[Federal Register Volume 64, Number 214 (Friday, November 5, 1999)]
[Rules and Regulations]
[Pages 60349-60359]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28964]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 54 and 69
[CC Docket Nos. 96-45 and 96-262; FCC 99-290]
Federal-State Joint Board on Universal Service Access Charge
Reform
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: This document concerning the Federal-State Joint Board on
Universal Service: Access Charge Reform adopts modifications to the
Commission's rules consistent with the portions of the United States
Court of Appeals for the Fifth Circuit decision concerning the
assessment and recovery of universal service contributions, and the
Lifeline program.
DATES: Effective November 1, 1999.
FOR FURTHER INFORMATION CONTACT: Jack Zinman, Attorney, Common Carrier
Bureau, Accounting Policy Division, (202) 418-7400.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's
Sixteenth Order on Reconsideration in CC Docket No. 96-45, Eighth
Report and Order in CC Docket No. 96-45, and Sixth Report and Order in
CC Docket No. 96-262 released on October 8, 1999. The full text of this
document is available for public inspection during regular business
hours in the FCC Reference Center, Room CY-A257, 445 Twelfth Street,
S.W., Washington, D.C., 20554.
I. Introduction
1. On July 30, 1999, a three-judge panel of the United States Court
of Appeals for the Fifth Circuit issued a decision affirming in part,
remanding in part, and reversing in part the Commission's May 8, 1997
Universal Service Order, 62 FR 32862 (June 17, 1997). Several of the
court's rulings in that decision affect the assessment and recovery of
universal service contributions, as well as the Commission's Lifeline
program for low-income consumers. The court's mandate from the decision
is scheduled to take effect on November 1, 1999. Accordingly, in this
Order, we adopt modifications to our rules consistent with those
portions of the court's decision concerning the assessment and recovery
of universal service contributions, and the Lifeline program. These
rule changes shall become effective on November 1, 1999.
2. This Order reflects our effort to respond promptly to the
court's forthcoming mandate. The actions we take are transitional in
view of the limited time and data available to us in implementing the
court's mandate that we change our rules and past practices by a
specific date. In view of these constraints, our actions represent our
best effort to take short-term action, subject to later refinement if
necessary, in order to assure compliance with the court's mandate.
II. Opinion by the Fifth Circuit Court of Appeals
3. Numerous parties filed petitions for review of the Commission's
Universal Service Order. Those petitions were consolidated before the
Fifth Circuit, which issued an opinion on July 30, 1999. In response to
the arguments of Petitioner COMSAT Corporation (COMSAT), the court
reversed and remanded to the Commission for further consideration the
Commission's decision to assess contributions based on contributors'
combined interstate and international revenues. COMSAT did not
challenge the Commission's jurisdiction to include international
revenues in calculating carriers' contributions. COMSAT argued,
however, that including the international revenues of interstate
carriers in the revenue base was unreasonable for carriers such as
COMSAT whose interstate revenues account for a small percentage of
their total annual revenues and whose annual contribution to universal
service would exceed their annual interstate revenues. COMSAT argued,
and the court agreed, that this result is contrary to the statutory
requirement in section 254(d) of the Act, that contributions be made on
an ``equitable and nondiscriminatory basis.'' Specifically, the court
found that the Commission failed to demonstrate how requiring COMSAT to
pay more in universal service contributions than it derives in
interstate revenues satisfies the ``equitable'' language of section
254(d). Additionally, the court criticized the contribution requirement
at issue as ``discriminatory'' under section 254(d), on the basis that
the application of that requirement ``damages some international
carriers like COMSAT more than it harms others.'' Accordingly, the
court reversed and remanded for further consideration the Commission's
decision to assess the international revenues of interstate carriers.
4. With respect to the Commission's methodology for assessing
contributions for the universal service support mechanisms for schools
and libraries, and rural health care providers, the court found that
the Commission had exceeded its jurisdictional authority by assessing
contributions for those programs based, in part, on the intrastate
revenues of universal service contributors. Accordingly, the court
reversed the Commission's decision to include intrastate revenues in
the contribution base for the schools and libraries, and rural health
care support mechanisms.
[[Page 60350]]
5. The court also reversed the Commission's ``decision to require
[incumbent LECs] to recover universal service contributions from their
interstate access charges.'' Finding that the Commission had
``required'' incumbent LECs to recover their contributions from
interstate access charges, the court held that this requirement
maintained an implicit subsidy in violation of section 254(e) of the
Act.
6. Finally, the court reversed the Commission's decision to
prohibit carriers eligible for universal service support from
disconnecting Lifeline service to consumers who fail to pay toll
charges. The court held that the Commission lacked jurisdiction under
the Act to impose this ``no disconnect'' requirement on carriers.
III. Response to the Fifth Circuit's Opinion
A. Procedural Response
7. On September 9, 1999, the Commission filed a motion to stay the
court's mandate, which had been scheduled to take effect on September
20, 1999. On September 13, 1999, the Commission, GTE, and AT&T each
filed petitions for rehearing with the court. On September 28, 1999,
the court denied all of the petitions for rehearing, and granted, in
part, the Commission's motion for stay. In its order granting, in part,
the Commission's motion for stay, the court ordered its July 30, 1999
mandate to issue on November 1, 1999. In light of the court's September
28, 1999 rulings, the rule changes shall become effective on November
1, 1999.
B. Changes to the Commission's Rules
1. Single Contribution Base for Universal Service Support Mechanisms
8. Overview. In light of the court's ruling, we amend Secs. 54.706
and 54.709 of our rules to provide for a single contribution base for
purposes of funding all of the universal service support mechanisms.
Specifically, in response to the court's determination that the
Commission lacks jurisdiction to assess providers' intrastate revenues,
we have eliminated intrastate revenues from the contribution base.
Consistent with the court's ruling, we also reconsider the basis for
assessing the international revenues of interstate providers. No party
has challenged the Commission's decision to include international
revenues generally. The court, however, agreed with COMSAT's argument
that our rules, as applied, are in some instances inequitable and
discriminatory. We modify Secs. 54.706 and 54.709 of our rules to
exclude from the contribution base the international end-user
telecommunications revenues of each interstate telecommunications
provider whose interstate end-user telecommunications revenues
constitute less than 8 percent of its combined interstate and
international end-user telecommunications revenues. Except for revenues
excluded pursuant to revised Sec. 54.706(c), the new contribution base
will consist of interstate providers' interstate and international end-
user telecommunications revenues.
9. Our rules provide that the Commission will determine
contribution factors on a quarterly basis. Because the court's mandate
will issue on November 1, 1999, however, the Commission must establish
contribution factors in the middle of the quarter, to comply with the
court's decision. The Commission's rules permit us, on our own motion,
to waive our rules for good cause shown. Because it is necessary to
issue new contribution factors before the start of the next quarter in
order to comply with the judicial mandate, we find that good cause
exists to waive Sec. 54.709(a) on this occasion to the extent that it
provides that contribution factors will be adopted on a quarterly
basis. In addition, because of the need to revise our rules so that
they will be in compliance with the mandate as of November 1, 1999, we
find good cause to dispense with notice and comment requirements that
might otherwise apply, pursuant to the Administrative Procedure Act,
because those requirements are impracticable and contrary to the public
interest.
10. Revised Fourth Quarter Contribution Factor. On September 10,
1999, the Commission released proposed fourth quarter 1999 contribution
factors, which USAC is using to bill contributors for their October
1999 contributions. Consistent with the Commission's rules in effect on
that date, one of those contribution factors was calculated based on
contributors' intrastate, interstate, and international end-user
telecommunications revenues for the July 1998 through December 1998
period, as reported by contributors on the March 1999 Universal Service
Worksheet (FCC Form 457). In order to comply with the Fifth Circuit's
decision, we must eliminate intrastate revenues from the contribution
base. Eliminating intrastate revenues from the new contribution base
will eliminate the need for two contribution factors. Specifically, our
revised rules provide for a single contribution factor that will be
calculated based on contributors' interstate and international end-user
telecommunications revenues. That factor will be applied to individual
contributors' combined interstate and international end-user
telecommunications revenues to calculate contributions for all of the
universal service support mechanisms. The elimination of intrastate
revenues from the contribution base will reduce the contributions of
incumbent LECs. To the extent an incumbent LEC is recovering its
universal service contributions in interstate access charges, it must
file tariffs reducing its access charges correspondingly.
11. In order to implement this change by November 1, 1999, the
effective date of the court's mandate, the Common Carrier Bureau
(Bureau) is releasing today a revised proposed fourth quarter
contribution factor that will be applicable to carrier contributions
for November and December 1999. We direct USAC to calculate all
contributor bills for November and December 1999 based on this revised
fourth quarter 1999 contribution factor. For the month of October 1999,
USAC shall continue to bill contributors, and contributors shall
continue making contributions to universal service, in accordance with
the Commission's current contribution rules. Providers that fail to
contribute to the universal service support mechanisms in accordance
with the Commission's rules will be subject to enforcement action by
the Commission.
12. Limited International Revenues Exception. Consistent with the
court's ruling, we modify Secs. 54.706 and 54.709 of our rules. A
provider of interstate and international telecommunications shall not
be required to contribute based on its international end-user
telecommunications revenues if its interstate end-user
telecommunications revenues constitute less than 8 percent of its
combined interstate and international end-user telecommunications
revenues. This modification is consistent with the court's ruling
because it will exclude from the contribution base the international
end-user telecommunications revenues of any telecommunications provider
whose annual contribution to the federal universal service support
mechanisms, based on the provider's interstate and international end-
user telecommunications revenues, would exceed the amount of the
provider's interstate end-user telecommunications revenues. We do not
anticipate that the universal service contribution factor will exceed 8
percent in the near future. Thus, this 8 percent rule ensures that a
provider's universal service contribution will not exceed the amount
[[Page 60351]]
of its interstate end-user telecommunications revenues.
13. The operation of this rule is demonstrated in the following
example. Assume a hypothetical provider with $100 of interstate and
international end-user telecommunications revenues, consisting of $5 of
interstate revenues and $95 of international revenues. Also assume a
contribution factor of 0.06, or 6 percent. In the absence of the 8
percent rule, the provider's contribution ($6) would exceed its
interstate revenues ($5)--a result contrary to the court's ruling.
Under our 8 percent rule, however, the provider's interstate revenues
($5) are less than 8 percent of its combined interstate and
international revenues and, therefore, the provider is not required to
contribute on the basis of its international revenues--a result
consistent with the court's ruling. The provider must still contribute,
however, on the basis of its $5 of interstate revenues. This
hypothetical is only for purposes of illustration. Under existing
rules, if such a provider's annual contribution to universal service
would be less than $10,000 in a given year, the provider would not be
required to submit a contribution for that year, see Sec. 54.708.
14. Equitable Requirement of Section 254(d). We believe that the
international revenues exception adopted here is responsive to the
court's concerns regarding the fairness of our assessment methodology
in that it will permit a contributor that derives the substantial
majority of its revenues from the provision of international services
to calculate its contribution to universal service based solely on its
domestic interstate revenues. We conclude that this exception further
addresses the court's concerns by ensuring that a provider is not
assessed a contribution in an amount exceeding that provider's annual
interstate end-user telecommunications revenues. Because providers will
receive a financial benefit, overall, from providing interstate
service, we conclude that our revised rule is equitable.
15. We decline to adopt a more expansive exception than the rule
adopted here or to exclude international revenues from the contribution
requirement altogether in light of section 254(d)'s mandate requiring
all interstate telecommunications providers to contribute without
regard to whether those providers' revenues are interstate or
international. Moreover, nothing in the court's decision suggests that
the Commission's decision to assess international revenues is
inconsistent with the Act, outside of the impact it had on Comsat and
similarly situated carriers. In addition, we conclude that providers
whose interstate revenues account for a greater amount of their
combined interstate and international revenues than the threshold
adopted here clearly receive a direct benefit from universal service
insofar as their domestic interstate business benefits from the
expanded network that is fostered by universal service. For these
providers, their interstate telecommunications services are not merely
ancillary to their provision of international telecommunications
services. Accordingly, as direct beneficiaries of an expanded domestic
network, such carriers reasonably should be required to contribute to
universal service based on their combined interstate and international
revenues.
16. Nondiscriminatory Requirement of Section 254(d). The
international revenues exception that we adopt here also addresses the
court's concerns regarding the potentially discriminatory impact of our
previous assessment methodology. As stated by the court, the FCC's
interpretation is ``discriminatory,'' because the agency concedes that
its rule damages some international carriers like COMSAT more than it
harms others. Any competitive disparity claimed by COMSAT or by
similarly situated carriers should be minimized as a result of the
exception that we adopt today. Specifically, such a provider of
interstate and international telecommunications shall not be required
to contribute based on its international revenues if its interstate
end-user telecommunications revenues constitute less than 8 percent of
its combined interstate and international end-user telecommunications
revenues. Therefore, providers whose interstate telecommunications
services are merely ancillary to their international operations will
not be in a worse position than providers that, by virtue of their
status as exclusively international providers, are not subject to the
universal service contribution requirements.
17. Specific, Predictable, and Sufficient Requirement of Section
254(d). The limited international revenues exception that we adopt
today also meets the requirement in section 254(d) of the Act that
universal service support mechanisms be specific, predictable, and
sufficient. By setting the international exception at the predetermined
level of 8 percent, we establish a bright-line rule for providers. As
soon as providers prepare their worksheets, they will know with
certainty whether their interstate end-user telecommunications revenues
comprise 8 percent or more of their total interstate and international
end-user telecommunications revenues and, thus, whether they must
contribute on the basis of their international end-user
telecommunications revenues during the upcoming quarters in which their
reported revenues will be assessed. In sum, the 8 percent rule allows
the provider to make decisions based on the specific and predictable
operation of the support mechanism.
18. As an alternative, we considered creating an exception based
not on a fixed percentage of a provider's interstate revenues, but
instead on the relationship between a provider's actual contribution
and the amount of its interstate revenues. Under this alternative, a
carrier would not contribute in a given quarter if its contribution for
the quarter exceeded its interstate end-user telecommunications
revenues applicable to that quarter. While this approach would address
the equitable and nondiscriminatory requirements of section 254(d), we
conclude that it does not meet the specific and predictable
requirements as well as the 8 percent rule. If we were to base the
international revenues exception on the amount of a provider's
contribution in relation to its interstate end-user telecommunications
revenues, then the provider's eligibility for the exception would
depend on the level of the quarterly contribution factor, which varies
from quarter to quarter. Providers with a percentage of interstate end-
user telecommunications revenues close to the contribution factor would
not know with certainty whether they qualify for the exception until
the contribution factor is announced shortly before the beginning of
each quarter. Thus, this approach is not as specific and predictable as
the 8 percent rule, and we decline to adopt it.
19. We also conclude that the 8 percent rule meets section 254(d)'s
requirement that universal service support mechanisms be sufficient. In
order to address the court's concerns, any approach that we adopt must
necessarily exclude a certain amount of international revenue from the
contribution base. The 8 percent rule excludes only slightly more
international revenue from the contribution base than would an approach
that is tied directly to the level of the quarterly contribution
factor. Moreover, the relatively small amount of international revenue
excluded from the contribution base by the 8 percent rule should not
dramatically affect the level of the quarterly contribution factor
[[Page 60352]]
or the ability of providers to meet their contribution obligations.
Thus, we conclude that the 8 percent rule will allow us to maintain
universal service support mechanisms that are sufficient.
20. Implementation of Limited International Revenues Exception.
Because providers currently report their interstate and international
end-user telecommunications revenues as a combined amount on the
Telecommunications Reporting Worksheet (FCC Form 499), the Commission
does not have revenue data for contributors that distinguish their
interstate and international revenues. Although the worksheet that
carriers will submit in April 2000 will be revised to provide for
separate reporting of contributors' interstate and international
revenues, two potential implementation problems arise in the interim
with respect to our adoption of the international revenues exception
pending the issuance of a revised Worksheet. First, without revenue
data reflecting the amount of international revenues that will be
excluded from the contribution base pursuant to the international
revenues exception, the Commission cannot accurately calculate the
revised contribution factor for the fourth quarter of 1999. Second,
without revenue data separately identifying each contributor's
interstate and international revenues, USAC cannot determine which
contributors qualify for the international revenues exception and,
therefore, cannot accurately bill individual contributors. To remedy
these problems, this Order: (1) estimates the amount of international
revenues that we anticipate will be excluded from the contribution base
by operation of the international revenues exception described; and (2)
requires each contributor that qualifies for the international revenues
exception adopted in this Order to file an amendment to its March 1999
and September 1999 worksheets within 30 days of the effective date of
this Order, identifying the amount and percentages of the contributor's
interstate and international revenues.
21. The Common Carrier Bureau's Industry Analysis Division has
estimated that, as a result of our adoption of the limited
international revenues exception, approximately $0.617 billion of
international end-user telecommunications revenues will be excluded
from the $38.204 billion of interstate and international end-user
telecommunications revenues previously reported for the second half of
1998. Thus, we direct that the amount of interstate and international
end-user telecommunications revenues reported for July to December 1998
($38.204 billion), as filed with the Commission by USAC, should be
reduced to $37.587 billion when calculating a contribution base using
revenue data from that period. In the event that our estimate of the
amount of international revenues excluded by operation of the limited
international revenues exception proves inaccurate once actual revenue
data become available, we direct USAC to adjust future revenue
estimates and future contributor bills to correct for any inaccuracy in
our estimate.
22. To enable USAC to bill individual carriers, each contributor
that qualifies for the international revenues exception adopted in this
Order must file with USAC an amendment to its March 1999 Form 457 and
September 1999 Form 499-S worksheets within 30 days of the effective
date of this Order, identifying the amount and percentages of the
contributor's interstate and international revenues. Only a contributor
whose interstate end-user telecommunications revenues constituted less
than 8 percent of the contributor's combined interstate and
international end-user telecommunications revenues in 1998 should
submit these forms. Until the Telecommunications Reporting Worksheet
(FCC Form 499-A, FCC Form 499-S) can be revised and approved by the
Office of Management and Budget (OMB), we conclude that the interim
procedure just described will provide a reasonable estimate of the
contribution base and allow individual contributors to obtain the
benefit of the limited international revenues exception with minimal
disruption to USAC's billing, collection, and disbursement operations.
A revised worksheet that separately lists contributors' interstate and
international revenues will be made available in time for filing of the
April 2000 Worksheet (FCC Form 499-A). A contributor that qualifies for
the international revenues exception shall continue making its
contributions to universal service in accordance with the Commission's
current contribution rules regarding the assessment of international
revenues until such time as: (1) the contributor files the Form 457 and
Form 499-S amendments with USAC, and (2) the contributor has received a
bill or reimbursement from USAC in which USAC has adjusted the
contributor's payment obligation, effective November 1, 1999, to take
into account changes resulting from our adoption of the 8 percent rule.
2. Recovery of Universal Service Contributions by Incumbent Local
Exchange Carriers
23. In Texas Office of Public Utility Counsel v. FCC, the court
reversed the Commission's decision that incumbent LECs could only
recover their universal service contributions through access charges,
stating that:
forcing GTE to recover its universal service contributions from its
access charges * * * maintains an implicit subsidy. * * *
[R]equiring carriers to recover their contributions from access
charges on interstate calls shifts the costs of intrastate universal
service to the interstate jurisdiction.
* * * Because the agency continues to require implicit subsidies for
ILECs in violation of a plain, direct statutory command, we reverse
its decision to require ILECs to recover universal service
contributions from their interstate access charges.
24. The U.S. Court of Appeals for the Eighth Circuit held in
Southwestern Bell Telephone Co. v. FCC that section 254(e) does not
preclude the Commission from permitting incumbent LECs to recover
universal service contributions through access charges. That court
noted that contribution costs are ``real costs of doing business'' that
carriers may pass through to customers that use their services. Rather
than requiring explicit universal service support, section 254(e)
states that such support ``should'' be explicit. Moreover, section
254(e) does not address contributions to the universal service fund,
but support flowing from the fund. As the Eighth Circuit observed,
``[t]he flow-through of LEC universal service costs to its IXC
customers is akin to the flow-through of IXC universal service costs to
its long-distance customers--neither can be categorized as an implicit
subsidy in violation of section 254(e).''
25. The Fifth Circuit's analysis of section 254(e) can be
harmonized with the Eighth Circuit's decision in Southwestern Bell. We
believe that the Fifth Circuit intended to hold only that section
254(e) barred the FCC from requiring incumbent LECs to recover
universal service contributions through access charges. The Eighth
Circuit, on the other hand, simply held that section 254(e) does not
preclude the FCC from permitting incumbent LECs to recover universal
service contributions through access charges. Thus, we read the Fifth
Circuit decision, consistent with the Eighth Circuit's decision, as
permitting incumbent LECs to adopt this method of cost recovery.
26. To comply with the Fifth Circuit's order, we will expand
incumbent LECs'
[[Page 60353]]
options for recovering their universal service contributions to include
an end-user charge. Because incumbent LECs are dominant in the
provision of local exchange and exchange access services, we conclude
that some regulation of the way in which these carriers may recover
their universal service contributions from end-users remains necessary.
Competition is not sufficient to constrain their rates and ensure that
they remain just and reasonable. We require any such recovery to be
equitable and nondiscriminatory. Incumbent LECs will thus be able to
recover their contributions through access charges or through end-user
charges. To the extent they choose to implement an interstate end-user
charge, however, incumbent LECs that are currently recovering their
universal service contributions in interstate access charges must make
corresponding reductions in their interstate access charges to avoid
any double recovery.
3. Elimination of the ``No Disconnect'' Rule
27. Section 54.401(b) of the Commission's rules prohibits carriers
eligible for universal service support from disconnecting Lifeline
service to consumers that fail to pay toll charges. In light of the
court's ruling that the Commission does not have jurisdiction under the
Act impose this ``no disconnect'' rule, we amend part 54 of our rules
to eliminate that provision.
C. Authority Delegated to the Bureau
28. Pursuant to Sec. 54.711(c) of the Commission's rules, the
Bureau has authority to waive, reduce, eliminate, or add to the
Commission's universal service reporting requirements. To the extent
that the reporting requirements described in this Order require
subsequent modification, the Bureau has authority to make such
modifications without further Commission action.
IV. Procedural Matters
A. Supplemental Final Regulatory Flexibility Analysis
29. The Regulatory Flexibility Act (RFA) requires that a Regulatory
Flexibility Analysis be prepared for notice-and-comment rulemaking
proceedings, unless the agency certifies that ``the rule will not, if
promulgated, have a significant impact on a substantial number of small
entities.'' The RFA generally defines ``small entity'' as having the
same meaning as the terms ``small business,'' ``small organization,''
and ``small governmental jurisdiction.'' A small organization is
generally ``any not-for-profit enterprise which is independently owned
and operated and is not dominant in its field.'' This Supplemental
Final Regulatory Flexibility Analysis supplements the Final Regulatory
Flexibility Analysis (FRFA) included in the Universal Service Order,
only to the extent that changes to that order adopted here require
changes in the conclusions reached in the FRFA. As required by section
603 of the Regulatory Flexibility Act, the FRFA was preceded by an
Initial Regulatory Flexibility Analysis (IRFA) incorporated in the
Notice of Proposed Rulemaking and Order Establishing the Joint Board
(NPRM), 61 FR 63778 (December 2, 1996), and an IRFA, prepared in
connection with the Recommended Decision, which sought written public
comment on the proposals in the NPRM and the Recommended Decision. The
Commission has prepared this Supplemental Final Regulatory Flexibility
Analysis of the possible significant economic impact this Order might
have on small entities, in conformance with the RFA.
1. Need for and Objectives of Rules
30. The decisions and rules adopted in this Order are designed to
implement as quickly and effectively as possible the court's July 30,
1999 decision. In formulating these rules, we have been mindful of the
impact of our rules on small business entities, particularly regarding
their impact on (1) small international providers whose interstate
operations represent a modest amount of their combined interstate and
international revenues, and (2) small incumbent local exchange carriers
that wish to recover their universal service contributions from their
end-user customers through an explicit interstate end-user charge.
2. Summary of Significant Issues Raised by the Public Comments to the
IRFA
31. The Commission performed an IRFA in connection with both the
NPRM and Recommended Decision in this proceeding, which sought written
public comment on the proposals in the NPRM and Recommended Decision.
In the IRFAs, the Commission sought comment on possible exemptions from
the proposed rules for small telecommunications companies and measures
to avoid significant economic impact on small entities, as defined by
the RFA. No comments in response to the IRFAs, other than those
summarized in the Universal Service Order, were filed. In response to
the FRFA contained in the Universal Service Order, RTC argued that the
Commission did not satisfy the requirements of the RFA by considering
alternatives to the cap on recovery of corporate operations expenses.
Those comments were fully addressed in the Fourth Order on
Reconsideration.
32. No comments or petitions for reconsideration in response to the
IRFAs or FRFA, other than those described, were filed and none of the
comments filed pertain to the issues raised in the present Order. We
have nonetheless addressed small business concerns by giving incumbent
LECs greater flexibility in structuring their recovery of universal
service contributions and by creating an exception from the
contribution requirements for certain providers of international
telecommunications services, as described in ``Steps Taken to Minimize
Significant Economic Impact on Small Entities, and Significant
Alternatives Considered.''
3. Description and Estimate of Number of Small Entities to Which the
Rules May Apply
33. 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 new rules. The RFA generally defines the term ``small
entity'' as having the same meaning as the terms ``small business,''
``small organization,'' and ``small governmental jurisdiction.'' In
addition, the term ``small business'' has the same meaning as the term
``small business concern'' under the Small Business Act. A small
business concern is one that: (1) is independently owned and operated;
(2) is not dominant in its field of operation; and (3) satisfies any
additional criteria established by the Small Business Administration
(SBA). 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 1992, there were
approximately 275,801 small organizations. And finally, ``Small
governmental jurisdiction'' generally means ``governments of cities,
counties, towns, townships, villages, school districts, or special
districts, with a population of less than 50,000.'' As of 1992, there
were approximately 85,006 such jurisdictions in the United States. This
number includes 38,978 counties, cities, and towns; of these, 37,566,
or 96 percent, have populations of fewer than 50,000. The Census Bureau
estimates that this ratio is approximately accurate for all
governmental entities. Thus, of the 85,006 governmental entities, we
estimate that 81,600 (91 percent) are small entities. In this Order,
the
[[Page 60354]]
Commission stated that the new rules will affect all providers of
interstate telecommunications and interstate telecommunications
services. We further describe and estimate the number of small business
concerns that may be affected by the rules adopted in this Order.
34. As noted, under the Small Business Act, a ``small business
concern'' is one that: (1) is independently owned and operated; (2) is
not dominant in its field of operation; and (3) meets any additional
criteria established by the Small Business Administration (SBA). The
SBA has defined a small business for Standard Industrial Classification
(SIC) categories 4812 (Radiotelephone Communications) and 4813
(Telephone Communications, Except Radiotelephone) to be small entities
when they have no more than 1,500 employees. We first discuss the
number of small telephone companies falling within these SIC
categories, then attempt to refine further those estimates to
correspond with the categories of telecommunications companies that are
commonly used under our rules.
35. The most reliable source of information regarding the total
numbers of common carrier and related providers nationwide, including
the numbers of commercial wireless entities, appears to be data the
Commission publishes annually in its Carrier Locator report, derived
from filings made in connection with the Telecommunications Relay
Service (TRS). According to data in the most recent report, there are
3,604 interstate carriers. These carriers include, inter alia, local
exchange carriers, wireline carriers and service providers,
interexchange carriers, competitive access providers, operator service
providers, pay telephone operators, providers of telephone toll
service, providers of telephone exchange service, and resellers.
36. We have included small incumbent LECs in this present RFA
analysis. As noted, 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. 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.
37. Total Number of Telephone Companies Affected. The United States
Bureau of the Census (``the Census Bureau'') reports that, at the end
of 1992, there were 3,497 firms engaged in providing telephone
services, as defined therein, for at least one year. This number
contains a variety of different categories of carriers, including local
exchange carriers, interexchange carriers, competitive access
providers, cellular carriers, mobile service carriers, operator service
providers, pay telephone operators, PCS providers, covered SMR
providers, and resellers. It seems certain that some of those 3,497
telephone service firms may not qualify as small entities or small
incumbent LECs because they are not ``independently owned and
operated.'' For example, a PCS provider that is affiliated with an
interexchange carrier having more than 1,500 employees would not meet
the definition of a small business. It seems reasonable to conclude,
therefore, that fewer than 3,497 telephone service firms are small
entity telephone service firms or small incumbent LECs that may be
affected by the decisions and rules in this Order.
38. Wireline Carriers and Service Providers. SBA has developed a
definition of small entities for telephone communications companies
other than radiotelephone companies. The Census Bureau reports that,
there were 2,321 such telephone companies in operation for at least one
year at the end of 1992. According to SBA's definition, a small
business telephone company other than a radiotelephone company is one
employing no more than 1,500 persons. All but 26 of the 2,321 non-
radiotelephone companies listed by the Census Bureau were reported to
have fewer than 1,000 employees. Thus, even if all 26 of those
companies had more than 1,500 employees, there would still be 2,295
non-radiotelephone companies that might qualify as small entities or
small incumbent LECs. Although it seems certain that some of these
carriers are not independently owned and operated, we are unable at
this time to estimate with greater precision the number of wireline
carriers and service providers that would qualify as small business
concerns under SBA's definition. Consequently, we estimate that there
are fewer than 2,295 small entity telephone communications companies
other than radiotelephone companies that may be affected by the
decisions and rules in this Order.
39. Local Exchange Carriers, Interexchange Carriers, Competitive
Access Providers, Operator Service Providers, and Resellers. Neither
the Commission nor SBA has developed a definition of small local
exchange carriers (LECs), interexchange carriers (IXCs), competitive
access providers (CAPs), operator service providers (OSPs), or
resellers. The closest applicable definition for these carrier-types
under SBA rules is for telephone communications companies other than
radiotelephone (wireless) companies. The most reliable source of
information regarding the number of these carriers nationwide of which
we are aware appears to be the data that we collect annually in
connection with the Telecommunications Relay Service (TRS). According
to our most recent data, there are 1,410 LECs, 151 IXCs, 129 CAPs, 32
OSPs, and 351 resellers. Although it seems certain that some of these
carriers are not independently owned and operated, or have more than
1,500 employees, we are unable at this time to estimate with greater
precision the number of these carriers that would qualify as small
business concerns under SBA's definition. Consequently, we estimate
that there are fewer than 1,410 small entity LECs or small incumbent
LECs, 151 IXCs, 129 CAPs, 32 OSPs, and 351 resellers that may be
affected by the decisions and rules in the order and order on
reconsideration.
40. Wireless (Radiotelephone) Carriers. SBA has developed a
definition of small entities for radiotelephone (wireless) companies.
The Census Bureau reports that there were 1,176 such companies in
operation for at least one year at the end of 1992. According to SBA's
definition, a small business radiotelephone company is one employing no
more than 1,500 persons. The Census Bureau also reported that 1,164 of
those radiotelephone companies had fewer than 1,000 employees. Thus,
even if all of the remaining 12 companies had more than 1,500
employees, there would still be 1,164 radiotelephone companies that
might qualify as small entities if they are independently owned and
operated. Although it seems certain that some of these carriers are not
independently owned and operated, we are unable at this time to
estimate with greater precision the number of radiotelephone carriers
and service providers that would qualify as small business concerns
under SBA's definition. Consequently, we estimate that there are fewer
than 1,164 small entity radiotelephone companies that may be affected
by the decisions and rules in this Order.
41. Cellular, PCS, SMR and Other Mobile Service Providers. In an
effort to further refine our calculation of the number of
radiotelephone companies that may be affected by the rules
[[Page 60355]]
adopted herein, we consider the data that we collect annually in
connection with the TRS for the subcategories Wireless Telephony (which
includes Cellular, PCS, and SMR) and Other Mobile Service Providers.
Neither the Commission nor the SBA has developed a definition of small
entities specifically applicable to these broad subcategories, so we
will utilize the closest applicable definition under SBA rules--which,
for both categories, is for telephone companies other than
radiotelephone (wireless) companies. To the extent that the Commission
has adopted definitions for small entities providing PCS and SMR
services. According to our most recent TRS data, 732 companies reported
that they are engaged in the provision of Wireless Telephony services
and 23 companies reported that they are engaged in the provision of
Other Mobile Services. Although it seems certain that some of these
carriers are not independently owned and operated, or have more than
1,500 employees, we are unable at this time to estimate with greater
precision the number of Wireless Telephony Providers and Other Mobile
Service Providers, except as described, that would qualify as small
business concerns under SBA's definition. Consequently, we estimate
that there are fewer than 732 small entity Wireless Telephony Providers
and fewer than 23 small entity Other Mobile Service Providers that
might be affected by the decisions and rules in this Order.
42. Broadband PCS Licensees. The broadband 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 less than $40 million 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 regulations defining ``small
entity'' in the context of broadband PCS auctions have been approved by
SBA. No small businesses within the SBA-approved definition 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%
of the 1,479 licenses for Blocks D, E, and F. However, licenses for
Blocks C through F have not been awarded fully, therefore there are
few, if any, small businesses currently providing PCS services. Based
on this information, we estimate that the number of small broadband PCS
licenses will include the 90 winning C Block bidders and the 93
qualifying bidders in the D, E, and F blocks, for a total of 183 small
PCS providers as defined by SBA and the Commissioner's auction rules.
43. SMR Licensees. Pursuant to 47 CFR 90.814(b)(1), the Commission
has defined ``small entity'' in auctions for geographic area 800 MHz
and 900 MHz SMR licenses as a firm that had average annual gross
revenues of less than $15 million in the three previous calendar years.
The definition of a ``small entity'' in the context of 800 MHz SMR has
been approved by the SBA, and approval for the 900 MHz SMR definition
has been sought. The rules may apply to SMR providers in the 800 MHz
and 900 MHz bands that either hold geographic area licenses or have
obtained extended implementation authorizations. We do 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 less than $15 million.
Consequently, we estimate, for purposes of this IRFA, that all of the
extended implementation authorizations may be held by small entities,
some of which may be affected by the decisions and rules in this Order.
44. The Commission recently held auctions for geographic area
licenses in the 900 MHz SMR band. There were 60 winning bidders who
qualified as small entities in the 900 MHz auction. Based on this
information, we estimate that the number of geographic area SMR
licensees that may be affected by the decisions and rules in the order
and order on reconsideration includes these 60 small entities. No
auctions have been held for 800 MHz geographic area SMR licenses.
Therefore, no small entities currently hold these licenses. A total of
525 licenses will be awarded for the upper 200 channels in the 800 MHz
geographic area SMR auction. The Commission, however, has not yet
determined how many licenses will be awarded for the lower 230 channels
in the 800 MHz geographic area SMR auction. There is no basis,
moreover, on which to estimate how many small entities will win these
licenses. Given that nearly all radiotelephone companies have fewer
than 1,000 employees and that no reliable estimate of the number of
prospective 800 MHz licensees can be made, we estimate, for purposes of
this IRFA, that all of the licenses may be awarded to small entities,
some of which may be affected by the decisions and rules in this Order.
45. 220 MHz Radio Service--Phase I Licensees. The 220 MHz service
has both Phase I and Phase II licenses. 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 definition of small entities specifically applicable to
such incumbent 220 MHz Phase I licensees. To estimate the number of
such licensees that are small businesses, we apply the definition under
the SBA rules applicable to Radiotelephone Communications companies.
According to the Bureau of the Census, only 12 radiotelephone firms out
of a total of 1,178 such firms which operated during 1992 had 1,000 or
more employees. Therefore, if this general ratio continues to 1999 in
the context of Phase I 220 MHz licensees, we estimate that nearly all
such licensees are small businesses under the SBA's definition.
46. 220 MHz Radio Service--Phase II Licensees. The Phase II 220 MHz
service is a new service, and is subject to spectrum auctions. In the
220 MHz Third Report and Order, 62 FR 16004 (April 3, 1997), we adopted
criteria for defining small businesses and very small businesses for
purposes of determining their eligibility for special provisions such
as bidding credits and installment payments. We have defined a small
business as 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 defined as 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 Phase II
licenses commenced on September 15, 1998, and closed on October 22,
1998. 908 licenses were auctioned in 3 different-sized geographic
areas: three nationwide licenses, 30 Regional Economic Area Group
Licenses, and 875 Economic Area (EA) Licenses. Of the 908 licenses
auctioned, 693 were sold. Companies claiming small business status won:
one of the Nationwide licenses, 67% of the Regional licenses, and 54%
of the EA licenses. As of January 22, 1999, the Commission announced
that it was prepared to grant 654 of the Phase II licenses won at
auction. A reauction of the remaining, unsold licenses was completed on
June 30, 1999, with 16 bidders winning 222 of the Phase II licenses. As
a result, we estimate that 16
[[Page 60356]]
or fewer of these final winning bidders are small or very small
businesses.
47. Paging. On June 7, 1999, the Wireless Telecommunications Bureau
announced the first in a series of auctions of paging licenses, the
first to commence on December 7, 1999. The Bureau has proposed that the
first auction be composed of 2,499 licenses. The Commission utilizes a
two-tiered definition of small businesses in the context of auctioning
licenses in the Common Carrier Paging and exclusive Private Carrier
Paging services. A small business is defined as either (1) an entity
that, together with its affiliates and controlling principals, has
average gross revenues for the three preceding years of not more than
$3 million, or (2) an entity that, together with affiliates and
controlling principals, has average gross revenues for the three
preceding calendar years of not more than $15 million. The SBA has
approved this definition. At present, there are approximately 24,000
Private Paging licenses and 74,000 Common Carrier Paging licenses. In
addition, according to the most recent Carrier Locator data, 137
carriers reported that they were engaged in the provision of either
paging or messaging services, which are placed together in the data.
Because the auction has yet to occur, we do not have data specifying
the number of winning bidders that will meet the above small business
definition. Also, we will assume that there currently are 137 or fewer
small business paging carriers.
48. Narrowband PCS. The Commission has auctioned nationwide and
regional licenses for narrowband PCS. There are 11 nationwide and 30
regional licensees for narrowband PCS. The Commission does not have
sufficient information to determine whether any of these licensees are
small businesses within the SBA-approved definition for radiotelephone
companies. At present, there have been no auctions held for the major
trading area (MTA) and basic trading area (BTA) narrowband PCS
licenses. The Commission anticipates a total of 561 MTA licenses and
2,958 BTA licenses will be awarded by auction. Such auctions have not
yet been scheduled, however. Given that nearly all radiotelephone
companies have no more than 1,500 employees and that no reliable
estimate of the number of prospective MTA and BTA narrowband licensees
can be made, we assume, for purposes of this IRFA, that all of the
licenses will be awarded to small entities, as that term is defined by
the SBA.
49. Rural Radiotelephone Service. The Commission has not adopted a
definition of small entity specific to the Rural Radiotelephone
Service. A significant subset of the Rural Radiotelephone Service is
the Basic Exchange Telephone Radio Systems (BETRS). We will use the
SBA's definition applicable to radiotelephone companies, i.e., an
entity employing no more than 1,500 persons. There are approximately
1,000 licensees in the Rural Radiotelephone Service, and we estimate
that almost all of them qualify as small entities under the SBA's
definition.
50. Air-Ground Radiotelephone Service. The Commission has not
adopted a definition of small entity specific to the Air-Ground
Radiotelephone Service. Accordingly, we will use the SBA's definition
applicable to radiotelephone companies, i.e., an entity employing no
more than 1,500 persons. There are approximately 100 licensees in the
Air-Ground Radiotelephone Service, and we estimate that almost all of
them qualify as small entities under the SBA definition.
51. Private Land Mobile Radio (PLMR). PLMR systems, also known as
Private Mobile Radio Service (PMRS) systems, serve an essential role in
a range of industrial, business, land transportation, and public safety
activities. These radios are used by companies of all sizes operating
in all U.S. business categories. The Commission has not developed a
definition of small entity specifically applicable to PLMR licensees
due to the vast array of PLMR users. For the purpose of determining
whether a licensee is a small business as defined by the SBA, each
licensee would need to be evaluated within its own business area. The
Commission is unable at this time to estimate the number of, if any,
small businesses that could be impacted by the new rules. However, the
Commission's 1994 Annual Report on PLMRs indicates that at the end of
fiscal year 1994 there were 1,087,267 licensees operating 12,481,989
transmitters in the PLMR bands below 512 MHz. Because any entity
engaged in a commercial activity is eligible to hold a PLMR license,
the rules in this context could potentially impact any small U.S.
business that chooses to become licensed in this service. On July 21,
1999, the Wireless Telecommunications Bureau requested public comment
on whether the licensing of PMRS frequencies in the 800 MHz band for
commercial SMR use would serve the public interest.
52. Fixed Microwave Services. Microwave services include common
carrier, private-operational fixed, and broadcast auxiliary radio
services. At present, there are approximately 22,015 common carrier
fixed licensees in the microwave services. The Commission has not yet
defined a small business with respect to microwave services. For
purposes of this IRFA, we will utilize the SBA's definition applicable
to radiotelephone companies--i.e., an entity with no more than 1,500
persons. We estimate, for this purpose, that all of the Fixed Microwave
licensees (excluding broadcast auxiliary licensees) would qualify as
small entities under the SBA definition for radiotelephone companies.
53. Offshore Radiotelephone Service. This service operates on
several UHF TV broadcast channels that are not used for TV broadcasting
in the coastal area of the states bordering the Gulf of Mexico. At
present, there are approximately 55 licensees in this service. We are
unable at this time to estimate the number of licensees that would
qualify as small entities under the SBA's definition for radiotelephone
communications.
54. Wireless Communications Services. This service can be used for
fixed, mobile, radio location 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 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. We conclude that the
number of geographic area WCS licensees that may be affected by the
decisions and rules in this Order includes these eight entities.
55. Multipoint Distribution Systems (MDS): The Commission has
defined ``small entity'' for the auction of MDS as an entity that,
together with its affiliates, has average gross annual revenues that
are not more than $40 million for the preceding three calendar years.
This definition of a small entity in the context of MDS auctions has
been approved by the SBA. The Commission completed its MDS auction in
March 1996 for authorizations in 493 basic trading areas (BTAs). Of 67
winning bidders, 61 qualified as small entities.
56. MDS is also heavily encumbered with licensees of stations
authorized prior to the auction. The SBA has developed a definition of
small entities for pay television services, which
[[Page 60357]]
includes all such companies generating $11 million or less in annual
receipts. This definition includes multipoint distribution systems, and
thus applies to MDS licensees and wireless cable operators which did
not participate in the MDS auction. Information available to us
indicates that there are 832 of these licensees and operators that do
not generate revenue in excess of $11 million annually. Therefore, for
purposes of this IRFA, we find there are approximately 892 small MDS
providers as defined by the SBA and the Commission's auction rules,
some which may be affected by the decisions and rules in this Order.
57. International Service Providers. The Commission has not
developed a definition of small entities applicable to licensees in the
international services. Therefore, the applicable definition of small
entity is the definition under the SBA rules applicable to
Communications Services, Not Elsewhere Classified (NEC). This
definition provides that a small entity is expressed as one with $11
million or less in annual receipts. According to the Census Bureau,
there were a total of 848 communications services, NEC in operation in
1992, and a total of 775 had annual receipts of less than $9.999
million. We note that those entities providing only international
service will not be affected by our revised rules. We do not, however,
have sufficient data to estimate with greater detail those providing
both international and interstate services. Consequently, we estimate
that there are fewer than 775 small international service entities
potentially impacted by our rules.
4. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements
58. In this Order, we adopt revisions to Part 54 that are
responsive to the court's July 30, 1999 ruling. In response to the
court's concern that our assessment rules were unduly burdensome as
applied to small providers whose interstate operations represent a
modest amount of their combined interstate and international revenues,
we modify our rules to create an exception from the contribution
requirements for certain providers of international telecommunications
services. In doing so, we have asked providers claiming entitlement to
this exception to prepare and submit to USAC two short forms amending
their two most recently filed Worksheets. Those forms ask contributors
claiming entitlement to the exception to separately list their
interstate and international revenues. To the extent that this
reporting obligation is not unduly burdensome and is adopted in order
to establish certain providers' entitlement to an exception from the
contribution requirements, we project that this Order will impose no
significant new reporting requirements on small carriers.
59. In light of the court's determination that the Commission may
not require incumbent LECs to recover the cost of their universal
service contributions through interstate access charges, we give
incumbent LECs flexibility in the manner in which they recover their
universal service contributions. For those that elect to continue
recovering their contributions through interstate access charges, no
additional requirements are imposed by this Order. For those that elect
to recover their contributions through an explicit end-user charge,
this Order requires such carriers to take steps to make corresponding
reductions in their interstate access charges to avoid double recovery.
5. Steps Taken to Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
60. In this Order, we have taken several steps to minimize the
economic impact of our Part 54 rule changes on all carriers, including
small carriers. For example, in response to the court's concern that
our contribution requirement, as applied to certain small providers,
was unduly burdensome, we have sought to reduce the contribution
obligation of providers, many of which are small entities, whose
interstate operations represent a modest amount of their combined
interstate and international revenues. We take this action in response
to the court's concerns and to help primarily international providers
with a small portion of interstate business to compete on a more equal
footing with international providers that, by virtue of their status as
exclusively international carriers, are not subject to the universal
service contribution requirements.
61. In light of the court's determination that the Commission may
not require incumbent LECs to recover the cost of their universal
service contributions through interstate access charges, we give
incumbent LECs flexibility in the manner in which they recover their
universal service contributions. For those that elect to continue
recovering their contributions through interstate access charges, no
additional requirements are imposed by this Order. For those that elect
to recover their contributions through an explicit end-user charge,
this Order requires such carries to take steps to make corresponding
reductions in their interstate access charges to avoid double recovery.
Given that the compliance obligations associated with transitioning to
an end-user method of recovery for incumbent LECs are in large measure
voluntary, and insofar as carriers, including small carriers, are given
no deadlines for implementing such changes, we conclude the compliance
requirements adopted in this Order will not be unduly burdensome on
small carriers.
6. Report to Congress
62. The Commission will send a copy of this Order, including the
Supplemental Final Regulatory Flexibility Analysis, in a report to be
sent to Congress pursuant to the Small Business Regulatory Enforcement
Fairness Act of 1996. A summary of the rules adopted in this Order and
this Supplemental Final Regulatory Flexibility Analysis will also be
published in the Federal Register, and will be sent to the Chief
Counsel for Advocacy of the Small Business Administration.
B. Effective Date of Final Rules
63. In this Order, the Commission amends its rules to implement the
court's July 30, 1999 mandate with respect to the assessment and
recovery of universal service contributions. Consistent with the
court's September 28, 1999 rulings, we make this Order and the rule
changes adopted herein effective on November 1, 1999. The court's
directive that its July 30, 1999 mandate will issue on November 1, 1999
provides good cause to depart in the manner described from the general
requirement of 5 U.S.C. 553(d) that final rules take effect not less
than thirty (30) days after their publication in the Federal Register.
The information collections contained in this Order was approved by OMB
under control number 3060-0907.
V. Ordering Clauses
64. Accordingly, it is ordered that, pursuant to the authority
contained in sections 1-4, 201, 205, 218-220, 254, 303(r), 403, and 410
of the Communications Act of 1934, as amended, 47 U.S.C. 151-154, 201-
205, 218-220, 254, 303(r), 403, 410, the Sixteenth Order on
Reconsideration in CC Docket No. 96-45 is adopted.
65. The Eighth Report and Order in CC Docket No. 96-45 is adopted.
65. The Sixth Report and Order in CC Docket No. 96-262 is adopted.
67. Parts 54 and 69 of the Commission's Rules, 47 CFR Parts 54
[[Page 60358]]
and 69, are amended, effective November 1, 1999.
68. The authority is delegated to the Chief of the Common Carrier
Bureau pursuant to 47 CFR 0.291 and 54.711(c) to modify, or require the
filing of, any forms that are necessary to implement the decisions and
rules adopted in this Order and that are required to ensure the sound
and efficient functioning of the universal service support mechanisms.
69. The Commission's Office of Public Affairs, Reference Operations
Division, shall send a copy of this Order, including the Supplemental
Final Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration.
List of Subjects
47 CFR Part 54
Universal service.
47 CFR Part 69
Communications common carrier.
Federal Communications Commission.
Magalie Roman Salas,
Secretary.
Rule Changes
Parts 54 and 69 of Title 47 of the Code of Federal Regulations is
amended to read as follows:
PART 54--UNIVERSAL SERVICE
1. The authority citation for part 54 continues to read as follows:
Authority: 47 U.S.C. 1, 4(i), 201, 214, and 254 unless otherwise
noted.
Sec. 54.401 [Amended].
2. In Sec. 54.401, remove and reserve paragraph (b).
3. Amend Sec. 54.706 by revising paragraphs (b) and (c) and adding
paragraph (d) to read as follows:
Sec. 54.706 Contributions.
* * * * *
(b) Except as provided in paragraph (c) of this section, every
telecommunications carrier that provides interstate telecommunications
services, every provider of interstate telecommunications that offers
telecommunications for a fee on a non-common carrier basis, and every
payphone provider that is an aggregator shall contribute to the federal
universal service support mechanisms on the basis of its interstate and
international end-user telecommunications revenues.
(c) Any entity required to contribute to the federal universal
service support mechanisms whose interstate end-user telecommunications
revenues comprise less than 8 percent of its combined interstate and
international end-user telecommunications revenues shall contribute to
the federal universal service support mechanisms for high cost areas,
low-income consumers, schools and libraries, and rural health care
providers based only on such entity's interstate end-user
telecommunications revenues. For purposes of this paragraph, an
``entity'' shall refer to the entity that is subject to the universal
service reporting requirements in 47 CFR 54.711 and shall include all
of that entity's affiliated providers of telecommunications services.
(d) Entities providing open video systems (OVS), cable leased
access, or direct broadcast satellite (DBS) services are not required
to contribute on the basis of revenues derived from those services. The
following entities will not be required to contribute to universal
service: non-profit health care providers; broadcasters; systems
integrators that derive less than five percent of their systems
integration revenues from the resale of telecommunications.
4. Amend Sec. 54.709 by revising paragraph (a) to read as follows:
Sec. 54.709 Computations of required contributions to universal
service support mechanisms.
(a) Contributions to the universal service support mechanisms shall
be based on contributors' end-user telecommunications revenues and a
contribution factor determined quarterly by the Commission.
(1) For funding the federal universal service support mechanisms,
the subject revenues will be contributors' interstate and international
revenues derived from domestic end users for telecommunications or
telecommunications services.
(2) The quarterly universal service contribution factor shall be
determined by the Commission based on the ratio of total projected
quarterly expenses of the universal service support mechanisms to total
end-user interstate and international telecommunications revenues. The
Commission shall approve the Administrator's quarterly projected costs
of the universal service support mechanisms, taking into account demand
for support and administrative expenses. The total subject revenues
shall be compiled by the Administrator based on information contained
in the Telecommunications Reporting Worksheets described in
Sec. 54.711(a).
(3) Total projected expenses for the federal universal service
support mechanisms for each quarter must be approved by the Commission
before they are used to calculate the quarterly contribution factor and
individual contributions. For each quarter, the Administrator must
submit its projections of demand for the federal universal service
support mechanisms for high-cost areas, low-income consumers, schools
and libraries, and rural health care providers, respectively, and the
basis for those projections, to the Commission and the Common Carrier
Bureau at least sixty (60) calendar days prior to the start of that
quarter. For each quarter, the Administrator must submit its
projections of administrative expenses for the high-cost mechanism, the
low-income mechanism, the schools and libraries mechanism and the rural
health care mechanism and the basis for those projections to the
Commission and the Common Carrier Bureau at least sixty (60) calendar
days prior to the start of that quarter. Based on data submitted to the
Administrator on the Telecommunications Reporting Worksheets, the
Administrator must submit the total contribution base to the Common
Carrier Bureau at least sixty (60) days before the start of each
quarter. The projections of demand and administrative expenses and the
contribution factor shall be announced by the Commission in a public
notice and shall be made available on the Commission's website. The
Commission reserves the right to set projections of demand and
administrative expenses at amounts that the Commission determines will
serve the public interest at any time within the fourteen-day period
following release of the Commission's public notice. If the Commission
takes no action within fourteen (14) days of the date of release of the
public notice announcing the projections of demand and administrative
expenses, the projections of demand and administrative expenses, and
the contribution factor shall be deemed approved by the Commission.
Except as provided in Sec. 54.706(c), the Administrator shall apply the
quarterly contribution factor, once approved by the Commission, to
contributors' interstate and international end-user telecommunications
revenues to calculate the amount of individual contributions.
* * * * *
PART 69--ACCESS CHARGES
5. The authority citation for part 69 continues to read as follows:
Authority: 47 U.S.C. 154, 201, 202, 203, 205, 218, 220, 254, 403
unless otherwise noted.
[[Page 60359]]
6. Amend Sec. 69.4 by adding paragraph (d) to read as follows:
Sec. 69.4 Charges to be filed.
* * * * *
(d) Recovery of Contributions to the Universal Service Support
Mechanisms by Incumbent Local Exchange Carriers.
(1) Incumbent local exchange carriers may recover their
contributions to the universal service support mechanisms through
carriers' carrier charges.
(i) Price cap incumbent local exchange carriers may do so by
exogenously adjusting the price cap indices of each basket on the basis
of relative end-user revenues.
(ii) Non-price cap incumbent local exchange carriers may do so by
applying a factor to their carrier common line charge revenue
requirements.
(2)(i) In lieu of the carriers' carrier charges described in
paragraph (d)(1), incumbent local exchange carriers may recover their
contributions to the universal service support mechanisms through
explicit, interstate, end-user charges that are equitable and
nondiscriminatory.
(ii) To the extent that incumbent local exchange carriers choose to
implement explicit, interstate, end-user charges to recover their
contributions to the universal service support mechanisms, they must
make corresponding reductions in their access charges to avoid any
double recovery.
Sec. 69.5 [Amended]
7. In Sec. 69.5, remove and reserve paragraph (d).
[FR Doc. 99-28964 Filed 11-4-99; 8:45 am]
BILLING CODE 6712-01-U
