[Federal Register Volume 74, Number 151 (Friday, August 7, 2009)]
[Rules and Regulations]
[Pages 39551-39563]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-18716]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 63
[WC Docket No. 04-36; FCC 09-40]
IP-Enabled Services
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: This document amends the Commission's rules so that providers
of interconnected Voice over Internet Protocol (VoIP) service will be
required to comply with the same discontinuance rules as domestic non-
dominant telecommunications carriers. These rules protect consumers of
interconnected VoIP service from the abrupt discontinuance, reduction
or impairment of their service by requiring
[[Page 39552]]
prior notice to customers and the filing of an application with the
Commission.
DATES: Effective September 8, 2009 except for Sec. Sec. 63.60(a) and
(f) which affect information collection requirements that are not
effective until approved by the Office of Management and Budget. The
FCC will publish a document in the Federal Register announcing the
effective date for those sections.
ADDRESSES: Federal Communications Commission, 445 12th Street, SW.,
Washington, DC 20554.
Interested parties may submit PRA comments by any of the following
methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Federal Communications Commission's Web Site: http://www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
E-mail: Parties who choose to file by e-mail should submit
their comments to [email protected]. Please include WC Docket
Number 04-36 and FCC No. 09-40 in the subject line of the message.
Mail: Parties who choose to file by paper should submit
their comments to Rodney McDonald, Federal Communications Commission,
Wireline Competition Bureau, Room 6-A430, 445 12th Street, SW.,
Washington, DC 20554.
In addition to filing comments with the Office of the Secretary, a
copy of any comments on the Paperwork Reduction Act information
collection requirements contained herein should be submitted to Judith
B. Herman, Federal Communications Commission, Room 1-B441, 445 12th
Street, SW., Washington, DC 20554, or via the Internet to [email protected].
FOR FURTHER INFORMATION CONTACT: Rodney McDonald, Wireline Competition
Bureau, (202) 418-1580. For additional information concerning the
Paperwork Reduction Act information collection requirements contained
in this document, contact Judith B. Herman at (202) 418-0214, or via
the Internet at [email protected].
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order (Order) in WC Docket No. 04-36; FCC 09-40, adopted and
released May 13, 2009. In this Order, the Commission extends to
providers of interconnected VoIP service the discontinuance obligations
that apply to domestic non-dominant telecommunications carriers under
section 214 of the Communications Act of 1934, as amended (the Act).
Consequently, before an interconnected VoIP provider may discontinue,
reduce, or impair service, it must comply with the streamlined
discontinuance requirements under part 63 of the Commission's rules,
including the requirements to provide written notice to all affected
customers, notify relevant state authorities, and file an application
for authorization of the planned action with the Commission.
The complete text of this document is available for inspection and
copying during normal business hours in the FCC Reference Information
Center, Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC
20554. This document may also be purchased from the Commission's
duplicating contractor, Best Copy and Printing, Inc., 445 12th Street,
SW., Room CY-B402, Washington, DC 20554, telephone (800) 378-3160 or
(202) 863-2893, facsimile (202) 863-2898, or via e-mail at http://www.bcpiweb.com. It is also available on the Commission's Web site at
http://www.fcc.gov.
Final Paperwork Reduction Act of 1995 Analysis
This document contains new information collection requirements. The
Commission, as part of its continuing effort to reduce paperwork
burdens, invites the general public to comment on the information
collection requirements contained in this Order as required by the
Paperwork Reduction Act of 1995, Public Law 104-13. In addition, the
Commission notes 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.''
In this present document, we have assessed the effects of extending
the Commission's discontinuance obligations to interconnected VoIP
providers and find these changes warranted. The reasons for this
conclusion are explained in more detail below.
Report to Congress
The Commission will send a copy of the Order, including this FRFA,
in a report to Congress and the Government Accountability Office
pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A). In
addition, the Commission will send a copy of the Order, including this
FRFA, to the Chief Counsel for Advocacy of the SBA. [A copy of this
present summarized Order and FRFA is also hereby published in the
Federal Register.]
In this Order, the Commission extends to providers of
interconnected VoIP service the discontinuance obligations that apply
to domestic non-dominant telecommunications carriers under section 214
of the Communications Act of 1934, as amended (the Act). Consequently,
before an interconnected VoIP provider may discontinue, reduce, or
impair service, it must comply with the streamlined discontinuance
requirements under part 63 of the Commission's rules, including the
requirements to provide written notice to all affected customers,
notify relevant state authorities, and file an application for
authorization of the planned action with the Commission.
Synopsis of Order
1. On March 10, 2004, the Commission initiated a rulemaking
proceeding to examine issues relating to IP-enabled services--services
and applications making use of IP, including, but not limited to, VoIP
services. In the IP-Enabled Services Notice, published at 69 FR 16193,
March 29, 2004, the Commission sought comment on numerous issues,
including whether to extend certain consumer protection obligations,
such as the discontinuance obligations of section 214, to any class of
IP-enabled service provider.
2. Consumers increasingly use interconnected VoIP service as a
replacement for traditional voice service, and as interconnected VoIP
service improves and proliferates, consumers' expectations for this
type of service trend toward their expectations for other telephone
services. Thus, in this Order, the Commission takes steps to protect
consumers of interconnected VoIP service from the abrupt
discontinuance, reduction, or impairment of their service without
notice. Specifically, the Commission extends to providers of
interconnected VoIP service the discontinuance obligations that apply
to domestic non-dominant telecommunications carriers under section 214
of the Communications Act of 1934, as amended (the Act). Consequently,
before an interconnected VoIP provider may discontinue service, it must
comply with the streamlined discontinuance requirements under part 63
of the Commission's rules, including the requirements to provide
written notice to all affected customers, notify relevant state
authorities, and file an application
[[Page 39553]]
for authorization of the planned discontinuance with the Commission.
3. Scope. The exit certification requirements adopted in this Order
apply to interconnected VoIP service and providers of such service. The
Commission's rules in 47 CFR 9.3 define ``interconnected VoIP service''
as ``a service that: (1) Enables real-time, two-way voice
communications; (2) requires a broadband connection from the user's
location; (3) requires Internet protocol-compatible customer premises
equipment (CPE); and (4) permits users generally to receive calls that
originate on the public switched telephone network and to terminate
calls to the public switched telephone network.'' To date, the
Commission has not classified interconnected VoIP service as a
telecommunications service or information service as those terms are
defined in the Act, and does not make that determination with this
Order. In general, providers of facilities-based interconnected VoIP
services and ``over-the-top'' interconnected VoIP services are subject
to the rules in this Order. However, section 214 requirements are not
extended to providers of interconnected VoIP services that are ``mobile
services'' under the Act. If anything, these services would be more
akin to Commercial Mobile Radio Service (CMRS) than to traditional
wireline services. Therefore, for purposes of the rules at issue here,
it makes more sense to treat providers of interconnected VoIP services
that are mobile in the same way as CMRS providers, which are not
subject to the Commission's section 214 discontinuance obligations. The
Commission may revisit this issue if circumstances warrant, and in
other contexts may decline to exempt these services from rules that
apply to interconnected VoIP services generally.
4. As the Commission has found before, unlike certain other IP-
enabled services, interconnected VoIP service increasingly is used as a
replacement for traditional voice service. Customers therefore
reasonably expect their interconnected VoIP service to include the
regulatory protections that they would receive with traditional voice
services. The Commission believes it is critically important that all
customers of interconnected VoIP service receive the protections of the
section 214 discontinuance requirements. Importantly, if customers were
to lose their telephone service without sufficient notice, they would
also lose access to 911 service--possibly with disastrous consequences.
This Order, therefore, is consistent with, and a necessary extension
of, the Commission's prior exercises of authority to ensure public
safety.
5. Authority. In this Order, the Commission concludes that it has
authority under Title I of the Act to impose section 214 discontinuance
obligations on providers of interconnected VoIP services. Ancillary
jurisdiction may be employed, at the Commission's discretion, when
Title I of the Act gives the Commission subject matter jurisdiction
over the service to be regulated and the assertion of jurisdiction is
``reasonably ancillary to the effective performance of [its] various
responsibilities.'' The Commission finds that both predicates for
ancillary jurisdiction are satisfied here.
6. First, as the Commission previously has concluded,
interconnected VoIP service falls within the subject matter
jurisdiction granted to the Commission under the Act. Second, the
Commission must evaluate whether imposing service discontinuance
obligations on interconnected VoIP providers is reasonably ancillary to
the effective performance of the Commission's responsibilities. As
discussed further below, the Commission finds that sections 1 and 214
of the Act provide the requisite nexus, with additional support from
section 706. Specifically, the Commission finds that extending the
section 214 discontinuance procedures to interconnected VoIP service
providers is ``reasonably ancillary to the effective performance of
[our] responsibilities'' under these statutory provisions, and ``will
`further the achievement of long-established regulatory goals' '' to
ensure that the public is not adversely affected by the discontinuance,
reduction, or impairment of service.
7. The Commission finds that extending domestic discontinuance
requirements to interconnected VoIP providers is reasonably ancillary
to the Commission's effective performance of its responsibility to
promote safety of life and property through the use of wire and radio
communication. Section 1 of the Act charges the Commission with
responsibility for making available ``a rapid, efficient, Nation-wide,
and world-wide wire and radio communication service * * * for the
purpose of promoting safety of life and property through the use of
wire and radio communication.'' By extending the section 214
discontinuance procedures to interconnected VoIP providers, the
Commission protects American consumers from the unanticipated and
harmful consequences that could follow the loss of telephone service
without sufficient notice. Most notably, as mentioned above, if an
interconnected VoIP provider discontinued service without notice,
customers would lose the ability to call 911 through that service. In
addition, extending the section 214 discontinuance rules to
interconnected VoIP providers ensures customers' ability to transition
to alternative service providers in an orderly fashion. The Commission
thereby fosters ``rapid, efficient, Nation-wide, and world-wide wire
and radio communication service'' by safeguarding the public interest
in continuity of such services--irrespective of which provider makes
those services available.
8. Section 214(a) of the Act states that ``[n]o carrier shall
discontinue, reduce, or impair service to a community, or part of a
community, unless and until there shall first have been obtained from
the Commission a certificate that neither the present nor future public
convenience and necessity will be adversely affected thereby.'' The
primary purpose of this requirement is to reduce the harm to consumers
caused by discontinuances of service. The Commission finds that the
extension of section 214 service discontinuance requirements to
providers of interconnected VoIP service is reasonably ancillary to the
effective performance of the Commission's duty to protect the public
from the adverse effects of service discontinuances. The Commission
already has found that interconnected VoIP service ``is increasingly
used to replace analog voice service''--a trend that the Commission
expects will continue. From the perspective of a customer making an
ordinary telephone call, the Commission believes that interconnected
VoIP service is functionally indistinguishable from traditional
telephone service. It therefore is reasonable for American consumers to
have similar expectations for these services. In particular, the
Commission finds it reasonable for customers of interconnected VoIP
service to expect some advance notice before the discontinuance of
their voice service, and notes that customers receiving traditional
telephone service from wireline carriers are already entitled to such
notice under the Commission's discontinuance requirements. By extending
the Commission's discontinuance requirements to interconnected VoIP
services, the Commission advances the public interest by helping ensure
that such notice is actually given to customers that are making and
receiving calls regardless of whether they are receiving service from a
traditional
[[Page 39554]]
carrier or an interconnected VoIP provider.
9. The Commission is also guided by section 706 of the 1996 Act,
which, among other things, directs the Commission to encourage the
deployment of advanced telecommunications capability to all Americans
by using measures that ``promote competition in the local
telecommunications market.'' The assurance that providers of
interconnected VoIP services are subject to service-discontinuance
procedures comparable to those that apply to non-dominant carriers may
spur consumer demand for those services, in turn driving demand for
broadband connections, and consequently encouraging more broadband
investment and deployment consistent with the goals of section 706.
10. Interconnected VoIP Provider Discontinuance Obligations. To
protect customers from an abrupt discontinuance, reduction, or
impairment of service without adequate notice, the Commission requires
providers of interconnected VoIP service to comply with the same
service discontinuance obligations as domestic non-dominant carriers.
The Commission disagrees with commenters who assert that such action is
unnecessary in light of competitive market conditions. Service
discontinuance can be disruptive to all customers, regardless of
whether their provider has market power or utilizes new technology. As
the Commission has previously concluded with respect to other
competitive telephone services, even customers with competitive
alternatives need fair notice and information to choose a substitute
service. Therefore, in order to protect customers of interconnected
VoIP service from interrupted service and its associated consequences,
providers of interconnected VoIP service must notify all affected
customers of their plans to discontinue, reduce, or impair service, and
must provide affected customers with an opportunity to inform the
Commission of resultant hardships.
11. The Commission's rules do not provide an exhaustive list of
what constitutes the discontinuance, reduction, or impairment of
service. In the context of interconnected VoIP service, the Commission
finds that a discontinuance, reduction, or impairment of service would
include, but is not limited to, the conversion of an interconnected
VoIP service to one that permits only inbound, but not outbound, calls
to the PSTN--or one that permits only outbound, but not inbound, calls
to the PSTN.
12. By requiring interconnected VoIP providers to comply with the
Commission's streamlined domestic discontinuance requirements
applicable to non-dominant carriers, the Commission balances the need
to protect consumers with the goal, set forth in section 230 of the
Act, of minimizing the regulation of the Internet and other interactive
computer services. As the Commission previously has found, Sec. 63.71
of the Commission's rules strikes a good balance between the
Commission's dual objectives of permitting ease of exit from
competitive markets and ensuring that the public will be given a
reasonable period of time to make other service arrangements. The
Commission therefore disagrees with commenters who argue that applying
section 214 exit regulations to interconnected VoIP service will unduly
deter market entry, distort the market, or depress investment in new
technologies. On the contrary, as the Commission has stated previously,
disparate treatment of entities providing the same or similar services
is not in the public interest as it creates distortions in the
marketplace that may harm consumers.
13. It is important to note that the Commission does not impose any
economic regulation on providers of interconnected VoIP service by this
Order. Title II and the Commission's rules subject all common carriers
to a variety of non-economic regulations designed to further important
public policy goals and protect consumers, and the Commission has
stated previously that it ``will not hesitate to adopt any non-economic
regulatory obligations that are necessary to ensure consumer protection
and network security and reliability in this dynamically changing
broadband era.'' Included among these are the obligations the
Commission imposes, with this Order, on providers of interconnected
VoIP service, which serve as important consumer protection measures.
The Commission acknowledges that section 230 of the Act provides that
``[i]t is the policy of the United States--to preserve the vibrant and
competitive free market that presently exists for the Internet and
other interactive computer services, unfettered by Federal or State
regulation.'' The Commission's discussion of section 230 in Vonage
Holdings Corporation Petition for Declaratory Ruling Concerning an
Order of the Minnesota Public Utilities Commission, WC Docket No. 03-
211, Memorandum Opinion and Order, FCC 04-267, para. 35 (rel. Nov. 12,
2004) (Vonage Order) acknowledged this policy and cautioned against the
imposition of undue regulation by multiple jurisdictions, but was
directed at ``traditional common carrier economic regulations.'' The
Commission finds this order consistent with its previous decisions, and
does not believe that the congressional policy statement in section 230
of the Act precludes the Commission from extending consumer protection
obligations, such as the section 214 discontinuance obligations, to
interconnected VoIP providers. The Commission also notes that the
extension of discontinuance obligations to providers of interconnected
VoIP services has no effect on the Commission's preemption
determinations in the Vonage Order.
14. The Commission amends the part 63 domestic discontinuance rules
to encompass interconnected VoIP service. Accordingly, before an
interconnected VoIP provider may discontinue, reduce, or impair
service, it must provide all affected customers with written notice
that includes the provider's name and address, typically by postal mail
to the customer's billing address; the date of the planned service
discontinuance, reduction, or impairment; the geographic areas where
service will be affected; a brief description of the affected service;
and the statement found in Sec. 63.71(a)(5)(i) of the Commission's
rules. The Commission recognizes that because of the potentially
portable nature of some interconnected VoIP services, there may be
additional and/or alternative means of providing effective notice to
customers of interconnected VoIP providers. As such, upon request, the
Commission may authorize in advance another form of notice for good
cause shown.
15. On or after the date it provides notice to its customers as
specified above, the interconnected VoIP provider must file with the
Commission an application for authorization of the planned
discontinuance. The application shall identify that the provider is an
interconnected VoIP provider seeking to discontinue, reduce, or impair
interconnected VoIP services and shall include, in addition to the
information set forth in the notice provided to affected customers, a
caption, a brief description of the dates and methods of notice to all
affected customers, and any other information the Commission may
require. An interconnected VoIP provider shall also submit a copy of
its application to the public utility commission and to the Governor of
the State(s) in which it proposes to discontinue, reduce, or impair
service, as well as to the
[[Page 39555]]
Secretary of Defense. In addition to providing existing customers with
direct notice of a proposed discontinuance, providers seeking to
discontinue, reduce or impair service to a community should copy the
state public utility commissions (PUC) and governors' offices in the
states where they no longer plan to offer services regardless of
whether customers are currently subscribing to their service at the
time of the application. The Commission believes this requirement will
serve the public interest by, among other things, better enabling
states to play an active role in customer notification efforts where
circumstances warrant such involvement. The Commission recognizes that
interconnected VoIP providers that offer service nationwide will need
to notify every state PUC and governor's office before discontinuing
service altogether. However, the Commission does not find this
requirement to be unduly burdensome. In particular, notice to the
states pursuant to Sec. 63.71(a) only requires providing state
officials with a copy of the discontinuance application. This simple
notice should adequately inform states of the impending loss of
previously available services to their communities in a minimally
burdensome manner--using the same procedures that apply to other non-
dominant providers that plan to discontinue nationwide offerings.
16. The application to discontinue, reduce, or impair service shall
be automatically granted on the 31st day after the Commission releases
public notice of the application unless the Commission notifies the
applicant that the grant will not be automatically effective. Thus the
Commission believes that interconnected VoIP providers will be faced
with discontinuance requirements that are no more burdensome than the
reduced requirements that already apply to competitive carriers, and
that their customers will be afforded a reasonable time to make
alternative service arrangements in the event of a discontinuance,
reduction, or impairment of service. The Commission expects that
providers of wholesale inputs will coordinate and continue to work with
interconnected VoIP providers in the event that a discontinuance of
service becomes necessary so that the discontinuance of service can
occur in an orderly fashion consistent with this Order, the
Commission's rules, and the interest of customers.
Congressional Review Act
17. The Commission will send a copy of this Order in a report to be
sent to Congress and the Government Accountability Office pursuant to
the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).
Final Paperwork Reduction Act of 1995 Analysis
18. This document contains new or modified information collection
requirements. The Commission, as part of its continuing effort to
reduce paperwork burdens, invites the general public to comment on the
information collection requirements contained in this Order as required
by the Paperwork Reduction Act of 1995, Public Law 104-13. In addition,
the Commission notes that pursuant to the Small Business Paperwork
Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the
Commission previously sought specific comment on how the Commission
might ``further reduce the information collection burden for small
business concerns with fewer than 25 employees.''
19. In this present document, we have assessed the effects of
imposing domestic non-dominant discontinuance rules on providers of
interconnected VoIP service, and find that these requirements do not
place a significant burden on businesses with fewer than 25 employees.
Final Regulatory Flexibility Analysis
20. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the IP-Enabled Services Notice in WC Docket No. 04-36.
The Commission sought written public comment on the proposals in the
IP-Enabled Services Notice, including comment on the IRFA. The
Commission received comments specifically directed toward the IRFA from
three commenters in WC Docket No. 04-36. These comments are discussed
below. This Final Regulatory Flexibility Analysis (FRFA) conforms to
the RFA.
A. Need for, and Objectives of, the Rules
21. This Order takes a series of steps designed to ensure that
consumers of interconnected VoIP are afforded appropriate consumer
protection measures consistent with the Communications Act of 1934, as
amended (the Act). Today's telecommunications marketplace is one of
rapidly changing technology, capability, and services. Since the
Commission first described IP-enabled services nearly five years ago,
the American public has embraced them, resulting in the widespread
adoption of mass market interconnected VoIP and broadband services by
millions of consumers for voice, video, and Internet communications.
Consumers increasingly use interconnected VoIP service as a replacement
for traditional voice service, and as interconnected VoIP service
improves and proliferates, consumers' expectations for this type of
service trend toward their expectations for other telephone services.
22. This Order extends to providers of interconnected VoIP service
the discontinuance obligations that apply to domestic non-dominant
telecommunications carriers under section 214 of the Act. Consequently,
before an interconnected VoIP provider may discontinue service, it must
comply with the streamlined discontinuance requirements under part 63
of the Commission's rules, including the requirements to provide
written notice to all affected customers, notify relevant state
authorities, and file an application for authorization of the planned
discontinuance with the Commission.
B. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA
23. In this section, the Commission responds to comments filed in
response to the IRFA. To the extent the Commission received comments
raising general small business concerns during these proceedings, those
comments are discussed in the Order.
24. The Small Business Administration (SBA) comments that the
Commission's IP-Enabled Services Notice does not contain concrete
proposals and is more akin to an advance notice of proposed rulemaking
or a notice of inquiry. The Commission disagrees with the SBA and
Menard that the Commission should postpone acting in this proceeding,
thereby postponing extending the application of the section 214 service
discontinuance obligations to interconnected VoIP services. According
to SBA and Menard, the Commission instead should reevaluate the
economic impact and the compliance burdens on small entities and issue
a further notice of proposed rulemaking in conjunction with a
supplemental IRFA identifying and analyzing the economic impacts on
small entities and less burdensome alternatives. The Commission
believes these additional steps suggested by SBA and Menard are
unnecessary because small entities already have received sufficient
notice of the issues addressed in this Order, and because the
Commission has considered the
[[Page 39556]]
economic impact on small entities and the feasibility of alternative
approaches to minimize the burdens imposed on those entities.
C. Description and Estimate of the Number of Small Entities to Which
Rules Will Apply
25. The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that may be
affected by the rules adopted herein. The RFA generally defines the
term ``small entity'' as having the same meaning as the terms ``small
business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small business concern'' under the Small Business
Act. A small business concern is one which: (1) Is independently owned
and operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the SBA.
26. Small Businesses. Nationwide, there are a total of
approximately 22.4 million small businesses according to SBA data.
27. Small Organizations. Nationwide, there are approximately 1.6
million small organizations.
1. Telecommunications Service Entities
a. Wireline Carriers and Service Providers
28. The Commission includes small incumbent local exchange carriers
(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 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
Commission has therefore included small incumbent LECs in this RFA
analysis, although the Commission emphasizes that this RFA action has
no effect on Commission analyses and determinations in other, non-RFA
contexts.
29. Incumbent LECs. Neither the Commission nor the SBA has
developed a small business size standard specifically for incumbent
LECs. The appropriate size standard under SBA rules is for the category
Wired Telecommunications Carriers. Under that size standard, such a
business is small if it has 1,500 or fewer employees. According to
Commission data, 1,311 carriers have reported that they are engaged in
the provision of incumbent local exchange services. Of these 1,311
carriers, an estimated 1,024 have 1,500 or fewer employees and 287 have
more than 1,500 employees. Consequently, the Commission estimates that
most providers of incumbent local exchange service are small businesses
that may be affected by this action.
30. 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 size standard under SBA rules is for the category Wired
Telecommunications Carriers. Under that size standard, such a business
is small if it has 1,500 or fewer employees. According to Commission
data, 1,005 carriers have reported that they are engaged in the
provision of either competitive access provider services or competitive
LEC services. Of these 1,005 carriers, an estimated 918 have 1,500 or
fewer employees and 87 have more than 1,500 employees. In addition, 16
carriers have reported that they are ``Shared-Tenant Service
Providers,'' and all 16 are estimated to have 1,500 or fewer employees.
In addition, 89 carriers have reported that they are ``Other Local
Service Providers,'' and all 89 are estimated to have 1,500 or fewer
employees. Consequently, the Commission estimates that most providers
of competitive local exchange service, competitive access providers,
``Shared-Tenant Service Providers,'' and ``Other Local Service
Providers'' are small entities.
31. Local Resellers. 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. According to Commission data, 151 carriers have reported
that they are engaged in the provision of local resale services. Of
these, an estimated 149 have 1,500 or fewer employees and two have more
than 1,500 employees. Consequently, the Commission estimates that the
majority of local resellers are small entities that may be affected by
this action.
32. Toll Resellers. 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. According to Commission data, 815 carriers have reported
that they are engaged in the provision of toll resale services. Of
these, an estimated 787 have 1,500 or fewer employees and 28 have more
than 1,500 employees. Consequently, the Commission estimates that the
majority of toll resellers are small entities that may be affected by
this action.
33. Interexchange Carriers (IXCs). Neither the Commission nor the
SBA has developed a small business size standard specifically for
providers of interexchange services. The appropriate size standard
under SBA rules is for the category Wired Telecommunications Carriers.
Under that size standard, such a business is small if it has 1,500 or
fewer employees. According to Commission data, 300 carriers have
reported that they are engaged in the provision of interexchange
service. Of these, an estimated 268 have 1,500 or fewer employees and
32 have more than 1,500 employees. Consequently, the Commission
estimates that the majority of IXCs are small entities that may be
affected by this action.
b. Satellite Telecommunications and All Other Telecommunications
34. Satellite Telecommunications and All Other Telecommunications.
These two economic census categories address the satellite industry.
The first category has a small business size standard of $15 million or
less in average annual receipts, under SBA rules. The second has a size
standard of $25 million or less in annual receipts. The most current
Census Bureau data in this context, however, are from the (last)
economic census of 2002, and the Commission will use those figures to
gauge the prevalence of small businesses in these categories.
35. The category of Satellite Telecommunications ``comprises
establishments primarily engaged in providing telecommunications
services to other establishments in the telecommunications and
broadcasting industries by forwarding and receiving communications
signals via a system of satellites or reselling satellite
telecommunications.'' For this category, Census Bureau data for 2002
show that there were a total of 371 firms that operated for the entire
year. Of this total, 307 firms had annual receipts of under $10
million, and 26 firms had receipts of $10 million to $24,999,999.
Consequently, the Commission estimates that the majority of Satellite
Telecommunications firms are small entities that might be affected by
this action.
36. The second category of All Other Telecommunications comprises,
inter alia, ``establishments primarily engaged in providing specialized
[[Page 39557]]
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.'' For this
category, Census Bureau data for 2002 show that there were a total of
332 firms that operated for the entire year. Of this total, 303 firms
had annual receipts of under $10 million and 15 firms had annual
receipts of $10 million to $24,999,999. Consequently, the Commission
estimates that the majority of All Other Telecommunications firms are
small entities that might be affected by this action.
c. Wireless Telecommunications Carriers (Except Satellite)
37. Below, for those services subject to auctions, the Commission
notes that, as a general matter, the number of winning bidders that
qualify as small businesses at the close of an auction does not
necessarily represent the number of small businesses currently in
service. Also, the Commission does not generally track subsequent
business size unless, in the context of assignments or transfers,
unjust enrichment issues are implicated.
38. Wireless Telecommunications Carriers (except Satellite). Since
2007, the Census Bureau has placed wireless firms within this new,
broad, economic census category. Prior to that time, such firms were
within the now-superseded categories of ``Paging'' and ``Cellular and
Other Wireless Telecommunications.'' Under the present and prior
categories, the SBA has deemed a wireless business to be small if it
has 1,500 or fewer employees. Because Census Bureau data are not yet
available for the new category, the Commission will estimate small
business prevalence using the prior categories and associated data. For
the category of Paging, data for 2002 show that there were 807 firms
that operated for the entire year. Of this total, 804 firms had
employment of 999 or fewer employees, and three firms had employment of
1,000 employees or more. For the category of Wireless
Telecommunications Carriers (except Satellite), data for 2002 show that
there were 1,397 firms that operated for the entire year. Of this
total, 1,378 firms had employment of 999 or fewer employees, and 19
firms had employment of 1,000 employees or more. Thus, the Commission
estimates that the majority of wireless firms are small.
39. In the Paging Third Report and Order, published at 62 FR 15978,
April 3, 1997, the Commission developed a small business size standard
for ``small businesses'' and ``very small businesses'' for purposes of
determining their eligibility for special provisions such as bidding
credits and installment payments. A ``small business'' is an entity
that, together with its affiliates and controlling principals, has
average gross revenues not exceeding $15 million for the preceding
three years. Additionally, a ``very small business'' is an entity that,
together with its affiliates and controlling principals, has average
gross revenues that are not more than $3 million for the preceding
three years. The SBA has approved these small business size standards.
An auction of Metropolitan Economic Area licenses commenced on February
24, 2000, and closed on March 2, 2000. Of the 985 licenses auctioned,
440 were sold. Fifty-seven companies claiming small business status
won. An auction of MEA and Economic Area (EA) licenses commenced on
October 30, 2001, and closed on December 5, 2001. Of the 15,514
licenses auctioned, 5,323 were sold. One hundred thirty-two companies
claiming small business status purchased 3,724 licenses. A third
auction, consisting of 8,874 licenses in each of 175 EAs and 1,328
licenses in all but three of the 51 MEAs commenced on May 13, 2003, and
closed on May 28, 2003. Seventy-seven bidders claiming small or very
small business status won 2,093 licenses. The Commission also notes
that, currently, there are approximately 74,000 Common Carrier Paging
licenses.
40. Wireless Communications Services. This service can be used for
fixed, mobile, radiolocation, and digital audio broadcasting satellite
uses. The Commission established small business size standards for the
wireless communications services (WCS) auction. A ``small business'' is
an entity with average gross revenues of $40 million or less for each
of the three preceding years, and a ``very small business'' is an
entity with average gross revenues of $15 million or less for each of
the three preceding years. The SBA has approved these small business
size standards. The Commission auctioned geographic area licenses in
the WCS service. In the auction, there were seven winning bidders that
qualified as ``very small business'' entities, and one that qualified
as a ``small business'' entity.
41. Wireless Telephony. Wireless telephony includes cellular,
personal communications services (PCS), and specialized mobile radio
(SMR) telephony carriers. As noted earlier, the SBA has developed a
small business size standard for ``Wireless Telecommunications Carriers
(except Satellite)'' services. Under that SBA small business size
standard, a business is small if it has 1,500 or fewer employees.
According to Commission data, 434 carriers reported that they were
engaged in the provision of wireless telephony. The Commission has
estimated that 222 of these are small under the SBA small business size
standard.
42. Broadband Personal Communications Service. The broadband
Personal Communications Service (PCS) spectrum is divided into six
frequency blocks designated A through F, and the Commission has held
auctions for each block. The Commission defined ``small entity'' for
Blocks C and F as an entity that has average gross revenues of $40
million or less in the three previous calendar years. For Block F, an
additional classification for ``very small business'' was added and is
defined as an entity that, together with its affiliates, has average
gross revenues of not more than $15 million for the preceding three
calendar years. These standards defining ``small entity'' in the
context of broadband PCS auctions have been approved by the SBA. No
small businesses, within the SBA-approved small business size standards
bid successfully for licenses in Blocks A and B. There were 90 winning
bidders that qualified as small entities in the Block C auctions. A
total of 93 small and very small business bidders won approximately 40
percent of the 1,479 licenses for Blocks D, E, and F. On March 23,
1999, the Commission re-auctioned 347 C, D, E, and F Block licenses.
There were 48 small business winning bidders. On January 26, 2001, the
Commission completed the auction of 422 C and F Broadband PCS licenses
in Auction No. 35. Of the 35 winning bidders in this auction, 29
qualified as ``small'' or ``very small'' businesses. Subsequent events,
concerning Auction 35, including judicial and agency determinations,
resulted in a total of 163 C and F Block licenses being available for
grant.
43. Narrowband Personal Communications Services. The Commission
held an auction for Narrowband PCS licenses that commenced on July 25,
1994, and closed on July 29, 1994. A second auction commenced on
October 26, 1994 and closed on November 8, 1994. For purposes of the
first two Narrowband PCS auctions, ``small businesses'' were entities
with average gross revenues for the prior three
[[Page 39558]]
calendar years of $40 million or less. Through these auctions, the
Commission awarded a total of 41 licenses, 11 of which were obtained by
four small businesses. To ensure meaningful participation by small
business entities in future auctions, the Commission adopted a two-
tiered small business size standard in the Narrowband PCS Second Report
and Order, published at 65 FR 35843, June 6, 2000. A ``small business''
is an entity that, together with affiliates and controlling interests,
has average gross revenues for the three preceding years of not more
than $40 million. A ``very small business'' is an entity that, together
with affiliates and controlling interests, has average gross revenues
for the three preceding years of not more than $15 million. The SBA has
approved these small business size standards. A third auction commenced
on October 3, 2001 and closed on October 16, 2001. Here, five bidders
won 317 (Metropolitan Trading Areas and nationwide) licenses. Three of
these claimed status as a small or very small entity and won 311
licenses.
44. 220 MHz Radio Service--Phase I Licensees. The 220 MHz service
has both Phase I and Phase II licenses. Phase I licensing was conducted
by lotteries in 1992 and 1993. There are approximately 1,515 such non-
nationwide licensees and four nationwide licensees currently authorized
to operate in the 220 MHz band. The Commission has not developed a
small business size standard for small entities specifically applicable
to such incumbent 220 MHz Phase I licensees. To estimate the number of
such licensees that are small businesses, the Commission applies the
small business size standard under the SBA rules applicable to
``Wireless Telecommunications Carriers (except Satellite)'' companies.
This category provides that a small business is a wireless company
employing no more than 1,500 persons. Census Bureau data for 2002 show
that there were 1,397 firms in this category that operated for the
entire year. Of this total, 1,378 firms had employment of 999 or fewer
employees, and 19 firms had employment of 1,000 employees or more.
Thus, under this category and size standard, the majority of firms can
be considered small.
45. 220 MHz Radio Service--Phase II Licensees. The 220 MHz service
has both Phase I and Phase II licenses. The Phase II 220 MHz service is
a new service and is subject to spectrum auctions. In the 220 MHz Third
Report and Order, published at 62 FR 15978, April 3, 1997, the
Commission adopted a small business size standard for ``small'' and
``very small'' businesses for purposes of determining their eligibility
for special provisions such as bidding credits and installment
payments. This small business size standard indicates that a ``small
business'' is an entity that, together with its affiliates and
controlling principals, has average gross revenues not exceeding $15
million for the preceding three years. A ``very small business'' is an
entity that, together with its affiliates and controlling principals,
has average gross revenues that do not exceed $3 million for the
preceding three years. The SBA has approved these small business size
standards. Auctions of Phase II licenses commenced on September 15,
1998, and closed on October 22, 1998. In the first auction, 908
licenses were auctioned in three different-sized geographic areas:
Three nationwide licenses, 30 Regional Economic Area Group (EAG)
Licenses, and 875 Economic Area (EA) Licenses. Of the 908 licenses
auctioned, 693 were sold. Thirty-nine small businesses won licenses in
the first 220 MHz auction. The second auction included 225 licenses:
216 EA licenses and 9 EAG licenses. Fourteen companies claiming small
business status won 158 licenses. A third auction included four
licenses: 2 BEA licenses and 2 EAG licenses in the 220 MHz Service. No
small or very small business won any of these licenses.
46. 800 MHz and 900 MHz Specialized Mobile Radio Licenses. The
Commission awards ``small entity'' and ``very small entity'' bidding
credits in auctions for Specialized Mobile Radio (SMR) geographic area
licenses in the 800 MHz and 900 MHz bands to firms that had revenues of
no more than $15 million in each of the three previous calendar years,
or that had revenues of no more than $3 million in each of the previous
calendar years, respectively. These bidding credits apply to SMR
providers in the 800 MHz and 900 MHz bands that either hold geographic
area licenses or have obtained extended implementation authorizations.
The Commission does not know how many firms provide 800 MHz or 900 MHz
geographic area SMR service pursuant to extended implementation
authorizations, nor how many of these providers have annual revenues of
no more than $15 million. One firm has over $15 million in revenues.
The Commission assumes, for purposes here, that all of the remaining
existing extended implementation authorizations are held by small
entities, as that term is defined by the SBA. The Commission has held
auctions for geographic area licenses in the 800 MHz and 900 MHz SMR
bands. There were 60 winning bidders that qualified as small or very
small entities in the 900 MHz SMR auctions. Of the 1,020 licenses won
in the 900 MHz auction, bidders qualifying as small or very small
entities won 263 licenses. In the 800 MHz auction, 38 of the 524
licenses won were won by small and very small entities.
47. 700 MHz Guard Band Licensees. In the 700 MHz Guard Band Order,
the Commission adopted a small business size standard for ``small
businesses'' and ``very small businesses'' for purposes of determining
their eligibility for special provisions such as bidding credits and
installment payments. A ``small business'' is an entity that, together
with its affiliates and controlling principals, has average gross
revenues not exceeding $15 million for the preceding three years.
Additionally, a ``very small business'' is an entity that, together
with its affiliates and controlling principals, has average gross
revenues that are not more than $3 million for the preceding three
years. An auction of 52 Major Economic Area (MEA) licenses commenced on
September 6, 2000, and closed on September 21, 2000. Of the 104
licenses auctioned, 96 licenses were sold to nine bidders. Five of
these bidders were small businesses that won a total of 26 licenses. A
second auction of 700 MHz Guard Band licenses commenced on February 13,
2001 and closed on February 21, 2001. All eight of the licenses
auctioned were sold to three bidders. One of these bidders was a small
business that won a total of two licenses. Subsequently, in the 700 MHz
Second Report and Order, the Commission reorganized the licenses
pursuant to an agreement among most of the licensees, resulting in a
spectral relocation of the first set of paired spectrum block licenses,
and an elimination of the second set of paired spectrum block licenses
(many of which were already vacant, reclaimed by the Commission from
Nextel). A single licensee that did not participate in the agreement
was grandfathered in the initial spectral location for its two licenses
in the second set of paired spectrum blocks. Accordingly, at this time
there are 54 licenses in the 700 MHz Guard Bands and there is no
auction data applicable to determine which are held by small
businesses.
48. 39 GHz Service. The Commission created a special small business
size standard for 39 GHz licenses--an entity that has average gross
revenues of $40 million or less in the three previous calendar years.
An additional size standard for ``very small business'' is: An entity
that, together with affiliates,
[[Page 39559]]
has average gross revenues of not more than $15 million for the
preceding three calendar years. The SBA has approved these small
business size standards. The auction of the 2,173 39 GHz licenses began
on April 12, 2000 and closed on May 8, 2000. The 18 bidders who claimed
small business status won 849 licenses. Consequently, the Commission
estimates that 18 or fewer 39 GHz licensees are small entities that may
be affected by the rules and polices adopted herein.
49. Wireless Cable Systems. Wireless cable systems use 2 GHz band
frequencies of the Broadband Radio Service (BRS), formerly Multipoint
Distribution Service (MDS), and the Educational Broadband Service
(EBS), formerly Instructional Television Fixed Service (ITFS), to
transmit video programming and provide broadband services to
residential subscribers. These services were originally designed for
the delivery of multichannel video programming, similar to that of
traditional cable systems, but over the past several years licensees
have focused their operations instead on providing two-way high-speed
Internet access services. The Commission estimates that the number of
wireless cable subscribers is approximately 100,000, as of March 2005.
Local Multipoint Distribution Service (LMDS) is a fixed broadband
point-to-multipoint microwave service that provides for two-way video
telecommunications. As described below, the SBA small business size
standard for the broad census category of Cable and Other Program
Distribution, which consists of such entities generating $13.5 million
or less in annual receipts, appears applicable to MDS, ITFS and LMDS.
Other standards also apply, as described.
50. The Commission has defined small MDS (now BRS) and LMDS
entities in the context of Commission license auctions. In the 1996 MDS
auction, the Commission defined a small business as an entity that had
annual average gross revenues of less than $40 million in the previous
three calendar years. This definition of a small entity in the context
of MDS auctions has been approved by the SBA. In the MDS auction, 67
bidders won 493 licenses. Of the 67 auction winners, 61 claimed status
as a small business. At this time, the Commission estimates that of the
61 small business MDS auction winners, 48 remain small business
licensees. In addition to the 48 small businesses that hold BTA
authorizations, there are approximately 392 incumbent MDS licensees
that have gross revenues that are not more than $40 million and are
thus considered small entities. MDS licensees and wireless cable
operators that did not receive their licenses as a result of the MDS
auction fall under the SBA small business size standard for Cable and
Other Program Distribution. Information available to the Commission
indicates that there are approximately 850 of these licensees and
operators that do not generate revenue in excess of $13.5 million
annually. Therefore, the Commission estimates that there are
approximately 850 small entity MDS (or BRS) providers, as defined by
the SBA and the Commission's auction rules.
51. Educational institutions are included in this analysis as small
entities; however, the Commission has not created a specific small
business size standard for ITFS (now EBS). The Commission estimates
that there are currently 2,032 ITFS (or EBS) licensees, and all but 100
of the licenses are held by educational institutions. Thus, the
Commission estimates that at least 1,932 ITFS licensees are small
entities.
52. In the 1998 and 1999 LMDS auctions, the Commission defined a
small business as an entity that has annual average gross revenues of
less than $40 million in the previous three calendar years. Moreover,
the Commission added an additional classification for a ``very small
business,'' which was defined as an entity that had annual average
gross revenues of less than $15 million in the previous three calendar
years. These definitions of ``small business'' and ``very small
business'' in the context of the LMDS auctions have been approved by
the SBA. In the first LMDS auction, 104 bidders won 864 licenses. Of
the 104 auction winners, 93 claimed status as small or very small
businesses. In the LMDS re-auction, 40 bidders won 161 licenses. Based
on this information, the Commission believes that the number of small
LMDS licenses will include the 93 winning bidders in the first auction
and the 40 winning bidders in the re-auction, for a total of 133 small
entity LMDS providers as defined by the SBA and the Commission's
auction rules.
53. Local Multipoint Distribution Service. Local Multipoint
Distribution Service (LMDS) is a fixed broadband point-to-multipoint
microwave service that provides for two-way video telecommunications.
The auction of the 1,030 LMDS licenses began on February 18, 1998 and
closed on March 25, 1998. The Commission established a small business
size standard for LMDS licensees as an entity that has average gross
revenues of less than $40 million in the three previous calendar years.
An additional small business size standard for ``very small business''
was added as an entity that, together with its affiliates, has average
gross revenues of not more than $15 million for the preceding three
calendar years. The SBA has approved these small business size
standards in the context of LMDS auctions. There were 93 winning
bidders that qualified as small entities in the LMDS auctions. A total
of 93 small and very small business bidders won approximately 277 A
Block licenses and 387 B Block licenses. On March 27, 1999, the
Commission re-auctioned 161 licenses; there were 40 winning bidders.
Based on this information, the Commission concludes that the number of
small LMDS licenses consists of the 93 winning bidders in the first
auction and the 40 winning bidders in the re-auction, for a total of
133 small entity LMDS providers.
54. 218-219 MHz Service. The first auction of 218-219 MHz spectrum
resulted in 170 entities winning licenses for 594 Metropolitan
Statistical Area (MSA) licenses. Of the 594 licenses, 557 were won by
entities qualifying as a small business. For that auction, the small
business size standard was an entity that, together with its
affiliates, has no more than a $6 million net worth and, after federal
income taxes (excluding any carry over losses), has no more than $2
million in annual profits each year for the previous two years. In the
218-219 MHz Report and Order and Memorandum Opinion and Order,
published at 64 FR 59656, November 3, 1999, the Commission established
a small business size standard for a ``small business'' as an entity
that, together with its affiliates and persons or entities that hold
interests in such an entity and their affiliates, has average annual
gross revenues not to exceed $15 million for the preceding three years.
A ``very small business'' is defined as an entity that, together with
its affiliates and persons or entities that hold interests in such an
entity and its affiliates, has average annual gross revenues not to
exceed $3 million for the preceding three years. The Commission cannot
estimate, however, the number of licenses that will be won by entities
qualifying as small or very small businesses under its rules in future
auctions of 218-219 MHz spectrum.
55. 24 GHz--Incumbent Licensees. This analysis may affect incumbent
licensees who were relocated to the 24 GHz band from the 18 GHz band
and applicants who wish to provide services in the 24 GHz band. The
applicable SBA small business size standard is that of ``Wireless
Telecommunications Carriers (except Satellite)'' companies. This
[[Page 39560]]
category provides that such a company is small if it employs no more
than 1,500 persons. According to Census Bureau data for 1997, there
were 977 firms in this category, total, that operated for the entire
year. Of this total, 965 firms had employment of 999 or fewer
employees, and an additional 12 firms had employment of 1,000 employees
or more. Thus, under this size standard, the great majority of firms
can be considered small. These broader census data notwithstanding, the
Commission believes that there are only two licensees in the 24 GHz
band that were relocated from the 18 GHz band, Teligent and TRW, Inc.
It is our understanding that Teligent and its related companies have
less than 1,500 employees, though this may change in the future. TRW is
not a small entity. Thus, only one incumbent licensee in the 24 GHz
band is a small business entity.
56. 24 GHz--Future Licensees. With respect to new applicants in the
24 GHz band, the small business size standard for ``small business'' is
an entity that, together with controlling interests and affiliates, has
average annual gross revenues for the three preceding years not in
excess of $15 million. ``Very small business'' in the 24 GHz band is an
entity that, together with controlling interests and affiliates, has
average gross revenues not exceeding $3 million for the preceding three
years. The SBA has approved these small business size standards. These
size standards will apply to the future auction, if held.
2. Cable and OVS Operators
57. Cable Television Distribution Services. The ``Cable and Other
Program Distribution'' census category includes cable systems
operators, closed circuit television services, direct broadcast
satellite services, multipoint distribution systems, satellite master
antenna systems, and subscription television services. Since 2007,
these services have been defined within the broad economic census
category of Wired Telecommunications Carriers; that category is defined
as follows: ``This industry comprises establishments primarily engaged
in operating and/or providing access to transmission facilities and
infrastructure that they own and/or lease for the transmission of
voice, data, text, sound, and video using wired telecommunications
networks. Transmission facilities may be based on a single technology
or a combination of technologies. 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 this category, which is: All such firms having 1,500 or fewer
employees. To gauge small business prevalence for these cable services
the Commission must, however, use current census data that are based on
the previous category of Cable and Other Program Distribution and its
associated size standard; that size standard was: All such firms having
$13.5 million or less in annual receipts. According to Census Bureau
data for 2002, there were a total of 1,191 firms in this previous
category that operated for the entire year. Of this total, 1,087 firms
had annual receipts of under $10 million, and 43 firms had receipts of
$10 million or more but less than $25 million. Thus, the majority of
these firms can be considered small.
58. Cable Companies and Systems. The Commission has also 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, of 1,076 cable operators nationwide, all but eleven are
small under this size standard. In addition, under the Commission's
rules, a ``small system'' is a cable system serving 15,000 or fewer
subscribers. Industry data indicate that, of 7,208 systems nationwide,
6,139 systems have fewer than 10,000 subscribers, and an additional 379
systems have 10,000-19,999 subscribers. Thus, under this second size
standard, most cable systems are small.
59. Cable System Operators. The Communications Act of 1934, as
amended, 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.'' The Commission has determined that an operator serving
fewer than 677,000 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. Industry
data indicate that, of 1,076 cable operators nationwide, all but ten
are small under this size standard. The Commission notes that it
neither requests nor collects information on whether cable system
operators are affiliated with entities whose gross annual revenues
exceed $250 million, and therefore the Commission is unable to estimate
more accurately the number of cable system operators that would qualify
as small under this size standard.
60. Open Video Systems (OVS). In 1996, Congress established the
open video system (OVS) framework, one of four statutorily recognized
options for the provision of video programming services by local
exchange carriers (LECs). The OVS framework provides opportunities for
the distribution of video programming other than through cable systems.
Because OVS operators provide subscription services, OVS falls within
the SBA small business size standard of Cable and Other Program
Distribution Services, which consists of such entities having $13.5
million or less in annual receipts. The Commission has certified 25 OVS
operators, with some now providing service. Broadband service providers
(BSPs) are currently the only significant holders of OVS certifications
or local OVS franchises. As of June, 2005, BSPs served approximately
1.4 million subscribers, representing 1.5 percent of all MVPD
households. Affiliates of Residential Communications Network, Inc.
(RCN), which serves about 371,000 subscribers as of June, 2005, is
currently the largest BSP and 14th largest MVPD. RCN received approval
to operate OVS systems in New York City, Boston, Washington, D.C. and
other areas. The Commission does not have financial information
regarding the entities authorized to provide OVS, some of which may not
yet be operational. The Commission thus believes that at least some of
the OVS operators may qualify as small entities.
61. Satellite Carriers. The term ``satellite carrier'' includes
entities providing services as described in 17 U.S.C. 119(d)(6) using
the facilities of a satellite or satellite service licensed under part
25 of the Commission's rules to operate in Direct Broadcast Satellite
(DBS) or Fixed-Satellite Service (FSS) frequencies. As a general
practice, not mandated by any regulation, DBS licensees usually own and
operate their own satellite facilities as well as package the
programming they offer to their subscribers. In contrast, satellite
carriers using FSS facilities often lease capacity from another entity
that is licensed to operate the satellite used to
[[Page 39561]]
provide service to subscribers. These entities package their own
programming and may or may not be Commission licensees themselves. In
addition, a third situation may include an entity using a non-U.S.
licensed satellite to provide programming to subscribers in the United
States pursuant to a blanket earth station license. Since 2007, the SBA
has recognized satellite television distribution services within the
broad economic census category of Wired Telecommunications Carriers.
The SBA has developed a small business size standard for this category,
which is: All such firms having 1,500 or fewer employees. The most
current Census Bureau data, however, are from the last economic census
of 2002, and the Commission will use those figures to gauge the
prevalence of small businesses in this category. Those size standards
are for the two census categories of ``Satellite Telecommunications''
and ``Other Telecommunications.'' Under both prior categories, such a
business was considered small if it had $13.5 million or less in
average annual receipts.
62. Direct Broadcast Satellite (DBS) Service. DBS service is a
nationally distributed subscription service that delivers video and
audio programming via satellite to a small parabolic ``dish'' antenna
at the subscriber's location. Because DBS provides subscription
services, DBS falls within the SBA-recognized definition of Wired
Telecommunications Carriers. However, as discussed above, the
Commission relies on the previous size standard, Cable and Other
Subscription Programming, which provides that a small entity is one
with $13.5 million or less in annual receipts. Currently, only two
operators--DirecTV and EchoStar Communications Corporation (EchoStar)--
hold licenses to provide DBS service, which requires a great investment
of capital for operation. Both currently offer subscription services
and report annual revenues that are in excess of the threshold for a
small business. Because DBS service requires significant capital, the
Commission believes it is unlikely that a small entity as defined by
the SBA would have the financial wherewithal to become a DBS licensee.
Nevertheless, given the absence of specific data on this point, the
Commission acknowledges the possibility that there are entrants in this
field that may not yet have generated $13.5 million in annual receipts,
and therefore may be categorized as a small business, if independently
owned and operated.
63. Fixed-Satellite Service (FSS). The FSS is a radiocommunication
service between earth stations at a specified fixed point or between
any fixed point within specified areas and one or more satellites. The
FSS, which utilizes many earth stations that communicate with one or
more space stations, may be used to provide subscription video service.
Therefore, to the extent FSS frequencies are used to provide
subscription services, FSS falls within the SBA-recognized definition
of Wired Telecommunications Carriers. However, as discussed above, the
Commission relies on the previous size standard, Cable and Other
Subscription Programming, which provides that a small entity is one
with $13.5 million or less in annual receipts. Although a number of
entities are licensed in the FSS, not all such licensees use FSS
frequencies to provide subscription services. Both of the DBS licensees
(EchoStar and DirecTV) have indicated interest in using FSS frequencies
to broadcast signals to subscribers. It is possible that other entities
could similarly use FSS frequencies, although the Commission is not
aware of any entities that might do so.
3. Internet Service Providers
64. Internet Service Providers. The 2007 Economic Census places
these providers, which include voice over Internet protocol (VoIP)
providers, in the category of All Other Telecommunications. The SBA
small business size standard for such firms is: those having annual
average receipts of $25 million or less. The most current Census Bureau
data on such entities, however, are the 2002 data for the previous
census category called Internet Service Providers. The 2002 data show
that there were 2,529 such firms that operated for the entire year. Of
those, 2,437 firms had annual receipts of under $10 million, and an
additional 47 firms had receipts of between $10 million and $24,
999,999. Consequently, the Commission estimates that the majority of
ISP firms are small entities that may be affected by this action.
4. Other Internet-Related Entities
65. Internet Publishing and Broadcasting and Web Search Portals.
The Census Bureau defines this category as including ``establishments
primarily engaged in (1) publishing and/or broadcasting content on the
Internet exclusively or (2) operating Web sites that use a search
engine to generate and maintain extensive databases of Internet
addresses and content in an easily searchable format (and known as Web
search portals) * * *. Establishments known as Web search portals often
provide additional Internet services, such as e-mail, connections to
other Web sites, auctions, news, and other limited content, and serve
as a home base for Internet users.'' The SBA small business size
standard for such firms is: those having 500 or fewer employees. The
most current Census Bureau data on such entities, however, are the 2002
data for the previous two separate categories of Internet Publishing
and Broadcasting, and Web Search Portals entities. For the first
previous category, the 2002 data show that there were 1,362 firms that
operated for the entire year. Of these, 1,351 had employment of 499 or
fewer employees, and 11 firms had employment of between 500 and 999.
Consequently, the Commission estimates that the majority of these firms
are small entities that may be affected by this action. For the second
previous census category of Web Search Portals, the SBA had developed a
small business size standard of $6.5 million or less in average annual
receipts. According to the data for 2002, there were 342 firms in this
category that operated for the entire year. Of these, 303 had annual
receipts of under $5 million, and an additional 15 firms had receipts
of between $5 million and $9,999,999. Consequently, the Commission
estimates that the majority of Web Search Portals firms are small
entities that may be affected by this action.
66. Data Processing, Hosting, and Related Services. Entities in
this category ``primarily * * * provid[e] infrastructure for hosting or
data processing services.'' The SBA has developed a small business size
standard for this category; that size standard is $23 million or less
in average annual receipts. According to Census Bureau data for 2002,
there were 6,877 firms in this category that operated for the entire
year. Of these, 6,418 had annual receipts of under $10 million, and an
additional 251 firms had receipts of between $10 million and
$24,999,999. Consequently, the Commission estimates that the majority
of these firms are small entities that may be affected by this action.
67. All Other Information Services. ``This industry comprises
establishments primarily engaged in providing other information
services (except new syndicates and libraries and archives).'' The
Commission's action pertains to VoIP services, which could be provided
by entities that provide other services such as e-mail, online gaming,
Web browsing, video conferencing, instant messaging, and other, similar
IP-enabled services. The SBA has developed a small business size
standard for this category; that size standard is $6.5 million or less
in
[[Page 39562]]
average annual receipts. According to Census Bureau data for 2002,
there were 155 firms in this category that operated for the entire
year. Of these, 138 had annual receipts of under $5 million, and an
additional four firms had receipts of between $5 million and
$9,999,999. Consequently, the Commission estimates that the majority of
these firms are small entities that may be affected by this action.
D. Description of Projected Reporting, Recordkeeping and Other
Compliance Requirements
68. In this Order, the Commission requires providers of
interconnected VoIP service to take actions to comply with section 214
service discontinuance obligations. For example, to protect against
abrupt termination of service, the Order requires providers of
interconnected VoIP services to be subject to the same service
discontinuance procedures as non-dominant carriers. Thus, the
Commission requires that a provider of interconnected VoIP service
seeking to discontinue service provide all affected customers with
notice of the planned discontinuance of service. Specifically, the
Order requires an interconnected VoIP provider to provide all affected
customers with its name and address, the date of the planned service
discontinuance, the geographic areas where service will be
discontinued, a brief description of the service to be discontinued,
and the statement found in Sec. 63.71(a)(5)(i) of the Commission's
rules. The Order requires written notice to be provided to each
affected customer, but allows the Commission to authorize in advance
another form of notice for good cause shown upon request.
69. The Order also requires an interconnected VoIP provider to file
with the Commission an application for authorization of the planned
discontinuance. The application shall identify that the provider is an
interconnected VoIP provider with respect to the service to be
discontinued and shall include, in addition to the information set
forth in the notice provided to affected customers, a caption, a brief
description of the dates and methods of notice to all affected
customers, and any other information the Commission may require. The
Order also requires an interconnected VoIP provider to submit a copy of
its application to the public utility commission and to the Governor of
the State(s) in which it proposes to discontinue, reduce, or impair
service, as well as to the Secretary of Defense.
E. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
70. The RFA requires an agency to describe any significant
alternatives that it has considered in reaching its proposed approach,
which may include (among others) the following four alternatives: (1)
The establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(3) the use of performance, rather than design, standards; and (4) an
exemption from coverage of the rule, or any part thereof, for small
entities.
71. The IP-Enabled Services Notice sought comment on whether to
extend consumer protections afforded in the Act to subscribers of VoIP
or other IP-enabled services, and invited comment on the effect on
small entities. The Commission must assess the interests of small
businesses in light of the overriding public interest in protecting
consumers from interrupted voice service and its associated
consequences.
72. In the Order, the Commission found that allowing customers of
interconnected VoIP services to receive the benefits of section 214
discontinuance procedures is fundamentally important for the protection
of consumers. Specifically, the Commission found that extending section
214 discontinuance procedures to interconnected VoIP service customers
is necessary to protect consumers from abrupt and unexpected
telecommunications service interruptions. As the Commission stated,
even customers with competitive alternatives need fair notice and
information to choose a substitute service. The Commission thus found
that notice of proposed service discontinuances is important for the
protection of all customers of interconnected VoIP providers, including
those of small businesses. In considering whether to impose section 214
service discontinuance obligations on interconnected VoIP providers,
the Commission considered several alternatives, including imposing
streamlined obligations for dominant and non-dominant carriers and
separate notice provisions. The Commission concluded that imposing the
minimal streamlined obligations for non-dominant carriers on
interconnected VoIP providers was appropriate, striking a good balance
between the Commission's dual objectives of permitting ease of exit
from competitive markets and ensuring that the public will be given a
reasonable period of time to make other service arrangements. The
Commission further concluded that given that these same minimal
requirements were imposed on non-dominant carrier small entities and
did not result in any hardship, imposing these requirements on all
interconnected VoIP providers, including providers that may be small
entities, would be appropriate.
Ordering Clauses
73. Accordingly, it is ordered, pursuant to sections 1, 4(i), 4(j),
214, and 303(r) of the Communications Act of 1934, as amended, 47
U.S.C. 151, 154(i) through (j), 214, 303(r), that the Report and Order
in WC Docket No. 04-36 is adopted and part 63 of the Commission's
rules, 47 CFR part 63, is amended as set forth in Appendix B.
74. It is further ordered that, pursuant to Sec. Sec. 1.103(a) and
1.427(a) of the Commission's rules, 47 CFR 1.103(a), 1.427(a), this
Report and Order shall be effective September 8, 2009. However, the
information collection requirements contained in the Report and Order
will become effective following Office of Management and Budget (OMB)
approval.
75. It is further ordered that the Commission's Consumer &
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Report and Order, including the Final Regulatory
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
Business Administration.
List of Subjects in 47 CFR Part 63
Cable television, Communications, Communications common carriers,
Discontinuance of service, IP-enabled services, Radio, Reporting and
recordkeeping requirements, Telecommunications, Telegraph, Telephone,
Voice over Internet Protocol, VoIP.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Final Rules
0
For the reasons discussed in the preamble, the Federal Communications
Commission amends 47 CFR part 63 as follows:
[[Page 39563]]
PART 63--EXTENSION OF LINES, NEW LINES, AND DISCONTINUANCE,
REDUCTION, OUTAGE AND IMPAIRMENT OF SERVICE BY COMMON CARRIERS; AND
GRANTS OF RECOGNIZED PRIVATE OPERATING AGENCY STATUS
0
1. The authority citation for part 63 continues to read as follows:
Authority: Sections 1, 4(i), 4(j), 10, 11, 201-205, 214, 218,
403 and 651 of the Communications Act of 1934, as amended, 47 U.S.C.
151, 154(i), 154(j), 160, 201-205, 214, 218, 403, and 571, unless
otherwise noted.
0
2. Section 63.60 is amended by redesignating paragraph (d) as paragraph
(g); redesignating paragraph (c) as paragraph (e); redesignating
paragraphs (a) and (b) as paragraphs (b) and (c), respectively; and
adding paragraphs (a), (b)(3), (d), and (f) to read as follows:
Sec. 63.60 Definitions.
* * * * *
(a) For the purposes of Sec. Sec. 63.60 through 63.90, the term
``carrier,'' when used to refer either to all telecommunications
carriers or more specifically to non-dominant telecommunications
carriers, shall include interconnected VoIP providers.
(b) * * *
(3) The conversion of an interconnected VoIP service to a service
that permits users to receive calls that originate on the public
switched telephone network but not terminate calls to the public
switched telephone network, or the converse.
* * * * *
(d) The term ``interconnected VoIP provider'' is an entity that
provides interconnected VoIP service as that term is defined in Sec.
9.3 of this chapter.
* * * * *
(f) For the purposes of Sec. Sec. 63.60 through 63.90, the term
``service,'' when used to refer to a real-time, two-way voice
communications service, shall include interconnected VoIP service as
that term is defined in Sec. 9.3 of this chapter but shall not include
any interconnected VoIP service that is a ``mobile service'' as defined
in Sec. 20.3 of this chapter.
* * * * *
[FR Doc. E9-18716 Filed 8-6-09; 8:45 am]
BILLING CODE 6712-01-P