[Federal Register Volume 63, Number 237 (Thursday, December 10, 1998)]
[Proposed Rules]
[Pages 68224-68233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-32803]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 54
[CC Docket No. 96-45; FCC 98-278]
Federal-State Joint Board on Universal Service
AGENCY: Federal Communications Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: Between September, 1997 and March, 1998, the Commission's
Wireless Telecommunications Bureau and Common Carrier Bureau hosted a
series of ex parte meetings with representatives of the wireless
telecommunications industry. The Bureau's primary objective in hosting
those meetings was to solicit proposals on methods by which wireless
telecommunications providers might allocate between the intrastate and
interstate jurisdictions their end-user telecommunications revenues for
purposes of the universal service reporting requirements. In this
document, the Commission seeks comment on what amount of local usage,
if any, eligible telecommunications carriers should be required to
provide.
DATES: Comments are due on or before January 11, 1999 and reply
comments are due on or before January 25, 1999.
Written comments by the public on the proposed information
collections are due January 11, 1999. Written comments must be
submitted by the Office of Management and Budget (OMB) on the proposed
information collections on or before February 8, 1999.
ADDRESSES: Parties who choose to file by paper must file an original
and four copies of each filing. All filings must be sent to the
Commission's Secretary, Magalie Roman Salas, Office of the Secretary,
Federal Communications Commission, 445 Twelfth Street, S.W., TW-A325,
Washington, D.C. 20554. In addition to filing comments with the
Secretary, a copy of any comments on the information collections
contained herein should be submitted to Judy Boley, Federal
Communications Commission, Room 234, 1919 M Street, N.W., Washington,
DC 20554, or via the Internet to jboley@fcc.gov, and to Timothy Fain,
OMB Desk Officer, 10236 NEOB, 725--17th Street, N.W., Washington, DC
20503 or via the Internet to fain__t@al.eop.gov.
FOR FURTHER INFORMATION CONTACT: Lori Wright, Attorney, Common Carrier
Bureau, Accounting Policy Division, (202) 418-7400. For additional
information concerning the information collections contained in this
Further Notice of Proposed Rulemaking contact Judy Boley at 202-418-
0214, or via the Internet at jboley@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's
document released on October 26, 1998. The full text of this document
is available for public inspection during regular business hours in the
FCC Reference Center, Room 239, 1919 M Street, N.W., Washington, D.C.,
20554.
Initial Paperwork Reduction Act Analysis
1. This Further Notice of Proposed Rulemaking (Further Notice)
contains a proposed information collection. The Commission, as part of
its continuing effort to reduce paperwork burdens, invites the general
public and the Office of Management and Budget (OMB) to comment on the
information collections
[[Page 68225]]
contained in this Further Notice, as required by the Paperwork
Reduction Act of 1995, Public Law 104-13. Public and agency comments
are due at the same time as other comments on this Further Notice; OMB
notification of action is due February 8, 1999. Comments should
address: (a) whether the proposed collection of information is
necessary for the proper performance of the functions of the
Commission, including whether the information shall have practical
utility; (b) the accuracy of the Commission's burden estimates; (c)
ways to enhance the quality, utility, and clarity of the information
collected; and (d) ways to minimize the burden of the collection of
information on the respondents, including the use of automated
collection techniques or other form of information technology.
OMB Approval Number: None.
Form No.: N/A.
Type of Review: New collection.
Respondents: Business or Other for Profit.
Title: Data to Determine Percentage of Interstate
Telecommunications Revenues from Wireless Carriers and Submission of
Data to Determine Eligibility.
----------------------------------------------------------------------------------------------------------------
Estimate time
Number of per response Total annual
respondents (hours) burden (hours)
----------------------------------------------------------------------------------------------------------------
Data to Determine Percentage of Interstate Telecommunications
Revenue by Wireless Carriers................................... 900 10 9000
Submission of Data to Determine Eligibility.................... 3400 .25 850
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Total Annual Burden: 9,850 hours.
Estimated costs per respondent: $0.
Needs and Uses: The Commission seeks comment on various mechanisms
for allocating between the intrastate and interstate jurisdictions the
end-user telecommunications revenues of universal service contributors
that cannot derive this information readily from their books of
account. The Commission seeks comment on its proposals for wireless
carriers to conduct traffic studies and extrapolate from the data the
percentage of their revenues that should be attributed to the
interstate jurisdiction. This allocation will be used for purposes of
calculating the federal universal service reporting and contribution
obligations. The Commission also seeks comment on whether to require
eligible telecommunications carriers to include some fixed number of
minutes of use per month as part of the basic universal service package
or whether we should require some number of calls. This information
would be reported by the carriers to their state utility commission
when they seek designation as an eligible telecommunications carriers.
I. Introduction
2. Between September, 1997 and March, 1998, the Commission's
Wireless Telecommunications Bureau and Common Carrier Bureau hosted a
series of ex parte meetings with representatives of the wireless
telecommunications industry. The Bureau's primary objective in hosting
those meeting was to solicit proposals on methods by which wireless
telecommunications providers might allocate between the intrastate and
interstate jurisdictions their end-user telecommunications revenues for
purposes of the universal service reporting requirements. In this
Further Notice, we propose and seek comment on various mechanisms for
allocating between the intrastate and interstate jurisdictions the end-
user telecommunications revenues of universal service contributions
that cannot derive this information readily from their books of
account. This allocation will be used for purposes of calculating the
federal universal service reporting and contribution obligation. On
March 8, 1996, the Commission adopted an initial Notice of Proposed
Rulemaking and Order Establishing Joint Board, 61 FR 10499 (March 14,
1996) seeking comments on recommended changes to our regulations to
implement the universal service directives of the Telecommunications
Act of 1996.
A. Proposed Mechanisms for Separating Interstate and Intrastate
Revenues
a. Good Faith Estimates
3. We tentatively conclude that we should provide specific guidance
to wireless telecommunications providers in identifying their
interstate revenues, as required on the Universal Service Worksheet
(Worksheet). Certain parties initially proposed that we adopt on a
permanent basis the revenue reporting approach relied upon for purposes
of the Telecommunications Relay Services (TRS) Fund Worksheet. The
Commission's TRS rules permit carriers that are not subject to the
Uniform System of Accounts (USOA) in Part 32, such as CMRS providers,
to rely on a special study to estimate their percentages of interstate
and international traffic. Under this approach, contributors must
document how they calculated their estimates and make such information
available to the Commission or TRS Administrator upon request. Although
the NECA II Order, 62 FR 47369 (September 9, 1997), permitted certain
universal service contributors, on an interim basis, to make good faith
estimates of their interstate revenues along the lines of the special
study method used for TRS, we tentatively conclude that we should not
adopt this approach on a permanent basis. Given the greater impact
universal service contributions have on carriers, we tentatively agree
with CTIA and Comcast that allowing carriers to rely on good faith
estimates on a permanent basis as a means of distinguishing
contributors' interstate and intrastate revenues will not provide
contributors with sufficient certainty as to the appropriate amount of
their payment obligations and may result in inequities in payment
obligations. Comcast contends that the Commission should provide
specific guidance on this issue to minimize the ``potential for
systematic underreporting or underestimating of revenues, or, in some
cases, overestimation of revenues.'' Specifically, Comcast suggests
that, without establishing relevant markets according to which carriers
report their percentage of interstate telecommunications revenues,
larger wireless carriers will ``average down their interstate
percentages by including [revenue information from] distant markets.''
We seek comment on the merits of our tentative conclusions and on how
we might amend our rules in a manner that would provide certainty and
avoid substantial inequities in payment obligations.
b. Percentage of Interstate Revenues Estimates
4. We tentatively conclude that, as proposed by Comcast, the
Commission should establish a fixed percentage of interstate end-user
wireless telecommunications revenues that a wireless telecommunications
provider
[[Page 68226]]
must report on the Worksheet. It appears that such an approach would
eliminate competitive inequities that may be associated with the use of
differing allocation assumptions and methodologies. We invite parties
to comment on the use of such an approach for determining the
interstate wireless telecommunications revenues for wireless
telecommunications providers.
5. Given that various categories of wireless providers may have
substantially differing levels of interstate traffic, we also
tentatively conclude that we should establish different percentages
according to the type of provider (e.g., cellular, broadband PCS,
paging, and SMR). We adopt a similar approach for our interim
guidelines for wireless providers' reporting on the Worksheet of their
interstate wireless telecommunications revenues. Although this approach
recognizes that interstate traffic levels may differ among differing
classes of wireless providers, it assumes that such levels are
generally similar among competing carriers with similar systems and
operations. We seek comment on whether this is a reasonable assumption.
6. With regard to broadband PCS and cellular services, we seek
comment on whether the fixed percentage of interstate
telecommunications revenues that must be reported on the Worksheet
should be based on the level of interstate traffic experienced by
wireline providers. We seek comment on whether the similarities between
broadband PCS, cellular, and traditional wireline services are
sufficient to warrant such an outcome. For wireline services, current
Commission statistics indicate that the nationwide average percentage
of interstate wireline traffic reported for the DEM weighting program
is approximately 15 percent. We seek comment on whether cellular and
broadband PCS providers should report 15 percent of their cellular and
PCS revenues as interstate. We note that members of the wireless
telecommunications industry have suggested that 15 percent represents a
reasonable approximation of the percentage of cellular and PCS traffic
that is interstate. We are not aware of evidence that cellular and
broadband PCS providers experience substantially more or less
interstate traffic than wireline providers, nor do we have evidence
before us to indicate that the level of interstate traffic for wireline
carriers reporting under the DEM weighting program differs
substantially from wireline carriers as a whole. At the same time, we
are cognizant that, due to the difference in pricing structures between
wireline service and wireless service, the level of interstate
telecommunications revenues generated by each type of service may vary
from one to another. Moreover, some cellular and PCS carriers have
reported as much as 28 percent of their revenues as interstate, which
may represent a more accurate accounting given that carriers have
incentives to underreport their interstate revenues for universal
service reporting purposes. We therefore invite parties to comment on
the appropriateness of using data submitted for purposes of the DEM
weighting program to approximate the percentage of interstate cellular
and PCS revenues generated by wireless telecommunications providers.
7. We recognize that analog SMR and paging services do not as
closely resemble broadband PCS, cellular, or traditional wireline
services, and therefore seek comment on an appropriate estimation of
these providers' interstate analog SMR and paging revenues. We adopt
interim guidelines for paging and analog SMR providers, based on the
average interstate revenues percentage reported by those carriers in
1998. Paging providers and analog SMR providers reported, on average,
interstate paging and analog SMR revenue levels at approximately 12
percent and one percent, respectively. Unlike our estimate for the
interstate portion of cellular and PCS revenues, however, the DEM
weighting reports do not provide the Commission with an independent
source for estimating the portion of paging and analog SMR revenues
that is interstate. We also note that these carriers may have
incentives to underreport their interstate revenues for universal
service reporting purposes. We seek comment on whether the 12 percent
average reported by paging carriers and one percent reported by analog
SMR providers should form the basis for the final fixed percentages,
and, if not, what would be an appropriate allocation. We are interested
in knowing of any other mechanisms that, like DEM weighting, could
provide an independent basis for a permanent rule for analog SMR and
paging carriers. Parties are encouraged to provide alternative
estimations of the percentage of interstate traffic experienced by
analog SMR and paging providers and a detailed basis for the
estimation.
8. According to the American Mobile Telecommunications Association
(AMTA), SMR providers, with the possible exception of NEXTEL, generate
relatively low levels of interstate traffic. We seek comment on this
assertion and on whether any other categories of provider, such as
paging providers, generate similarly low levels of interstate
telecommunications traffic relative to other categories of providers.
We also seek comment on how to treat providers, like NEXTEL, that may
generate atypical levels of interstate traffic. Likewise, we seek
comment on whether any category of provider experiences higher levels
of interstate telecommunications traffic relative to other categories
of providers.
9. We note that traffic studies may represent one possible
mechanism wireless telecommunications carriers could use to determine
their percentage of interstate telecommunications revenues. We believe
that it would be reasonably simple for most wireless carriers to
conduct traffic studies and extrapolate from the data the percentage of
their revenues that should be attributed to the interstate
jurisdiction. Some wireless carriers could conduct joint traffic
studies, the results of which could be used by all similarly situated
companies. We seek comment on these proposals. Furthermore, if the
Commission elects not to use the data submitted for purposes of the DEM
weighting program to estimate the percentage of broadband PCS and
cellular revenues generated by broadband PCS and cellular providers
(i.e., 15 percent), as discussed above, one alternative would be to
derive a fixed percentage for each category of provider based upon data
reported on the 1997 TRS Fund Worksheets. Given the impact that
universal service contributions have on carriers, however, we believe
that we should establish a percentage of interstate wireless
telecommunications revenues that is based on data more certain and
accurate than what may be obtained from TRS worksheets. Therefore, we
tentatively conclude that we should not use the allocations made for
the TRS Fund Worksheet to determine the proper portion of revenues
derived from interstate calls. We seek comment on this tentative
conclusion.
10. We also seek comment on whether the Commission should establish
different percentages within each category of provider, rather than
establishing a single percentage for each category of provider. For
example, because the service areas of some wireless telecommunications
providers may consist of many smaller states (i.e., in the northeastern
part of the United States) and thus experience a higher level of
interstate traffic than service areas in, for example, the midwestern
and western parts of the United States, the Commission could establish
various
[[Page 68227]]
percentages within each category of provider that take into
consideration the area of the country being served. Comcast asserts
that, in order to estimate accurately the percentage of broadband PCS
providers' interstate broadband PCS revenues, the Commission must first
establish an appropriate market size. Comcast recommends that the level
of interstate telecommunications revenues reported by wireless
telecommunications providers whose license territories are established
on the basis of Major Trading Areas (MTAs) should be determined on an
MTA-by-MTA basis. Comcast, which serves markets in the northeastern
part of the United States where there may be a relatively high number
of interstate calls, contends that reporting the level of interstate
revenues on an MTA-by-MTA basis would ensure consistent reporting of
interstate revenues among wireless telecommunications providers.
Comcast contends that this approach would minimize the possibility that
larger carriers, that are likely to have a relatively larger proportion
of interstate traffic, would report their interstate revenues on the
basis of an average that includes markets with relatively low levels of
interstate traffic. Comcast maintains, therefore, that carriers in a
single market would be less likely to impose widely varying charges on
bills to recover their universal service contributions. We seek comment
on Comcast's proposal. If the Commission elects to establish a market-
by-market approach, we seek comment on the appropriate market size for
wireless telecommunications providers that are not licensed on the
basis of MTAs. We also seek comment on whether the Commission should
establish different percentages within each category of provider
according to other criteria.
11. We seek comment on whether wireless telecommunications
providers should be given the option of using a Commission-established
percentage of interstate wireless telecommunications revenues, as
discussed above, or using their own data-collection procedures to
demonstrate to the Commission the percentage of their wireless
telecommunications revenues derived from interstate calls. Allowing
carriers to choose between these two options, rather than requiring all
wireless providers to use the Commission-established percentage, may be
preferable for wireless providers that are able, without substantial
difficulty, to distinguish their interstate revenues. We note that this
approach may encourage providers that can derive accurate estimates of
their revenues from their books of account nevertheless to use the
Commission-established percentage if they determine that using the
Commission established percentage provides a financial advantage. We
seek comment on whether wireless telecommunications providers that wish
to use their own data collection procedures to identify the percentage
of their end-user wireless telecommunications revenues that is derived
from interstate calls should be required to obtain a waiver from the
Commission.
12. We also seek comment on whether we should adopt for wireless
telecommunications providers a universal service contribution
methodology that does not require these carriers to allocate their
revenues as either interstate or intrastate. We seek comment on whether
it would be competitively neutral, equitable, and economically
efficient to require wireless telecommunications providers to
contribute to the universal service support mechanisms on the basis of
a flat fee per voice grade access line or voice grade equivalent,
rather than as a percentage of their revenues. We note that parties
have generally sought reconsideration of the Commission's decision to
assess carriers based on a percentage of their telecommunications
revenues, and we seek further comment on this issue with regard to
wireless carriers. We seek comment on how we would determine the amount
of such a flat charge. We are cognizant that the amount of a flat
charge may need to vary according to the type of carrier on which it is
assessed. If we were to assess different types of carriers differently,
we seek comment on how to accomplish this in a fair and equitable
manner. In connection with this issue, we seek comment on how to
establish for paging carriers a voice grade equivalent on which to
assess a flat charge, e.g., capacity level. We also seek comment on
whether we should assess wireless carriers different amounts for
business and residential subscribers. We also seek comment on whether a
flat charge would be consistent with our prior determination that
contributions to the federal high cost and low-income support
mechanisms should be assessed only on interstate revenues. We also
invite parties to comment on other methodologies that the Commission
could adopt to assess universal service contribution obligations on
wireless providers or other providers that generally do not operate
with regard to state boundaries.
c. Simplifying Assumptions
13. In this section, we seek comment on a number of proposed
simplifying assumptions that either the Commission or wireless
telecommunications providers could use to determine the appropriate
percentage of interstate wireless telecommunications revenues that
should be reported on the Worksheet. These simplifying assumptions
could be used in the event that the Commission declines to establish
the percentage of interstate wireless telecommunications revenues that
some or all categories of wireless telecommunications providers should
report on the Worksheet. Additionally, in the event that the Commission
decides to provide wireless telecommunications providers with the
option of using either a Commission-established percentage or their own
data-collection procedures to determine their percentage of interstate
wireless telecommunications revenues, wireless telecommunications
providers selecting the latter option could use these simplifying
assumptions.
14. We seek comment on whether it would be appropriate for the
Commission to adopt the following assumptions in light of the manner
and extent to which wireless telecommunications providers maintain
revenue data. These simplifying assumptions are set forth below
according to various categories of wireless telecommunications
providers. We note that certain simplifying assumptions may be relevant
to more than one category of wireless telecommunications provider.
Therefore, we invite comment on these simplifying assumptions as they
may apply to any category of wireless telecommunications provider.
i. Cellular and Broadband PCS Providers
15. Originating point of a call. CTIA proposes that, in determining
the jurisdictional nature of a call, cellular and broadband PCS
providers should consider the originating point of a call to be the
location of the antenna that first receives the call. We understand
that some wireless telecommunications providers use this approach for
purposes of reporting their revenues on the TRS Fund Worksheet and
recommend doing so for purposes of universal service reporting. We seek
comment on this proposal. To account for the situation in which an
antenna serves a region encompassing more than one state, a call would
be considered to originate in the state in which the antenna that
originally received the call is located, even though the customer
[[Page 68228]]
may be located in a different state than the antenna and even if,
during the course of a call, the customer enters another cell area
served by an antenna located in another state. We seek comment on
whether this would systematically understate the amount of revenues
derived from interstate wireless telecommunications. We also seek
comment on whether wireless telecommunications providers experience
difficulty in determining the jurisdictional nature of revenues derived
from calls that originate as wireline and terminate as wireless.
16. An assumption that a call originates in the state in which the
antenna that first receives the call is located would address CTIA's
concern that the billing systems of CMRS providers generally do not
record the location of the antenna to which the call is transferred
when the mobile customer enters a new cell area. This proposed
assumption also would address the situation described by CTIA in which
calls originating and terminating in the same state are transported,
during the course of the call, to a switch in another state. We note
that, in the Local Competition Order, 61 FR 45476 (August 29, 1996),
the Commission determined that, ``[f]or administrative convenience, the
location of the initial cell cite when a call begins shall be used as
the determinant of the geographic location of the mobile customer.'' We
seek comment on whether the originating call assumption discussed above
adequately addresses the concerns identified by CTIA.
17. Terminating point of a call. In addition to the originating
point of a call, the terminating point of a call must be identified in
order to determine the jurisdictional nature of the call. We seek
comment on whether a cellular or broadband PCS provider should assume
that a call terminates in the state that corresponds to the area code
to which the call was placed. Because we have received no evidence
indicating otherwise, we assume that this would be a reasonable
approach for determining the terminating point of a call. We seek
comment on our assumption that determining the terminating point of a
cellular or broadband PCS call in this manner is reasonable and does
not pose substantial difficulties for providers.
18. Calls originating and terminating in a Major Trading Area.
Because many wireless telecommunications providers operate without
regard to state boundaries, we seek comment on whether the Commission
should consider using MTA boundaries as the basis on which CMRS
providers might estimate the level of interstate wireless traffic for
universal service reporting purposes. Specifically, we seek comment on
whether CMRS traffic that originates and terminates within an MTA
should be classified as intrastate and all other calls classified as
interstate for purposes of the Worksheet. Because a single MTA can
occupy more than one state, this approach would result in some calls
that cross state boundaries being classified as intrastate. At the same
time, because some states have more than one MTA, a call could be
classified as interstate under this approach, even though the call
originates and terminates in the same state. We seek comment on the
significance of these observations. Because different types of wireless
telecommunications providers use different Commission-authorized
licensed territories, we also seek comment on whether we should use the
boundaries of other types of wireless licensed territories (e.g.,
Metropolitan Statistical Areas or Rural Service Areas) to differentiate
between interstate and intrastate traffic.
19. Roaming revenues. We seek comment on how ``roaming'' revenues
obtained by broadband PCS and cellular providers should be classified.
``Roaming'' occurs when customers located outside the scope of their
provider's network use a different provider's network to place and
receive calls. CTIA and AirTouch assert that when a customer is
``roaming'' on the system of another provider (the ``serving
provider''), the customer's principal provider, which is responsible
for billing the customer, receives limited information about the calls
made by the customer. In determining how a principal provider should
account for revenues generated while its customer ``roams'' on a
serving provider's system, AirTouch suggests that the principal
provider apply an established percentage to such revenues to
approximate the level of interstate usage by ``roaming'' customers. We
seek comment on AirTouch's proposal, and, assuming we adopt AirTouch's
proposal, the appropriate fixed percentage that should be applied to
such revenues. AirTouch explains that this option would eliminate the
need for extensive information exchanges between the customer's
principal provider and the serving provider. AirTouch further notes
that this approach would address the situation in which, because CMRS
providers price air-time usage differently, the identical levels of
usage do not generate uniform levels of revenues. We seek comment on
these assertions.
20. With regard to how ``roaming'' traffic should be treated for
purposes of distinguishing interstate and intrastate revenues, CTIA
notes that, some of its members have concluded that the principal
provider should treat all roaming traffic as interstate. CTIA further
states that some of its members have taken the position that calls
forwarded from the customer's principal provider to a serving provider
in the area where the customer is located should be treated as
interstate calls. We seek comment on these proposed simplifying
assumptions.
ii. Paging Providers
21. Due to the technical design of a paging system, AirTouch claims
that the information necessary to assess the jurisdictional nature of a
paging call is unavailable. AirTouch explains that a paging network
terminates communications simultaneously at all locations in its
service area, because the paging network cannot identify the location
of the paging unit. Thus, the paging network cannot identify the area
code of the location where the customer actually receives the page. In
light of these difficulties, we seek comment on any simplifying
assumptions that paging carriers may adopt in determining the
percentage of interstate paging revenues that they should report on the
Worksheet. For example, we seek comment on whether paging providers
should estimate their level of interstate traffic based, at least in
part, on the percentage of customers whose service package includes
toll-free number capabilities (e.g., 888-, 800-, and 877-numbers), with
the assumption that these customers are more likely to receive
interstate pages. If a paging provider is capable of distinguishing
between the paging revenues derived from its customers who subscribe to
local service and those who subscribe to nationwide service, we seek
comment on whether paging carriers should assume that its nationwide
customers generate more interstate traffic than the local customers. If
we were to direct wireless carriers to use a Commission-established
percentage of interstate wireless telecommunications revenues, we seek
comment on whether we should establish two percentages, one for traffic
to local paging customers and one for traffic to national paging
customers.
iii. SMR Providers
22. Analog SMR service provides land mobile communications and
consists of at least one base station transmitter and antenna, as well
as a mobile radio unit. Analog SMR service may be
[[Page 68229]]
interconnected with the public switched telephone network, which allows
mobile radio units to function essentially as a mobile telephone, or
through a dispatch system, which allows two-way, over-the-air, voice
communications only between two mobile radio units. We seek comment on
an appropriate estimation of the percentage of interstate
telecommunications revenues generated by analog SMR providers and on
whether there are appropriate simplifying assumptions to estimate the
percentage of analog SMR providers' interstate analog SMR revenues.
AMTA states that some of the dispatch systems provide service
exclusively within a state and others provide service across state
boundaries. AMTA states that, in a recent survey of its members, 63
percent of the respondents reported that their coverage areas are
intrastate, while the remaining 37 percent reported the use of systems
crossing state boundaries. AMTA also reports that 90 percent of the
survey respondents claimed to derive between zero and two percent of
their revenues from interstate service. AMTA further notes that 97
percent of the respondents maintain that they are exempt under the de
minimis standard from contributing to the universal service support
mechanisms. AMTA contends that ``the survey results to date certainly
indicate that SMR and related services bear little resemblance to mass-
market mobile telephony such as broadband PCS and cellular.'' We seek
comment on whether, and how, AMTA's survey results may be used to help
determine an appropriate percentage of analog SMR providers' interstate
analog SMR revenues. We also seek comment on other ways to arrive at
such an estimation.
iv. Point-to-point Wireless Providers
23. Unlike mobile service, which transmits a signal that may be
received by any of the mobile units within a certain area, the signal
that is transmitted as part of fixed, point-to-point wireless service
is sent directly to a fixed location. We seek comment on whether any
point-to-point wireless providers experience difficulty in reporting
their percentage of interstate telecommunications revenues. If so, we
seek comment on ways to estimate such carriers' level of interstate
telecommunications revenues derived from the provision of fixed, point-
to-point service and on whether any simplifying assumptions should be
applied to this type of provider. Because the service offered by
entities that provide wireless telecommunications on a fixed, point-to-
point basis is not mobile in nature, such entities' contribution
compliance concerns may differ from those of broadband PCS and cellular
providers.
d. AirTouch's Methodology
24. AirTouch states that its jurisdictional tracking system is able
to determine, with a reasonable degree of accuracy, whether a
particular cellular call is interstate or intrastate. AirTouch explains
that its tracking system initially was developed for state tax
purposes. According to AirTouch, this tracking system forwards data
received from the originating switch to databases used for billing. The
databases compiled from this data enable AirTouch to compare the
originating switch location with the terminating area code. AirTouch
uses this capability to estimate the percentage of interstate airtime
usage and then applies this percentage to an estimated level of total
end-user revenues, which yields the amount of interstate revenues.
AirTouch explains that the total-revenues estimate includes charges for
airtime revenues and monthly access charges, less non-
telecommunications revenues. Revenues from long-distance resale,
AirTouch further explains, are then included for purposes of
determining the total interstate revenues figure reported on the
Worksheet. We seek comment on the extent to which wireless
telecommunications and other providers are capable of distinguishing
their interstate and intrastate revenues using the method employed by
AirTouch or could, without substantial difficulty, adopt such a method.
We seek comment on whether wireless telecommunications carriers that
use a method similar to that described by AirTouch to identify their
interstate revenues should be allowed to do so, in the event that the
Commission adopts, for universal service reporting purposes, a
Commission-established percentage. In addition, we seek comment on
whether, for purposes of assessing certain charges, such as state
universal service charges or state taxes, wireless providers are
already required to distinguish their revenues in a way that could be
applied to their federal universal service reporting obligations.
25. AirTouch notes that its tracking system may yield inaccurate
information to the extent that the interstate portion of a call is not
recorded when the call originates as intrastate but terminates as
interstate due to the customer crossing a state boundary. Similarly, we
note that a tracking system like the one employed by AirTouch also may
yield inaccurate results when a call originates as interstate and
terminates as intrastate due to the customer crossing a state boundary.
We seek comment on whether the potential inaccuracies that may arise
from these two scenarios would, when taken together, tend to cancel
each other out and thus have no measurable effect.
e. Other Issues Surrounding Universal Service Reporting Requirements
26. We seek comment on whether wireless telecommunications
providers experience difficulty in complying with any universal service
reporting requirements other than identifying their interstate and
intrastate revenues, as described above. We also seek comment on any
other actions that the Commission might take to ensure that wireless
telecommunications providers are treated in an equitable and
nondiscriminatory manner with respect to the universal service
reporting and contribution obligations.
f. Providers Other Than Wireless Telecommunications Providers
27. In the previous sections, we discuss possible mechanisms that
wireless telecommunications providers could use in allocating their
wireless telecommunications revenues between the interstate and
intrastate jurisdictions for universal service reporting purposes. We
also seek comment whether there are other types of providers, such as
satellite providers, that may not be able to derive easily from their
books of account their percentage of interstate and intrastate
telecommunications revenues. Parties are invited to address whether the
proposals discussed in this Further Notice, such as the simplifying
assumptions discussed, might benefit other telecommunications providers
that cannot readily distinguish their interstate and intrastate
revenues for universal service reporting purposes.
B. Competitive Neutrality
28. In the Universal Service Order, 62 FR 32862 (June 17, 1997),
the Commission sought to adopt rules that would facilitate the entry of
new providers and promote competition in the context of universal
service. The Commission also sought to establish universal service
rules that are competitively and technologically neutral. We seek
comment here on the success of that goal. Specifically, we seek comment
on the extent to which our rules, in application, are accomplishing
that goal. We seek comment on the extent to which our rules facilitate
the provision of services eligible for universal service support by
providers, such as wireless
[[Page 68230]]
telecommunications providers and cable operators, that historically
have not supplied such services. We also seek comment on the extent to
which such providers are supplying the services supported by the
federal universal service support mechanisms to eligible beneficiaries.
For example, we seek comment on the extent to which wireless service
providers are supplying supported services to eligible schools and
libraries. Similarly, we seek comment on the extent to which cable and
other service providers are supplying supported services to entities
eligible for universal service support.
29. We also seek comment on whether, in practice, any of our
universal service rules discourage wireless service providers or cable
service providers from offering supported services to low-income
subscribers and rural, insular, and high cost subscribers. We also seek
comment on whether, in practice, our universal service rules may favor
unfairly one technology over another. If parties answer these
statements affirmatively, we seek specific suggestions on how those
rules could be amended, consistent with the Act, to facilitate the
provision of services eligible for universal service support by all
eligible providers.
C. Definition of Basic Service Packages To Be Provided by Eligible
Telecommunications Carriers
30. We seek comment on whether some amount of minimum local usage
should be included in the basic service packages, and if so, how to
determine that local usage requirement. In light of the cost
characteristics of mobile wireless service, we seek comment on how to
define a basic service package with a local usage requirement that
presents a realistic option to wireless customers. For example, the
obligation to provide some local usage would be rendered meaningless if
a wireless carrier could satisfy that obligation by offering, among
other service options, a basic service package containing local usage
that was priced hundreds of dollars higher than options offered by that
wireless carrier or competing carriers, so that no one selected it.
Thus we seek comment on how to ensure that a local usage requirement is
included as part of an option that represents a viable choice for
consumers. We seek comment on whether carriers should only be eligible
to receive universal service support with respect to subscribers who
select a basic service package that includes a certain amount of local
usage without additional charge. Alternatively, we seek comment on
whether carriers should only be eligible to receive universal service
support if a certain percentage of their subscribers subscribe to a
basic service package that includes a certain amount of flat-rated
local usage, because that would indicate that such package presented a
viable option to customers.
31. We also seek comment on whether we should require eligible
telecommunications carriers to include some fixed number of minutes of
use per month as part of the basic universal service package, or
whether we should require some minimum number of calls. We note that
the cost of a call for wireless carriers may vary depending on its
duration and on whether it is made during peak calling hours. These
factors may be less significant for wireline carriers. Therefore, we
seek comment on whether we should establish different requirements for
different types of carriers, and whether we should give carriers the
option of offering either a minimum number of minutes or a minimum
number of calls in their basic service package.
32. We seek comment on how much, if any, local usage to require
carriers to offer in such a basic service package in order to be
eligible for universal service support. According to the Statistics of
Common Carriers, telephone customers make, on average, 135 local calls
per month per access line. This average varies from 52 local calls per
month in Maine to 210 local calls per month in Louisiana. Other sources
report that cellular customers average 150 minutes of use per month,
and broadband PCS customers average 250 minutes of use per month. The
cellular and broadband PCS numbers are expected to increase in the
future. We seek comment on whether we should base the amount of local
usage that a carrier must offer, at least in part, on average usage
rates. Commenters that argue that no level of local usage should be
required should explain why such a requirement would not be necessary
to meet the goals of universal service. We encourage such commenters to
suggest alternative approaches that will promote universal service
goals.
33. We also seek comment on how we should determine what
constitutes local usage. We note that wireless and wireline carriers
may treat different sets of calls as ``local.'' The boundaries of the
local calling areas for wireline carriers and service areas for
eligible telecommunications carriers are set by the states, and the
value of a particular local usage requirement will depend in part on
the size of the area encompassed by the local calling area, which may
vary from state to state. We seek comment on whether, and how, to
account for differences in the size of local calling areas. We seek
comment on whether we should vary the amount of local usage that
carriers must offer depending on the size of their local calling areas.
We note that the California PUC suggested in the initial rulemaking
that we include a minimum of three dollars worth of local usage. We
seek guidance from the states on the level of local usage that we
should require from eligible carriers serving their residents, given
the size of the local calling areas and the basic service packages that
they have established, recognizing that local calling areas may be
different for customers of wireline and wireless carriers. We further
seek comment on whether the local usage requirement we establish should
be the same for business and residential users.
II. Procedural Matters and Ordering Clauses
A. Ex Parte Presentations
34. This is a permit-but-disclose notice-and-comment rulemaking
proceeding. Ex parte presentations are permitted, except during the
Sunshine Agenda period, provided that they are disclosed as provided in
the Commission's rules.
B. Initial Regulatory Flexibility Analysis
35. As required by the Regulatory Flexibility Act (RFA), the
Commission has prepared this Initial Regulatory Flexibility Analysis
(IRFA) of the possible significant economic impact on small entities by
the policies and rules proposed in this Further Notice. Written public
comments are requested on the IRFA. These comments must be filed in
accordance with the same filing deadlines as comments on the rest of
this Further Notice, and should have a separate and distinct heading
designating them as responses to the IRFA. The Commission will send a
copy of this Further Notice, including the IRFA, to the Chief Counsel
for Advocacy of the Small Business Administration (SBA) in accordance
with the RFA. See 5 U.S.C. 603(a).
36. Need for and Objectives of the Proposed Rules. In light of the
concerns raised by wireless telecommunications providers regarding the
difficulties associated with distinguishing their interstate and
intrastate revenues for universal service reporting purposes, the
Commission tentatively concludes that it should provide such providers
with specific guidance on how to separate their interstate and
intrastate revenues. Therefore, the Commission seeks comment in this
Further Notice on
[[Page 68231]]
how wireless telecommunications providers should separate their
interstate and intrastate revenues for purposes of universal service
reporting. The Commission sets forth and seeks comment on proposed
methodologies and simplifying assumptions that could be used by
wireless telecommunications providers to distinguish between their
interstate and intrastate revenues. Until we issue final rules
regarding the mechanisms that wireless telecommunications providers
should use in allocating their revenues between the interstate and
intrastate jurisdictions, we provide such providers with interim
guidelines for reporting on the Worksheet their percentage of
interstate telecommunications revenues. The Commission also seeks
comment on whether, from the perspective of wireless providers, which
historically have not supplied services eligible for universal service
support, our universal service rules are competitively neutral,
especially with regard to the schools and libraries program. Finally,
we seek comment on the definition of the basic service packages that
carriers must offer in order to be eligible to receive universal
service support.
37. Legal Basis. The proposed action is supported by Secs. 4(i),
4(j), 201-205, 254, and 403 of the Communications Act of 1934, as
amended, 47 U.S.C. 154(i), 154(j), 201-205, 254, and 403.
38. Description and Estimate of the Number of Small Entities to
which the Further Notice will Apply.
39. Radiotelephone (Wireless) Carriers. The SBA has developed a
definition of small entities for radiotelephone (wireless) companies.
According to the SBA's definition, a small business radiotelephone
company is one employing fewer than 1,500 persons. The Census Bureau
reports that there were 1,176 such companies in operation for at least
one year at the end of 1992. 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. We do not have information on the number of carriers that are
not independently owned and operated, and thus 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 the SBA's definition. Consequently, we estimate that
there are fewer than 1,164 small entity radiotelephone companies that
may be affected by the proposals included in this Further Notice.
40. Cellular Service Carriers. Neither the Commission nor the SBA
has developed a definition of small entities specifically applicable to
providers of cellular services. The closest applicable definition under
the SBA rules is for radiotelephone (wireless) companies (SIC 4812).
The most reliable source of information regarding the number of
cellular service carriers nationwide of which we are aware is the data
that the Commission collects annually in connection with the TRS
Worksheet. According to the most recent data, 792 companies reported
that they were engaged in the provision of cellular services. We have
no information on the number of carriers that are not independently
owned and operated, nor on those that have more than 1,500 employees,
and thus are unable at this time to estimate with greater precision the
number of cellular service carriers that would qualify as small
business concerns under the SBA's definition. Consequently, we estimate
that there are fewer than 792 small entity cellular service carriers
that may be affected by the proposals included in this Further Notice.
41. Paging Providers. The Commission has proposed a two-tier
definition of small businesses in the context of auctioning geographic
area paging licenses in the Common Carrier Paging and exclusive Private
Carrier Paging services. Under the proposal, a small business will be
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. Since the SBA has not yet approved this definition for paging
services, the Commission will utilize the SBA definition applicable to
radiotelephone companies, i.e., an entity employing no more than 1,500
persons. At present, there are approximately 24,000 Private Paging
licenses and 74,000 Common Carrier Paging licenses. According to
Telecommunications Industry Revenue data, there were 172 ``paging and
other mobile'' carriers reporting that they engage in these services.
Consequently, the Commission estimates that there are fewer than 172
small paging carriers. The Commission estimates that the majority of
private and common carrier paging providers would qualify as small
entities under the SBA definition.
42. Broadband PCS Licensees. The broadband PCS spectrum is divided
into six frequency blocks designated A through F. The Commission has
defined ``small entity'' in the auctions for Blocks C and F as a firm
that had average gross revenues of less than $40 million in the three
previous calendar years. This definition of ``small entity'' in the
context of broadband PCS auctions has been approved by the SBA. The
Commission has auctioned broadband PCS licenses in blocks A through F.
Of the qualified bidders in the C and F block auctions, all were
entrepreneurs. Entrepreneurs was defined for these auctions as
entities, together with affiliates, having gross revenues of less than
$125 million and total assets of less than $500 million at the time the
FCC Form 175 application was filed. Ninety bidders, including C block
reauction winners, won 493 C block licenses and 88 bidders won 491 F
block licenses. For purposes of this IRFA, the Commission assumes that
all of the 90 C block broadband PCS licensees and 88 F block broadband
PCS licensees, a total of 178 licensees, are small entities.
43. Narrowband PCS Licensees. 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 MTA and BTA narrowband PCS licenses. The Commission anticipates
a total of 561 MTA licenses and 2,958 BTA licenses will be awarded in
the auctions. 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, the
Commission assumes, for purposes of this IRFA, that all of the licenses
will be awarded to small entities, as that term is defined by the SBA.
44. 220 MHz radio services. Since the Commission has not yet
defined a small business with respect to 220 MHz radio services, it
will utilize the SBA definition applicable to radiotelephone companies,
i.e., an entity employing no more than 1,500 persons. With respect to
the 220 MHz services, the Commission has proposed a two-tiered
definition of small business for purposes of auctions: (1) for Economic
Area (EA) licensees, a firm with average annual gross revenues of not
more than $6 million for the preceding three years; and (2) for
regional and nationwide
[[Page 68232]]
licensees, a firm with average annual gross revenues of not more than
$15 million for the preceding three years. Given that nearly all
radiotelephone companies employ no more than 1,500 employees, for
purposes of this IRFA the Commission will consider the approximately
3,800 incumbent licensees as small businesses under the SBA definition.
45. Rural Radiotelephone Service. The Commission has not adopted a
definition of small business specific to the Rural Radiotelephone
Service, which is defined in Section 22.99 of the Commission's Rules. A
subset of the Rural Radiotelephone Service is BETRS, or Basic Exchange
Telephone Radio Systems. Accordingly, we will use the SBA's definition
applicable to radiotelephone companies, i.e., an entity employing fewer
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 under the SBA's definition of a small business.
46. Specialized Mobile Radio (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. This definition of a ``small entity'' in the
context of 800 MHz and 900 MHz SMR has been approved by the SBA. The
proposals included in this Further Notice 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.
47. The Commission has held auctions for geographic area licenses
in the 800 MHz and 900 MHz SMR band. There were 60 winning bidders who
qualified as small entities in the 900 MHz auction. Based on this
information, we conclude that the number of geographic area SMR
licensees affected by the rule adopted includes these 60 small
entities. In the 800 MHz SMR auction, there were 524 licenses won by
winning bidders, of which 38 licenses were won by small or very small
entities.
48. Wireless Communications Services (WCS). WCS is a wireless
service, which can be used for fixed, mobile, radiolocation, and
digital audio broadcasting satellite uses. The Commission defined
``small business'' for the WCS auction as an entity with average gross
revenues of $40 million for each of the three preceding years. The
Commission auctioned geographic area licenses in the WCS service. There
were seven winning bidders who qualified as very small business
entities and one small business entity in the WCS auction. Based on
this information, the Commission concludes that the number of
geographic area WCS licensees affected include these eight entities.
49. Description of Projected Reporting, Record keeping, and Other
Compliance Requirements. Section 254(d) states ``that all
telecommunications carriers that provide interstate telecommunications
services shall make equitable and nondiscriminatory contributions''
toward the preservation and advancement of universal service. Under the
Commission's rules, all telecommunications carriers that provide
interstate telecommunications services and some providers of interstate
telecommunications are required to contribute to the universal service
support mechanisms. Contributions for support for programs for high
cost areas and low-income consumers are assessed on the basis of
interstate and international end-user telecommunications revenues.
Contributions for support for programs for schools, libraries, and
rural health care providers are assessed on the basis of interstate,
intrastate, and international end-user telecommunications revenues.
Contributors are required to submit information on the Universal
Service Worksheet regarding their end-user telecommunications revenues.
Contributors are required to distinguish between their interstate and
intrastate revenues.
50. Steps Taken to Minimize Significant Economic Impact on Small
Entities and Significant Alternatives Considered. Throughout this
Further Notice, we seek comment on alternatives that will reduce the
impact on entities affected by these proposals. We tentatively conclude
that we should adopt a surrogate percentage that would represent the
percentage of interstate telecommunications revenues reported by
certain carriers. We believe that this tentative conclusion greatly
minimizes the administrative burden on those small carriers that
experience difficulty in identifying their interstate and intrastate
revenues. We also seek comment on a number of other simplifying
assumptions that certain carriers would apply in estimating their
percentage of interstate telecommunications revenues. Some of these
proposals may impose more administrative burdens on certain carriers
than others. We therefore seek comment on the level of administrative
burden that these proposals would impose and, in the event that such
proposals were adopted, on ways in which to reduce the level of
administrative burden that they may impose. We particularly encourage
parties to submit proposals that will reduce the administrative burden
on carriers in separating their interstate and intrastate revenues.
51. Federal Rules That May Overlap, Duplicate or Conflict with the
Proposed Rule. None.
52. It is furthered ordered that the Commission's Office of Public
Affairs, Reference Operations Division, shall send a copy of this
Further Notice of Proposed Rulemaking, including the Initial Regulatory
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
Business Administration.
C. Instructions for Filing Comments
53. Comments may be filed using the Commission's Electronic Comment
Filing System (ECFS) or by filing paper copies. See Electronic Filing
of Documents in Rulemaking Proceedings, 63 FR 24121 (1998). Comments
filed through the ECFS can be sent as an electronic file via the
Internet to http://www.fcc.gov/e-file/ecfs.html>. In completing the
transmittal screen, commenters should include their full name, Postal
Service mailing address, and the applicable docket or rulemaking
number. Parties may also submit an electronic comment by Internet e-
mail. To get filing instructions for e-mail comments, commenters should
send an e-mail to ecfs@fcc.gov, and should include the following words
in the body of the message, ``get form 