) The provisions of this section shall not apply to toll free
numbers assigned via competitive bidding or to numbers transferred
under this exception.
0
5. Amend Sec. 52.107 by adding paragraph (c) to read as follows:
Sec. 52.107 Hoarding.
* * * * *
(c) Toll Free Numbers Assigned via Competitive Bidding. The
provisions of this section shall not apply to toll free numbers
assigned via competitive bidding or to numbers transferred under the
exception to Sec. 52.105 contained in paragraph (f) of that section.
0
6. Amend Sec. 52.109 by revising paragraph (c) to read as follows:
Sec. 52.109 Permanent cap on number reservations.
* * * * *
(c) The Wireline Competition Bureau shall modify the quantity of
numbers a Responsible Organization may have in reserve status or the
percentage of numbers in the spare pool that a Responsible Organization
may reserve when exigent circumstances make such action necessary. The
Wireline Competition Bureau shall establish, modify, and monitor toll
free number conservation plans when exigent circumstances necessitate
such action.
0
7. Revise Sec. 52.111 to read as follows:
Sec. 52.111 Toll free number assignment.
Toll free telephone numbers must be made available to Responsible
Organizations and subscribers on an equitable basis. The Commission
will assign toll free numbers by competitive bidding, on a first-come,
first-served basis, by an alternative assignment methodology, or by a
combination of the foregoing options.
[FR Doc. 2018-22674 Filed 10-22-18; 8:45 am]
BILLING CODE 6712-01-P