Federal-State Joint Board on Universal Service; IP-Enabled Services, 38781-38797 [06-6059]
Download as PDF
38781
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
adequate floodplain management
measures with effective enforcement
measures. The communities listed no
longer comply with the statutory
requirements, and after the effective
date, flood insurance will no longer be
available in the communities unless
remedial action takes place.
Regulatory Classification
This final rule is not a significant
regulatory action under the criteria of
section 3(f) of Executive Order 12866 of
September 30, 1993, Regulatory
Planning and Review, 58 FR 51735.
I
Executive Order 12988, Civil Justice
Reform
This rule meets the applicable
standards of Executive Order 12988.
I
Paperwork Reduction Act
This rule does not involve any
collection of information for purposes of
the Paperwork Reduction Act, 44 U.S.C.
3501 et seq.
List of Subjects in 44 CFR Part 64
Flood insurance, Floodplains.
Community
No.
State and location
Accordingly, 44 CFR part 64 is
amended as follows:
Executive Order 13132, Federalism
This rule involves no policies that
have federalism implications under
Executive Order 13132.
PART 64—[AMENDED]
1. The authority citation for part 64 is
revised to read as follows:
Authority: 42 U.S.C. 4001 et seq.;
Reorganization Plan No. 3 of 1978, 3 CFR,
1978 Comp.; p. 329; E.O. 12127, 44 FR 19367,
3 CFR, 1979 Comp.; p. 376.
§ 64.6
[Amended]
The tables published under the
authority of § 64.6 are amended as
follows:
Date certain
Federal assistance no longer
available in
SFHAs
June 12, 1975, Emerg; August 1, 1986,
Reg; July 3, 2006, Susp.
July 3, 2006 ......
July 3, 2006.
220029
Ringgold, Town of, Bienville Parish ......
Current effective
map date
470069
Region IV
Tennessee: Greenville, Town of, Greene
County.
Region VI
Louisiana:
Arcadia, Town of, Bienville Parish ........
Effective date authorization/cancellation of
sale of flood insurance in community
June 12, 1975, Emerg; March 1, 1986,
Reg; July 3, 2006, Susp.
March 30, 1976, Emerg; October 15, 1985,
Reg; July 3, 2006, Susp.
......do* ..............
Do.
......do* ..............
Do.
220030
*-do-=Ditto.
Code for reading third column: Emerg.-Emergency; Reg.-Regular; Susp.-Suspension.
Dated: June 22, 2006.
David I. Maurstad,
Mitigation Division Director, Federal
Emergency Management Agency, Department
of Homeland Security.
[FR Doc. 06–6071 Filed 7–7–06; 8:45 am]
BILLING CODE 9110–12–P
FEDERAL COMMUNICATIONS
COMMISSION
47 CFR Parts 1 and 54
[CC Docket No. 96–45, WC Docket No. 04–
36; FCC 06–94]
Federal-State Joint Board on Universal
Service; IP–Enabled Services
Federal Communications
Commission.
ACTION: Final rule.
jlentini on PROD1PC65 with RULES
AGENCY:
SUMMARY: In this document, the Federal
Communications Commission
(Commission or FCC) adopts rules that
make interim modifications to the
existing approach for assessing
contributions to the federal universal
service fund (USF or Fund) in order to
provide stability while the Commission
continues to examine more fundamental
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
reform. First, the Commission raises the
interim wireless safe harbor from its
current 28.5 percent level to 37.1
percent. Second, the Commission
establishes universal service
contribution obligations for providers of
interconnected voice over Internet
Protocol (VoIP) service. These rules are
essential for securing the viability of
universal service—a fundamental goal
of communications policy as expressed
in the Communications Act—in the
near-term.
DATES: Effective Date: These rules
contain information collection
requirements that have not been
approved by the Office of Management
and Budget (OMB). The Commission
will publish a document in the Federal
Register announcing the effective date.
Comment Date: Written comments by
the public on the new and/or modified
information collection requirements are
due September 8, 2006.
FOR FURTHER INFORMATION CONTACT:
Amy Bender, Wireline Competition
Bureau, (202) 418–1469, or via e-mail at
Amy.Bender@fcc.gov.
For additional information concerning
the Paperwork Reduction Act
information collection requirements
contained in this document, contact
PO 00000
Frm 00029
Fmt 4700
Sfmt 4700
Judith B. Herman at (202) 418–0214, or
via e-mail at Judith-B.Herman@fcc.gov.
This is a
summary of the Commission’s Report
and Order (Order) in CC Docket No. 96–
45 and WC Docket No. 04–36, FCC 06–
94, adopted June 21, 2006, and released
June 27, 2006. The complete text of this
document is available for inspection
and copying during normal business
hours in the FCC Reference Information
Center, Portals II, 445 12th Street, SW.,
Room CY–A257, Washington, DC 20554.
This document may also be purchased
from the Commission’s duplicating
contractor, Best Copy and Printing, Inc.,
445 12th Street, SW., Room CY–B402,
Washington, DC 20554, telephone (800)
378–3160 or (202) 863–2893, facsimile
(202) 863–2898, or via e-mail at
www.bcpiweb.com. It is also available
on the Commission’s Web site at https://
www.fcc.gov.
In addition to filing comments with
the Office of the Secretary, a copy of any
comments on the Paperwork Reduction
Act information collection requirements
contained herein should be submitted to
Judith B. Herman, Federal
Communications Commission, Room 1–
C804, 445 12th Street, SW., Washington,
SUPPLEMENTARY INFORMATION:
E:\FR\FM\10JYR1.SGM
10JYR1
38782
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
jlentini on PROD1PC65 with RULES
DC 20554, or via the Internet to JudithB.Herman@fcc.gov.
Compliance Dates: Providers of
interconnected VoIP service must file
FCC Form 499–Q quarterly, beginning
with the August 1, 2006 filing.
Interconnected VoIP providers must file
Blocks 1, 2, and 6 of FCC Form 499–A
prior to filing the FCC Form 499–Q on
August 1, 2006. Interconnected VoIP
providers must complete and file FCC
Form 499–A beginning on April 1, 2007.
Synopsis of the Report and Order
1. Background. In 1996, Congress
directed the Commission and the states
to take the steps necessary to establish
support mechanisms to ensure the
delivery of affordable
telecommunications services to all
Americans in a changing competitive
environment. Since then, the
Commission has undertaken a number
of reforms to fulfill the universal service
goals established by Congress, and this
Order takes additional steps to continue
to satisfy these goals.
2. The interim revisions adopted in
this Order respond to changes that have
occurred in recent years in the
telecommunications market, but retain
the essential elements of the current
approach to USF contributions.
Specifically, while stand-alone
interstate long distance revenues have
been declining, wireless services and
interconnected VoIP services, both of
which typically include bundled long
distance service, have been growing
dramatically. As noted below, from
December 2000 to December 2004, the
number of wireless subscribers grew
from approximately 101 million to
approximately 181 million, and wireless
providers’ revenues grew from
approximately $70 billion to
approximately $122 billion. Similarly,
the number of VoIP subscribers has
grown from about 150 thousand at the
end of 2003 to about 4.2 million at the
end of 2005. The interim revisions made
in this Order respond to these growing
pressures on the stability and
sustainability of the Fund.
3. Of particular relevance to this
Order are three prior Commission
actions. First, in 2002, the Commission
sought additional comment on the
ability of mobile wireless providers to
report actual interstate end-user
telecommunications revenue and
whether the Commission should
eliminate the interim safe harbor of 28.5
percent that it had established for
mobile wireless providers. Second, as
part of its efforts to ensure the long-term
stability and sufficiency of the universal
service support system in an
increasingly competitive marketplace,
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
the Commission began a proceeding to
revisit the universal service contribution
methodology in May 2001. In its Notice
of Proposed Rulemaking, the
Commission sought comment generally
on whether and how to streamline and
reform the contribution assessment
methodology. Among other things, the
Commission sought comment on
whether to modify the existing revenuebased methodology, as well as whether
to replace that methodology with one
that assesses contributions on the basis
of a flat-fee charge, such as a per-line
charge. Finally, on March 10, 2004, the
Commission initiated a proceeding to
examine issues relating to Internet
Protocol (IP)-enabled services—services
and applications making use of the IP,
including, but not limited to, VoIP
services. In the IP-Enabled Services
Notice, the Commission asked
commenters to address, among other
things, the universal service
contribution obligations of both
facilities-based and non-facilities-based
providers of IP-enabled services.
4. Discussion. In this Order, we adopt
interim revisions to the existing
approach for assessing contributions for
the federal USF that will preserve and
advance universal service in the short
term, while we continue to explore
more fundamental reform. These
interim revisions comport with the
requirements of section 254 of the 1996
Act, and do so in a manner that
responds to recent developments in the
communications industry marketplace.
See 47 U.S.C. 254. First, we raise the
interim mobile wireless safe harbor from
28.5 percent to 37.1 percent. Second, we
establish universal service contribution
obligations for providers of
interconnected VoIP service.
5. We conclude that immediate
interim measures to revise the existing
approach to USF contributions are
necessary and in the public interest to
preserve and advance universal service.
There is widespread agreement that the
Fund is currently under significant
strain. The size of the Fund has grown
significantly, with disbursements rising
from approximately $4.4 billion in 2000
to approximately $6.5 billion in 2005,
and projected to grow even further in
the coming years. Moreover, changing
market conditions, including the
decline in long distance revenue and the
growth of wireless and interconnected
VoIP services, are eroding the
assumptions that form the basis for the
current revenue-based system.
6. When the revenue-based system
was adopted in 1997, assessable
interstate revenues were growing. The
total assessable revenue base has
recently declined, however, from about
PO 00000
Frm 00030
Fmt 4700
Sfmt 4700
$79.0 billion in 2000 to about $74.7
billion in 2004, while Fund
disbursements grew from approximately
$4.4 billion in 2000 to approximately
$5.7 billion in 2004, and continued to
grow to approximately $6.5 billion in
2005. Declines in the contribution base
combined with growth in the size of the
Fund increasingly have placed upward
pressure on the percentage of assessable
revenues that must be contributed to the
Fund (the ‘‘contribution factor’’). The
contribution factor grew from 5.9
percent in the first quarter of 2000 to 8.9
percent in the fourth quarter of 2004,
and is 10.9 percent for the second
quarter of 2006. The pressure caused by
a declining revenue base combined with
growing disbursement needs jeopardizes
the immediate sufficiency and stability
of the support mechanisms,
demonstrating the need for immediate,
interim USF improvements, while we
continue to pursue long-term
fundamental reform of the contribution
methodology.
7. In making our decision today, we
considered the voluminous record in
light of the current pressures on the
Fund. We decline to adopt, at this time,
more fundamental changes to the entire
universal service program or to the
contribution methodology. For example,
one commenter has suggested that the
entire universal service program is
‘‘broken’’ and advocated that a ‘‘holistic,
coordinated rational reform of all
universal support mechanisms’’ is
necessary. It argued that reforming the
contribution methodology in isolation,
without addressing distribution issues,
is ill-advised. Other parties advocate
fundamentally reforming the
contribution methodology by moving
away from a revenue-based approach.
The scale of reforming universal service
is considerable, and we will continue to
work towards stabilizing the Fund, as
well as the entire universal service
system. We note, however, that a
consensus approach to reform has not
developed. Thus, while we recognize
that there may be merit to fundamental
reform of the current USF contribution
methodology, we find, at this time, that
the discrete interim reforms we make to
expand the contribution base will best
promote the statutory requirements set
forth in section 254 of the 1996 Act in
the near-term, while providing the
Commission with the opportunity to
continue to address the challenges of
fundamental reform.
8. Wireless Provider Contributions. To
sustain the sufficiency of the Fund at
this time, we raise the current interim
safe harbor for mobile wireless
providers from 28.5 percent to 37.1
percent, a level that better reflects that
E:\FR\FM\10JYR1.SGM
10JYR1
jlentini on PROD1PC65 with RULES
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
industry’s interstate revenues in light of
the extraordinary growth of wireless
services since 2002, the last time the
Commission revisited this issue. We
also require mobile wireless providers
that use traffic studies (rather than use
the safe harbor) to report interstate
revenues to submit those traffic studies
to USAC and to the Commission for
review.
9. The revised interim safe harbor of
37.1 percent is the highest percentage of
interstate and international usage by a
wireless company supported in the
record. Specifically, according to a
traffic study conducted by TNS
Telecoms for TracFone Wireless, the
(then) seven large national mobile
wireless service providers’ interstate
minutes of use ranged from 11.9 percent
to 37.1 percent. Accordingly, consistent
with the Commission’s previous
rationale for raising the interim wireless
safe harbor to the highest level in the
record, and based on the record now
before us, we set the revised interim
wireless safe harbor at 37.1 percent.
Mobile wireless providers that choose to
use the revised interim safe harbor must
report 37.1 percent of their
telecommunications revenues as
interstate beginning with fourth quarter
2006 projected revenues that they will
report on the August 1, 2006 FCC Form
499–Q.
10. We disagree with those parties
that assert that the Commission should
not rely on the TNS Telecoms traffic
study because of concerns with sample
size and methodology. Notably, no other
wireless provider has proposed an
alternative safe harbor level or
submitted a traffic study that looks at
various wireless providers to support a
different, updated, interim safe harbor
level. Indeed, none of the parties that
criticize the TNS Telecoms study have
submitted any data or statistical analysis
that would show a specific upward bias
in the TNS Telecoms study.
11. In light of apparent data
discrepancies revealed in a preliminary
review by Commission staff of FCC
Form 499–A filings and other reports
filed by wireless telephony providers,
we take an additional step to ensure the
accuracy of reported revenue data.
Currently, a mobile wireless provider
that reports actual revenue data must
provide, upon request, documentation
to support the reporting of actual
interstate telecommunications revenues.
We note that a mobile wireless provider
may use a traffic study as a proxy for
calculating its total amount of actual
interstate revenues. We are concerned
that the use of traffic studies may be, in
part, a cause of these data reporting
problems. For example, mobile wireless
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
providers have incentives to bias any
traffic studies to minimize their amount
of interstate and international end-user
revenues and thereby minimize their
Fund contributions; there are no
countervailing market forces to offset
these incentives. Consequently, we now
require any mobile wireless provider
that uses a traffic study to determine its
interstate end-user revenues for
universal service contribution purposes
to submit the study to the Commission
and to USAC for review. Any mobile
wireless provider using a traffic study
shall submit the traffic study no later
than the deadline for submitting the
FCC Form 499–Q for the same time
period. We also remind wireless carriers
that, while they are permitted to
continue to report revenues at either the
legal entity level or on a consolidated
basis, they are required to decide
whether to report either actual or safe
harbor revenues for all of their affiliated
legal entities within the same safe
harbor category.
12. Accordingly, we take this
opportunity to caution universal service
contributors (and other entities
reporting data to the Commission) that
we will not hesitate to use our
enforcement authority to investigate and
remedy these and other discrepancies in
data reported to the Commission.
Moreover, we expect filers that have
made reporting errors to re-file the
relevant FCC forms or reports as soon as
possible (regardless of whether the
forms are due to the Commission,
USAC, or another entity). To the extent
that filers determine that they should
have made additional contributions to
the Fund, we further expect those
entities to work with USAC to resolve
their contribution obligations.
13. Interconnected VoIP Services. We
require providers of ‘‘interconnected
VoIP services,’’ as defined by the
Commission, to contribute to the federal
USF under the existing contribution
methodology on an interim basis. As
described above, the number of VoIP
subscribers in the United States has
grown significantly in recent years, and
we expect that trend to continue. At the
same time, the USF contribution base
has been shrinking, and the contribution
factor has risen considerably as a result.
We therefore find that extending USF
contribution obligations to providers of
interconnected VoIP services is
necessary at this time in order to
respond to these growing pressures on
the stability and sustainability of the
Fund.
14. The Commission has not yet
classified interconnected VoIP services
as ‘‘telecommunications services’’ or
‘‘information services’’ under the
PO 00000
Frm 00031
Fmt 4700
Sfmt 4700
38783
definitions of the Act. Again here, we do
not classify these services. To the extent
interconnected VoIP services are
telecommunications services, they are of
course subject to the mandatory
contribution requirement of section
254(d). Absent our final decision
classifying interconnected VoIP
services, we analyze the issues
addressed in this Order under our
permissive authority pursuant to section
254(d) and our Title I ancillary
jurisdiction. Specifically, we find that
interconnected VoIP providers are
‘‘providers of interstate
telecommunications’’ under section
254(d), and we assert the Commission’s
permissive authority to require
interconnected VoIP providers ‘‘to
contribute to the preservation and
advancement of universal service’’
because ‘‘the public interest so
requires.’’ We also exercise our ancillary
jurisdiction to extend contribution
obligations to interconnected VoIP
providers. We note that both Vonage
and the VON Coalition have stated on
the record in this proceeding their belief
that interconnected VoIP providers
should be required to contribute to the
Fund, apparently conceding that the
Commission has the authority to impose
such a requirement. Finally, we address
implementation issues related to our
requirement that interconnected VoIP
providers contribute to the USF.
15. Scope. We extend universal
service obligations to providers of
interconnected VoIP services, as
previously defined by the Commission.
The Commission has defined
‘‘interconnected VoIP services’’ as those
VoIP services that: (1) Enable real-time,
two-way voice communications; (2)
require a broadband connection from
the user’s location; (3) require IPcompatible customer premises
equipment; and (4) permit users to
receive calls from and terminate calls to
the PSTN. We emphasize that
interconnected VoIP service offers the
capability for users to receive calls from
and terminate calls to the PSTN; the
obligations we establish apply to all
VoIP communications made using an
interconnected VoIP service, even those
that do not involve the PSTN.
Furthermore, these obligations apply
regardless of how the interconnected
VoIP provider facilitates access to and
from the PSTN, whether directly or by
making arrangements with a third party.
Finally, we recognize that the definition
of interconnected VoIP services may
need to expand as new VoIP services
increasingly substitute for traditional
phone service.
16. We believe that it is appropriate
to require USF contributions from
E:\FR\FM\10JYR1.SGM
10JYR1
jlentini on PROD1PC65 with RULES
38784
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
interconnected VoIP providers because
this approach is consistent with
important principles that the
Commission has established in its
implementation of section 254 of the
Act. Specifically, the Commission has
previously found it appropriate to
extend universal service contribution
obligations to classes of providers that
benefit from universal service through
their interconnection with the PSTN. In
addition, in the Universal Service First
Report and Order, the Commission
established competitive neutrality as a
principle to guide the development of
universal service policies. As discussed
in more detail below, we find that these
two principles support our conclusion
that extending universal service
contribution obligations to this
particular category of providers is in the
public interest.
17. Permissive Authority Under
Section 254(d). Section 254(d) states
that the Commission may require ‘‘[a]ny
other provider of interstate
telecommunications’’ to contribute to
universal service, ‘‘if the public interest
so requires.’’ Pursuant to the Act’s
definitions, a ‘‘provider of interstate
telecommunications’’ provides ‘‘the
transmission, between or among points
specified by the user, of information of
the user’s choosing, without change in
the form or content of the information
as sent and received.’’ Unlike providers
of interstate telecommunications
services, however, providers of
interstate telecommunications do not
necessarily ‘‘offer’’ telecommunications
‘‘for a fee directly to the public.’’ The
Commission has previously used this
permissive authority to require private
carriers and payphone aggregators to
contribute to the Fund. In the IPEnabled Services Notice, the
Commission sought comment on, among
other things, its authority, including
mandatory and permissive authority
under section 254(d), to require
universal service contributions by IPenabled service providers.
18. Providers of Interstate
Telecommunications. We find that
interconnected VoIP providers are
‘‘providers of interstate
telecommunications’’ as required for the
use of the permissive authority pursuant
section 254(d). Specifically, using the
Act’s definitions, we find that
interconnected VoIP providers
‘‘provide’’ ‘‘the transmission, between
or among points specified by the user,
of information of the user’s choosing,
without change in the form or content
of the information as sent and
received.’’
19. First, we must consider whether
interconnected VoIP providers
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
‘‘provide’’ telecommunications.
Congress did not define the term
‘‘provide’’ or ‘‘provider,’’ but the
structure of the Act informs us that
‘‘provide’’ is a different and more
inclusive term than ‘‘offer.’’ It is settled
law that the determination of what is
‘‘offered,’’ under the Act’s definitions,
‘‘turns on the nature of the functions the
end user is offered.’’ Had Congress
intended us to look at the same factors
in analyzing our permissive authority
under section 254(d), it would have
referred to ‘‘other offerors of
telecommunications.’’ Because Congress
used a different term—‘‘providers’’—we
understand Congress to have meant
something broader. Common definitions
of the term ‘‘provide’’ suggest that we
should consider the meaning of
‘‘provide’’ from a supply side, i.e., from
the provider’s point of view. For
example, Black’s Law Dictionary defines
‘‘provide’’ to mean ‘‘[t]o make, procure,
or furnish for future use, prepare. To
supply; to afford; to contribute.’’
Transmission is an input into the
finished service ‘‘offered’’ to the
customer. But from the interconnected
VoIP provider’s point of view, we
believe that the provider ‘‘provides’’
more than just a finished service. We
believe that it is reasonable to conclude
that a provider ‘‘furnishes’’ or
‘‘supplies’’ components of a service, in
this case, transmission.
20. Second, we determine that
interconnected VoIP providers provide
‘‘telecommunications.’’ As the
Commission has recognized, ‘‘the heart
of ‘telecommunications’ is
transmission.’’ The Commission has
previously concluded that
interconnected VoIP services involve
‘‘transmission of [voice] by aid of wire,
cable, or other like connection’’ and/or
‘‘transmission by radio’’ of voice.
Indeed, by definition, interconnected
VoIP services are those ‘‘permitting
users to receive calls from and terminate
calls to the PSTN.’’ To provide this
capability, interconnected VoIP
providers may rely on their own
facilities or provide access to the PSTN
through others. ‘‘Over the top’’
interconnected VoIP providers generally
purchase access to the PSTN from a
telecommunications carrier who accepts
outgoing traffic from and delivers
incoming traffic to the interconnected
VoIP provider’s media gateway. The
telecommunications carrier supplies
transmission to or from the PSTN user,
or transmits the communication to
another carrier that can transmit the
communication to the PSTN user.
Facilities-based interconnected VoIP
providers similarly enter into
PO 00000
Frm 00032
Fmt 4700
Sfmt 4700
arrangements with telecommunications
carriers to complete communications to
and from the PSTN. The
telecommunications carriers involved in
originating or terminating a
communication via the PSTN are by
definition offering
‘‘telecommunications.’’ Just as the
Commission has previously found
resellers to be supplying
telecommunications to their customers
even though they do not own or operate
the transmission facilities, we find
interconnected VoIP providers to be
‘‘providing’’ telecommunications
regardless of whether they own or
operate their own transmission facilities
or they obtain transmission from third
parties. In contrast to services that
merely use the PSTN to supply a
finished product to end users,
interconnected VoIP supplies PSTN
transmission itself to end users.
21. Finally, the Commission
previously determined that Vonage’s
interconnected VoIP service is a
jurisdictionally mixed service in which
part of the service is interstate in nature.
We believe that other interconnected
VoIP services similarly are
jurisdictionally mixed and thus are
subject to USF contributions on
interstate and international revenues.
For these reasons, we conclude that
interconnected VoIP providers are
‘‘providers of interstate
telecommunications’’ under section
254(d).
22. Public Interest. Next, we must
consider whether requiring
interconnected VoIP providers to
contribute to the USF is in the public
interest. We conclude that it is. The
Commission has previously found it in
the public interest to extend universal
service contribution obligations to
classes of providers that benefit from
universal service through their
interconnection with the PSTN. We
believe that providers of interconnected
VoIP services similarly benefit from
universal service because much of the
appeal of their services to consumers
derives from the ability to place calls to
and receive calls from the PSTN, which
is supported by universal service
mechanisms. As the Fifth Circuit
explained, ‘‘Congress designed the
universal service scheme to exact
payments from those companies
benefiting from the provision of
universal service.’’ Like other
contributors to the Fund, interconnected
VoIP providers are ‘‘dependent on the
widespread telecommunications
network for the maintenance and
expansion of their business,’’ and they
‘‘directly benefit[] from a larger and
larger network.’’ It is therefore
E:\FR\FM\10JYR1.SGM
10JYR1
jlentini on PROD1PC65 with RULES
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
consistent with Commission precedent
to impose obligations that correspond
with the benefits of universal service
that these providers already enjoy.
23. We also find that the principle of
competitive neutrality supports our
conclusion that we should require
interconnected VoIP providers to
contribute to the support mechanisms.
Competitive neutrality means that
‘‘universal service support mechanisms
and rules neither unfairly advantage nor
disadvantage one provider over another,
and neither unfairly favor nor disfavor
one technology over another.’’ As the
Commission has noted, interconnected
VoIP service ‘‘is increasingly used to
replace analog voice service.’’ As the
interconnected VoIP service industry
continues to grow, and to attract
subscribers who previously relied on
traditional telephone service, it becomes
increasingly inappropriate to exclude
interconnected VoIP service providers
from universal service contribution
obligations. Moreover, we do not want
contribution obligations to shape
decisions regarding the technology that
interconnected VoIP providers use to
offer voice services to customers or to
create opportunities for regulatory
arbitrage. The approach we adopt today
reduces the possibility that carriers with
universal service obligations will
compete directly with providers without
such obligations. We therefore find that
the principle of competitive neutrality is
served by extending universal service
obligations to interconnected VoIP
service providers.
24. Thus, based on the record before
us, we find that interconnected VoIP
providers, like telecommunications
carriers, have built their businesses, or
a part of their businesses, on access to
the PSTN. For these reasons, we find
that the public interest requires
interconnected VoIP providers, as
providers of interstate
telecommunications, to contribute to the
preservation and advancement of
universal service in the same manner as
carriers that provide interstate
telecommunications services. Finally,
we note that the inclusion of such
providers as contributors to the support
mechanisms will broaden the funding
base, lessening contribution
requirements on telecommunications
carriers or any particular class of
telecommunications providers.
25. Ancillary Jurisdiction. In addition
to permissive authority under section
254(d), we exercise our ancillary
jurisdiction under Title I of the Act to
extend universal service contribution
obligations to interconnected VoIP
providers. We conclude that regardless
of the statutory classification of these
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
services, the Commission has ancillary
jurisdiction to promote universal service
by adopting universal service
contribution rules for interconnected
VoIP services, and commenters largely
agree. Ancillary jurisdiction may be
employed, in the Commission’s
discretion, when Title I of the Act gives
the Commission subject matter
jurisdiction over the service to be
regulated and the assertion of
jurisdiction is ‘‘reasonably ancillary to
the effective performance of [its] various
responsibilities.’’ Both predicates for
ancillary jurisdiction are satisfied here.
26. First, as we concluded in the VoIP
911 Order, interconnected VoIP services
fall within the subject matter
jurisdiction granted to us in the Act.
Second, our analysis requires us to
evaluate whether imposing universal
service contribution obligations is
reasonably ancillary to the effective
performance of the Commission’s
various responsibilities. Based on the
record in this matter, we find that
section 254 and section 1 of the Act
provide the requisite nexus.
27. Section 254 requires the
Commission to establish ‘‘specific,
predictable, and sufficient mechanisms
* * * to preserve and advance
universal service.’’ The Act requires
telecommunications carriers to
contribute to those mechanisms on a
mandatory basis, and as discussed
above, section 254(d) grants the
Commission permissive authority to
require other ‘‘providers of interstate
telecommunications’’ to contribute. As
discussed above, we recognize that
interconnected VoIP service ‘‘is
increasingly used to replace analog
voice service.’’ We expect that trend to
continue. If we do not require
interconnected VoIP providers to
contribute, the revenue base that
supports the Fund will continue to
shrink, while these providers continue
to benefit from their interconnection to
the PSTN. We believe that this trend
threatens the stability of the Fund and
our action to extend contributions
obligations to interconnected VoIP
providers is ‘‘reasonably ancillary to the
effective performance of [our]
responsibilities’’ under section 254.
Thus, we determine, as required, that
the approach we adopt today ‘‘will
‘further the achievement of longestablished regulatory goals’ ’’ to
preserve and advance universal service
through specific, predictable, and
sufficient contribution mechanisms.
28. In addition, section 1 of the Act
charges the Commission with
responsibility to ‘‘make available, so far
as possible, to all the people of the
United States, * * * a rapid, efficient,
PO 00000
Frm 00033
Fmt 4700
Sfmt 4700
38785
Nation-wide, * * * wire and radio
communication service with adequate
facilities at reasonable charges.’’ In light
of this statutory mandate, promoting
universal service became one of the
Commission’s primary responsibilities
under the Act even before Congress
adopted section 254 in 1996. Before the
1996 Act, the Commission relied
exclusively on its Title I ancillary
jurisdiction to adopt regulations
establishing a fund to further this
statutory goal. In Rural Telephone
Coalition v. FCC, the United States
Court of Appeals for the District of
Columbia Circuit upheld the
Commission’s assertion of ancillary
jurisdiction to establish a funding
mechanism to support universal service
in the absence of specific statutory
authority as ancillary to its
responsibilities under section 1 of the
Act to ‘‘further the objective of making
communications service available to all
Americans at reasonable charges.’’ We
conclude that as more consumers begin
to rely on interconnected VoIP services
for their communications needs, the
action we take here ensures that the
Commission continues to ‘‘further the
achievement of long-established
regulatory goals’’ to ‘‘make available
* * * communication service with
adequate facilities at reasonable
charges.’’ Thus, pursuant to our
ancillary jurisdiction, we extend USF
contribution obligations to providers of
interconnected VoIP services.
29. Implementation. In this section,
we address implementation issues
related to our requirement that
interconnected VoIP providers
contribute to the USF. Because we are
expanding the base of contributors,
certain entities that in the past have not
been required to report interstate and
international revenues will now be
required to do so. For that reason, we
provide a brief overview of our
reporting requirements. This Order does
not fully explain all of the
Commission’s requirements.
Interconnected VoIP providers that are
new to the USF procedures should
familiarize themselves with the
Commission’s USF rules and with FCC
Forms 499–A and 499–Q
Telecommunications Reporting
Worksheets and the accompanying
instructions.
30. Identifying Revenues for Reporting
Purposes. Most interconnected VoIP
providers offer packages of services to
consumers for a single price that
include telecommunications, as
discussed above, along with CPE and/or
features that may be information
services. To the extent that an
interconnected VoIP provider has
E:\FR\FM\10JYR1.SGM
10JYR1
jlentini on PROD1PC65 with RULES
38786
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
chosen to structure its offerings in this
manner, it may use the safe harbors
established in the CPE Bundling Order
to determine the appropriate amount of
telecommunications revenues to be
reported (as distinguished from revenue
derived from non-telecommunications).
Interconnected VoIP service providers
are not obligated to use either of the safe
harbors in the CPE Bundling Order, but
we emphasize that other allocation
methods may not be considered
reasonable and will be evaluated on a
case-by-case basis in an audit context.
31. Interconnected VoIP providers
must report and contribute to the USF
on all their interstate and international
end-user telecommunications revenues.
To fulfill this obligation, interconnected
VoIP providers have three options: (1)
They may use the interim safe harbor
established in this Order; (2) they may
report based on their actual interstate
telecommunications revenues; or (3)
they may rely on traffic studies, subject
to the conditions described below.
32. As we recognized in the Vonage
Order, it is difficult for some
interconnected VoIP providers to
separate their traffic on a jurisdictional
basis. Indeed, many of these VoIP
providers have advocated to us in other
proceedings that their services are
‘‘inherently interstate.’’ Consistent with
this advocacy and based on the
conclusions in the Vonage Order, we
find that it would be reasonable for us
to treat the interconnected VoIP traffic
as 100 percent interstate for USF
purposes. Indeed, in another context
where providers were unable to separate
their interstate telecommunications
revenues from other revenues, the
Commission found a safe harbor of 100
percent to be reasonable. Nevertheless,
we establish a safe harbor that is lower
than 100 percent as a convenient
alternative for interconnected VoIP
providers. Our safe harbor is necessarily
the product of line drawing. In adopting
a safe harbor we consider what would
be an appropriate analogue. One
industry report has estimated that 83.8
percent of VoIP traffic in 2004 was
either long distance or international and
only 16.2 percent was local. Thus, it
appears that VoIP traffic is
predominantly long distance or
international. As such, it is much like
wireline toll service which similarly
offers interstate, intrastate toll, and
international services. In fact as
described below, VoIP services are often
marketed as a substitute for wireline toll
service. The percentage of interstate
revenues reported to the Commission by
wireline toll providers is 64.9 percent.
We therefore find that establishing a
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
safe harbor of 64.9 percent is reasonable
for purposes of this interim action.
33. Moreover, we believe that setting
the safe harbor at 64.9 percent is
reasonable pending the completion of
the accompanying NPRM where we seek
comment on whether to change or
eliminate all of the safe harbors. To set
the safe harbor lower would permit
providers that actually provide more
interstate service to escape universal
service contribution obligations for
some of their interstate traffic, thus
undermining our actions to preserve
and advance the goals of universal
service. Furthermore, to the extent the
safe harbor percentage is higher than
some providers’ actual interstate use,
providers may instead contribute to the
fund based on actual revenue
allocations or by conducting a traffic
study, as described below. We
encourage interconnected VoIP
providers to explore these more precise
avenues for determining the
jurisdictional nature of their revenues.
34. We do not believe that the
percentage used as the wireless safe
harbor would serve as a reasonable safe
harbor for interconnected VoIP. Indeed,
the record reflects that interconnected
VoIP service is often marketed as an
economical way to make interstate and
international calls, as a lower-cost
substitute for wireline toll service. For
purposes of a safe harbor, it is
reasonable to account for the many
customers who purchase these services
to place a high volume of interstate and
international calls, and benefit from the
pricing plans the providers offer for
such services. We believe that these
characteristics differentiate it from
wireless service. Accordingly, we find
that the interconnected VoIP safe harbor
should be substantially higher than the
wireless safe harbor in order to properly
capture interstate revenues.
35. While, as stated above,
interconnected VoIP providers may
report their actual interstate
telecommunications revenues, we
recognize that some interconnected
VoIP providers do not currently have
the ability to identify whether customer
calls are interstate and therefore subject
to the section 254(d) contribution
requirement. Indeed, a fundamental
premise of our decision to preempt
Minnesota’s regulations in the Vonage
Order was that it was impossible to
determine whether calls by Vonage’s
customers stay within or cross state
boundaries. Therefore, an
interconnected VoIP provider may rely
on traffic studies or the safe harbor
described above in calculating its
federal universal service contributions.
Alternatively, to the extent that an
PO 00000
Frm 00034
Fmt 4700
Sfmt 4700
interconnected VoIP provider develops
the capability to track the jurisdictional
confines of customer calls, it may
calculate its universal service
contributions based on its actual
percentage of interstate calls. Under this
alternative, however, we note that an
interconnected VoIP provider with the
capability to track the jurisdictional
confines of customer calls would no
longer qualify for the preemptive effects
of our Vonage Order and would be
subject to state regulation. This is
because the central rationale justifying
preemption set forth in the Vonage
Order would no longer be applicable to
such an interconnected VoIP provider.
36. In lieu of using the interim safe
harbor or reporting actual interstate
telecommunications revenues,
interconnected VoIP providers may rely
on traffic studies, as noted above, and as
wireless carriers may do. The record
indicates that traffic studies are a
feasible option for providers of
interconnected VoIP service. However,
before it can begin to base its USF
contributions on a traffic study, an
interconnected VoIP provider must
submit its proposed traffic study to the
Commission for approval. While prior
Commission approval of traffic studies
is not required for wireless carriers, we
have nonetheless identified concerns in
the wireless context with the use of
traffic studies as a replacement for
reporting actual revenues, and we now
require wireless carriers to submit their
traffic studies to the Commission and to
USAC. If we were to allow
interconnected VoIP providers to rely
on unapproved traffic studies, we would
risk extending the problems we have
identified with the use of traffic studies
by wireless carriers to a new technology,
possibly creating unforeseen problems.
For these reasons, we find it appropriate
to require prior Commission approval of
any traffic study on which an
interconnected VoIP provider proposes
to rely. Until the Commission has
approved an interconnected VoIP
provider’s proposed traffic study, that
provider may use the interim safe
harbor. We may extend this treatment to
wireless traffic studies in the future, but
we decline to do so today. While there
would be a benefit to parity of
requirements between wireless and
interconnected VoIP providers, a preapproval requirement for wireless traffic
studies would be disruptive to wireless
contributors who, unlike interconnected
VoIP providers, are already relying on
the current regime.
37. We take one additional interim
action here to ensure the health of the
USF pending broader reform. As we
stated earlier, we have not yet classified
E:\FR\FM\10JYR1.SGM
10JYR1
jlentini on PROD1PC65 with RULES
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
interconnected VoIP as either a
telecommunications service or an
information service. Because we have
not yet made that classification, some
interconnected VoIP providers may hold
themselves out as telecommunications
carriers, but others do not, considering
themselves instead to be ‘‘end users.’’
Carriers that provide
telecommunications service inputs to
the latter group of interconnected VoIP
providers therefore have been reporting
the resulting revenues as end-user
revenues and including them in their
bases. Because we do not classify
interconnected VoIP today, nor do we
attempt to quantify the magnitude of
USF contributions from carriers that
supply wholesale inputs to
interconnected VoIP providers, carriers
supplying telecommunications services
to interconnected VoIP providers who
are not themselves carriers should
continue to include the revenues
derived therefrom in their own
contribution bases for two full quarters
after the effective date of this Order.
Wholesale carriers may not exclude
these revenues by invoking the
‘‘carrier’s carrier’’ rule during this
interim period. To the extent required,
we waive here Commission rule
54.706(b) for the duration of this
requirement.
38. We recognize that, by requiring on
an interim basis that both the
underlying carrier and the
interconnected VoIP provider contribute
based (in part) on the revenues derived
from providing the underlying
transmission, the Fund may receive
contributions from telecommunications
revenues associated with the same
facilities two times. We emphasize that
this is a temporary measure, and we do
not take this step lightly. We are
concerned, however, that if carriers are
permitted to invoke the carrier’s carrier
rule immediately to exclude revenues
from interconnected VoIP providers, the
result could be a net decrease in the
Fund in the short term. Such a result
would be inconsistent with our
obligation to ensure a sufficient and
sustainable Fund and to preserve and
advance universal service. By
continuing to require contributions from
carriers supplying transmission
facilities to interconnected VoIP
providers for an additional two quarters,
we eliminate any risk of decreasing the
Fund while we implement contribution
obligations for interconnected VoIP
providers. Further, we find nothing in
section 254 of the 1996 Act that
prohibits this interim approach.
39. Reporting Requirements.
Providers of interconnected VoIP
services will follow the same basic USF
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
reporting procedures as other providers
of interstate and international
telecommunications, using the same
forms and filing instructions.
Contributors to USF report historical
gross-billed, projected gross-billed, and
projected collected end-user interstate
and international revenues quarterly on
FCC Form 499–Q. Interconnected VoIP
service providers will be required to file
FCC Form 499–Q beginning on August
1, 2006. Contributors report gross-billed
and actual collected end-user interstate
and international revenues on FCC
Form 499–A on April 1 of each year.
Interconnected VoIP service providers
will be required to file a completed FCC
Form 499–A beginning on April 1, 2007.
Interconnected VoIP providers who will
be submitting the FCC Form 499–Q for
the first time because of this Order are
not required to complete lines 115–118
on the Form until they submit the Form
for the February 1, 2007 deadline. All
other portions of the Form must be
completed beginning with the
submissions due August 1, 2006.
40. Under Commission rules, a
provider of interstate and international
telecommunications whose annual
universal service contribution is
expected to be less than $10,000 is not
required to contribute to the USF, or to
file a Telecommunications Reporting
Worksheet unless it is required to
contribute to other support and cost
recovery mechanisms. Interconnected
VoIP providers that satisfy this de
minimis exemption need not contribute
to the Fund. We find, however, that it
is appropriate to require all providers of
interconnected VoIP services—
including those that satisfy the de
minimis exemption—to register with the
Commission in order to facilitate our
enforcement of the obligations the
Commission has imposed in this Order
on providers of interconnected VoIP
services. In order to fulfill this reporting
requirement, every interconnected VoIP
provider that has not already registered
with the Commission (and designated
an agent for service of process) must
complete and file an FCC Form 499–A
with blocks 1, 2, and 6 completed.
Providers should refer to the
instructions on the revised FCC Form
499–A for additional details on how to
complete this registration requirement.
Interconnected VoIP providers will
receive an FCC Registration Number
(FRN) when they register with the
Commission. Because providers must
have an FRN in order to submit required
USF filings, it is the responsibility of the
interconnected VoIP provider to register
with the Commission and obtain an
PO 00000
Frm 00035
Fmt 4700
Sfmt 4700
38787
FRN prior to the August 1, 2006
deadline for filing FCC Form 499–Q.
41. Finally, interconnected VoIP
providers must comply with the
Commission’s rules with respect to
recovering USF contributions from their
customers. Contributors may choose to
recover part or all of their universal
service contributions from their
customers, but they are prohibited from
marking up universal service line-item
amounts above the relevant contribution
factor.
42. Technical Matters. On our own
motion, we amend section 54.5 of our
rules to correct a typographical error.
Section 54.5 currently defines
‘‘contributor’’ as ‘‘an entity required to
contribute to the universal service
support mechanisms pursuant to
§ 54.703.’’ Section 54.706 addresses
which entities are required to contribute
to the universal service support
mechanisms, not section 54.703.
Accordingly, we amend section 54.5 to
define ‘‘contributor’’ as ‘‘an entity
required to contribute to the universal
service support mechanisms pursuant to
§ 54.706.’’ Further, in the sections of our
rules that we revise to conform to this
Order, we also remove references to our
contribution methodology prior to April
1, 2003 which are now outdated.
Because these rule changes are nonsubstantive, the notice and comment
and effective date provisions of the
Administrative Procedure Act are
inapplicable.
Final Paperwork Reduction Act
Analysis
43. This document contains new
information collection requirements.
The Commission, as part of its
continuing effort to reduce paperwork
burdens, invites the general public to
comment on the information collection
requirements contained in this Report
and Order as required by the Paperwork
Reduction Act of 1995, Public Law 104–
13. Public and agency comments are
due September 8, 2006.
Final Regulatory Flexibility Analysis
44. As required by the Regulatory
Flexibility Act of 1980, as amended
(RFA), an Initial Regulatory Flexibility
Analysis (IRFA) was incorporated in the
FNPRM in CC Docket No. 96–45 and
into the NPRM in WC Docket No. 04–
36. The Commission sought written
public comment on the proposals in the
NPRMs, including comment on the
IRFAs. This present Final Regulatory
Flexibility Analysis (FRFA) conforms to
the RFA. To the extent that any
statement in this FRFA is perceived as
creating ambiguity with respect to our
rules or statements made in preceding
E:\FR\FM\10JYR1.SGM
10JYR1
38788
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
jlentini on PROD1PC65 with RULES
sections of this Order, the rules and
statements set forth in those preceding
sections shall be controlling.
1. Need for, and Objectives of, the Rules
45. In the Report and Order (Order),
the Commission makes interim
modifications to the existing approach
for assessing contributions to the federal
universal service fund (USF or Fund) in
order to maintain the stability and
sufficiency of the Fund in the near-term
in response to marketplace changes
while we continue to examine more
fundamental reform. Under the revised
approach, the Commission raises the
interim wireless safe harbor from its
current 28.5 percent level to 37.1
percent. The Commission also
establishes universal service
contribution obligations for providers of
interconnected voice over Internet
Protocol (VoIP) service. As detailed in
the Order, interconnected VoIP
providers must report and contribute to
the USF on all their interstate and
international end-user
telecommunications revenues. To fulfill
this obligation, interconnected VoIP
providers have three options: (1) They
may use the interim safe harbor of 64.9
percent established in this Order; (2)
they may report based on their actual
interstate telecommunications revenues;
or (3) they may rely on traffic studies.
The interim changes made in the Order
are essential for securing the viability of
universal service—a fundamental goal
of communications policy as expressed
in the Communications Act—in the
near-term.
46. The interim modifications
adopted in the Order respond to
marketplace developments and
minimize the impact of changes to the
current system on consumers, service
providers, and universal service
administration, while we continue to
work towards more fundamental reform.
Specifically, the revised approach to
USF contributions will ensure that all
interstate telecommunications carriers
and providers of telecommunications
contribute, on an equitable,
competitively neutral, and
nondiscriminatory basis, to our
mechanism for preserving and
advancing universal service. For
example, applying universal service
obligations to providers of
interconnected VoIP service is
consistent with the principle of
competitive neutrality. In the Universal
Service First Report and Order, the
Commission established competitive
neutrality as a principle to guide the
development of universal service
policies. Competitive neutrality means
that ‘‘universal service support
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
mechanisms and rules neither unfairly
advantage nor disadvantage one
provider over another, and neither
unfairly favor nor disfavor one
technology over another.’’ The
Commission has recognized that
interconnected VoIP service is
increasingly seen by consumers as a
potential substitute for traditional
telephone service. As interconnected
VoIP service continues to grow, and to
attract subscribers who previously
relied on traditional telephone service,
it becomes increasingly inappropriate to
exclude interconnected VoIP service
providers from universal service
contribution obligations.
47. The interim modifications will
provide near-term stability and
sustainability for the Fund by
responding to the fundamental changes
in the telecommunications market while
retaining the essential elements of the
current approach to USF contributions.
They also ensure that
telecommunications carriers and
providers of telecommunications
contribute on an equitable,
competitively neutral, and
nondiscriminatory basis, to our
mechanism for preserving and
advancing universal service. For these
reasons, the Order revises the existing
approach for assessing contributions to
the Fund.
2. Summary of Significant Issues Raised
by Public Comments in Response to the
IRFA
48. On June 15, 2006, the Office of
Advocacy of the U.S. Small Business
Administration (SBA) filed an ex parte
letter with the Commission. In its letter,
the SBA challenges the sufficiency of
the Commission’s IRFA released with
the notice of proposed rulemaking in
the IP-Enabled Services proceeding. The
SBA states that the item itself ‘‘did not
propose specific regulations and the
IRFA released with the proposal
reflected this lack of specificity.’’ The
SBA states that the IP-Enabled Services
IRFA ‘‘makes no conclusions regarding
which regulations, if any, would apply
to any entity, including small entities.’’
This analysis leads SBA to conclude
that the Commission has not analyzed
the economic impact of the actions
taken in the Order on small businesses,
and to recommend that the Commission
defer action and complete an IRFA that
it believes would meet the requirements
of the RFA.
49. We disagree with SBA that the
Commission should postpone taking
action in this proceeding to change the
safe harbor percentage for wireless
carriers and to impose universal service
obligations on interconnected VoIP
PO 00000
Frm 00036
Fmt 4700
Sfmt 4700
providers, and instead issue a
supplemental IRFA identifying and
analyzing the economic impacts on
small entities and less burdensome
alternatives. We believe the additional
steps suggested by SBA are unnecessary
because small entities already have
received sufficient notice of the issues
addressed in today’s Order and because
the Commission has considered the
economic impact on small entities and
what ways are feasible to minimize the
burdens imposed on those entities, and,
to the extent feasible, has implemented
less burdensome alternatives. Moreover,
SBA’s proposal to postpone and thus
further delay these interim actions is
antithetical to the core purpose of the
Order, which is to ensure the near-term
stability and sufficiency of the USF.
50. The Commission also received
some general small business-related
comments. Some commenters, for
example, asserted that a connectionbased methodology would be
inequitable and burdensome for small
businesses, particularly with respect to
assessment of multi-line business
connections based on the proposed tiers
of capacity outlined in the Further
Notice. Other commenters maintained
that a de minimis exemption was
essential to any contribution system
adopted by the Commission. To the
extent that these commenters’ concerns
are implicated by today’s actions, they
are discussed throughout the Order.
3. Description and Estimate of the
Number of Small Entities to Which
Rules Will Apply
51. The RFA directs agencies to
provide a description of, and, where
feasible, an estimate of the number of
small entities that may be affected by
the rules adopted herein. The RFA
generally defines the term ‘‘small
entity’’ as having the same meaning as
the terms ‘‘small business,’’ ‘‘small
organization,’’ and ‘‘small governmental
jurisdiction.’’ In addition, the term
‘‘small business’’ has the same meaning
as the term ‘‘small business concern’’
under the Small Business Act, unless
the Commission has developed one or
more definitions that are appropriate to
its activities. 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).
52. 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
E:\FR\FM\10JYR1.SGM
10JYR1
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
jlentini on PROD1PC65 with RULES
annually in its Trends in Telephone
Service report. According to data in the
most recent report, there are 5,679
interstate carriers. These carriers
include, inter alia, incumbent local
exchange carriers, competitive local
exchange carriers, competitive access
providers, interexchange carriers, other
wireline carriers and service providers
(including shared-tenant service
providers and private carriers), operator
service providers, pay telephone
operators, providers of telephone toll
service, wireless carriers and services
providers, and resellers.
53. Nationwide, there are a total of
approximately 22.4 million small
businesses, according to SBA data. 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 2002, there were
approximately 1.6 million small
organizations. The term ‘‘small
governmental jurisdiction’’ is defined
generally as ‘‘governments of cities,
towns, townships, villages, school
districts, or special districts, with a
population of less than fifty thousand.’’
Census Bureau data for 2002 indicate
that there were 87,525 local
governmental jurisdictions in the
United States. We estimate that, of this
total, 84,377 entities were ‘‘small
governmental jurisdictions.’’ Thus, we
estimate that most governmental
jurisdictions are small.
54. We have perhaps been overbroad
in our list of entities directly affected,
below, in an effort to encourage
comment.
a. Wireline Carriers and Service
Providers
55. We have included small
incumbent local exchange carriers in
this present RFA analysis. As noted
above, a ‘‘small business’’ under the
RFA is one that, inter alia, meets the
pertinent small business size standard
(e.g., a telephone communications
business having 1,500 or fewer
employees), and ‘‘is not dominant in its
field of operation.’’ The SBA’s Office of
Advocacy contends that, for RFA
purposes, small incumbent local
exchange carriers are not dominant in
their field of operation because any such
dominance is not ‘‘national’’ in scope.
We have therefore included small
incumbent local exchange carriers in
this RFA analysis, although we
emphasize that this RFA action has no
effect on Commission analyses and
determinations in other, non-RFA
contexts.
56. Incumbent Local Exchange
Carriers (LECs). Neither the Commission
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
nor the SBA has developed a small
business size standard specifically for
incumbent local exchange services. The
appropriate size standard under SBA
rules is for the category Wired
Telecommunications Carriers. Under
that size standard, such a business is
small if it has 1,500 or fewer employees.
According to Commission data, 1,303
carriers have reported that they are
engaged in the provision of incumbent
local exchange services. Of these 1,303
carriers, an estimated 1,020 have 1,500
or fewer employees and 283 have more
than 1,500 employees. Consequently,
the Commission estimates that most
providers of incumbent local exchange
service are small businesses that may be
affected by our action.
57. Competitive Local Exchange
Carriers (CLECs), Competitive Access
Providers (CAPs), ‘‘Shared-Tenant
Service Providers.’’ and ‘‘Other Local
Service Providers.’’ Neither the
Commission nor the SBA has developed
a small business size standard
specifically for these service providers.
The appropriate size standard under
SBA rules is for the category Wired
Telecommunications Carriers. Under
that size standard, such a business is
small if it has 1,500 or fewer employees.
According to Commission data, 769
carriers have reported that they are
engaged in the provision of either
competitive access provider services or
competitive local exchange carrier
services. Of these 769 carriers, an
estimated 676 have 1,500 or fewer
employees and 93 have more than 1,500
employees. In addition, 12 carriers have
reported that they are ‘‘Shared-Tenant
Service Providers,’’ and all 12 are
estimated to have 1,500 or fewer
employees. In addition, 37 carriers have
reported that they are ‘‘Other Local
Service Providers.’’ Of the 39, an
estimated 38 have 1,500 or fewer
employees and one has more than 1,500
employees. Consequently, the
Commission estimates that most
providers of competitive local exchange
service, competitive access providers,
‘‘Shared-Tenant Service Providers,’’ and
‘‘Other Local Service Providers’’ are
small entities that may be affected by
our action.
58. Local Resellers. The SBA has
developed a small business size
standard for the category of
Telecommunications Resellers. Under
that size standard, such a business is
small if it has 1,500 or fewer employees.
According to Commission data, 143
carriers have reported that they are
engaged in the provision of local resale
services. Of these, an estimated 141
have 1,500 or fewer employees and two
have more than 1,500 employees.
PO 00000
Frm 00037
Fmt 4700
Sfmt 4700
38789
Consequently, the Commission
estimates that the majority of local
resellers are small entities that may be
affected by our action.
59. Toll Resellers. The SBA has
developed a small business size
standard for the category of
Telecommunications Resellers. Under
that size standard, such a business is
small if it has 1,500 or fewer employees.
According to Commission data, 770
carriers have reported that they are
engaged in the provision of toll resale
services. Of these, an estimated 747
have 1,500 or fewer employees and 23
have more than 1,500 employees.
Consequently, the Commission
estimates that the majority of toll
resellers are small entities that may be
affected by our action.
60. Payphone Service Providers
(PSPs). Neither the Commission nor the
SBA has developed a small business
size standard specifically for payphone
services providers. The appropriate size
standard under SBA rules is for the
category Wired Telecommunications
Carriers. Under that size standard, such
a business is small if it has 1,500 or
fewer employees. According to
Commission data, 654 carriers have
reported that they are engaged in the
provision of payphone services. Of
these, an estimated 652 have 1,500 or
fewer employees and two have more
than 1,500 employees. Consequently,
the Commission estimates that the
majority of payphone service providers
are small entities that may be affected
by our action.
61. Interexchange Carriers (IXCs).
Neither the Commission nor the SBA
has developed a small business size
standard specifically for providers of
interexchange services. The appropriate
size standard under SBA rules is for the
category Wired Telecommunications
Carriers. Under that size standard, such
a business is small if it has 1,500 or
fewer employees. According to
Commission data, 316 carriers have
reported that they are engaged in the
provision of interexchange service. Of
these, an estimated 292 have 1,500 or
fewer employees and 24 have more than
1,500 employees. Consequently, the
Commission estimates that the majority
of IXCs are small entities that may be
affected by our action.
62. Operator Service Providers (OSPs).
Neither the Commission nor the SBA
has developed a small business size
standard specifically for operator
service providers. The appropriate size
standard under SBA rules is for the
category Wired Telecommunications
Carriers. Under that size standard, such
a business is small if it has 1,500 or
fewer employees. According to
E:\FR\FM\10JYR1.SGM
10JYR1
38790
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
jlentini on PROD1PC65 with RULES
Commission data, 23 carriers have
reported that they are engaged in the
provision of operator services. Of these,
an estimated 20 have 1,500 or fewer
employees and three have more than
1,500 employees. Consequently, the
Commission estimates that the majority
of OSPs are small entities that may be
affected by our action.
63. Prepaid Calling Card Providers.
Neither the Commission nor the SBA
has developed a small business size
standard specifically for prepaid calling
card providers. The appropriate size
standard under SBA rules is for the
category Telecommunications Resellers.
Under that size standard, such a
business is small if it has 1,500 or fewer
employees. According to Commission
data, 89 carriers have reported that they
are engaged in the provision of prepaid
calling cards. Of these, an estimated 88
have 1,500 or fewer employees and one
has more than 1,500 employees.
Consequently, the Commission
estimates that the majority of prepaid
calling card providers are small entities
that may be affected by our action.
64. 800 and 800-Like Service
Subscribers. Neither the Commission
nor the SBA has developed a small
business size standard specifically for
800 and 800-like service (‘‘toll free’’)
subscribers. The appropriate size
standard under SBA rules is for the
category Telecommunications Resellers.
Under that size standard, such a
business is small if it has 1,500 or fewer
employees. The most reliable source of
information regarding the number of
these service subscribers appears to be
data the Commission collects on the
800, 888, and 877 numbers in use.
According to our data, at the beginning
of January 2005, the number of 800
numbers assigned was 7,540,453; the
number of 888 numbers assigned was
5,947,789 and the number of 877
numbers assigned was 4,805,568. We do
not have data specifying the number of
these subscribers that are not
independently owned and operated or
have more than 1,500 employees, and
thus are unable at this time to estimate
with greater precision the number of toll
free subscribers that would qualify as
small businesses under the SBA size
standard. Consequently, we estimate
that there are 7,540,453 or fewer small
entity 800 subscribers; 5,947,789 or
fewer small entity 888 subscribers; and
4,805,568 or fewer small entity 877
subscribers.
b. International Service Providers
65. Satellite Telecommunications and
Other Telecommunications. There is no
small business size standard developed
specifically for providers of
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
international service. The appropriate
size standards under SBA rules are for
the two broad census categories of
‘‘Satellite Telecommunications’’ and
‘‘Other Telecommunications.’’ Under
both categories, such a business is small
if it has $13.5 million or less in average
annual receipts.
66. The first category of Satellite
Telecommunications ‘‘comprises
establishments primarily engaged in
providing point-to-point
telecommunications services to other
establishments in the
telecommunications and broadcasting
industries by forwarding and receiving
communications signals via a system of
satellites or reselling satellite
telecommunications.’’ For this category,
Census Bureau data for 2002 show that
there were a total of 371 firms that
operated for the entire year. Of this
total, 307 firms had annual receipts of
under $10 million, and 26 firms had
receipts of $10 million to $24,999,999.
Consequently, we estimate that the
majority of Satellite
Telecommunications firms are small
entities that might be affected by our
action.
67. The second category of Other
Telecommunications ‘‘comprises
establishments primarily engaged in (1)
providing specialized
telecommunications applications, such
as satellite tracking, communications
telemetry, and radar station operations;
or (2) providing satellite terminal
stations and associated facilities
operationally connected with one or
more terrestrial communications
systems and capable of transmitting
telecommunications to or receiving
telecommunications from satellite
systems.’’ For this category, Census
Bureau data for 2002 show that there
were a total of 332 firms that operated
for the entire year. Of this total, 259
firms had annual receipts of under $10
million and 15 firms had annual
receipts of $10 million to $24,999,999.
Consequently, we estimate that the
majority of Other Telecommunications
firms are small entities that might be
affected by our action.
c. Wireless Telecommunications Service
Providers
68. Below, for those services subject
to auctions, we note that, as a general
matter, the number of winning bidders
that qualify as small businesses at the
close of an auction does not necessarily
represent the number of small
businesses currently in service. Also,
the Commission does not generally track
subsequent business size unless, in the
context of assignments or transfers,
unjust enrichment issues are implicated.
PO 00000
Frm 00038
Fmt 4700
Sfmt 4700
69. Wireless Service Providers. The
SBA has developed a small business
size standard for wireless firms within
the two broad economic census
categories of ‘‘Paging’’ and ‘‘Cellular and
Other Wireless Telecommunications.’’
Under both categories, the SBA deems
a wireless business to be small if it has
1,500 or fewer employees. For the
census category of Paging, Census
Bureau data for 2002 show that there
were 807 firms in this category that
operated for the entire year. Of this
total, 804 firms had employment of 999
or fewer employees, and three firms had
employment of 1,000 employees or
more. Thus, under this category and
associated small business size standard,
the majority of firms can be considered
small. For the census category of
Cellular and Other Wireless
Telecommunications, Census Bureau
data for 2002 show that there were 1,397
firms in this category that operated for
the entire year. Of this total, 1,378 firms
had employment of 999 or fewer
employees, and 19 firms had
employment of 1,000 employees or
more. Thus, under this second category
and size standard, the majority of firms
can, again, be considered small.
70. Cellular Licensees. The SBA has
developed a small business size
standard for wireless firms within the
broad economic census category
‘‘Cellular and Other Wireless
Telecommunications.’’ Under this SBA
category, a wireless business is small if
it has 1,500 or fewer employees.
According to Commission data, 437
carriers reported that they were engaged
in the provision of cellular service,
Personal Communications Service
(PCS), or Specialized Mobile Radio
(SMR) Telephony services, which are
placed together in the data. We have
estimated that 260 of these are small,
under the SBA small business size
standard. Thus, under this category and
size standard, the majority of firms can
be considered small.
71. Common Carrier Paging. The SBA
has developed a small business size
standard for Paging, under which a
business is small if it has 1,500 or fewer
employees. According to Commission
data, 375 carriers have reported that
they are engaged in Paging or Messaging
Service. Of these, an estimated 370 have
1,500 or fewer employees, and 5 have
more than 1,500 employees.
Consequently, the Commission
estimates that the majority of paging
providers are small entities that may be
affected by our action. In addition, in
the Paging Third Report and Order, we
developed a small business size
standard for ‘‘small businesses’’ and
‘‘very small businesses’’ for purposes of
E:\FR\FM\10JYR1.SGM
10JYR1
jlentini on PROD1PC65 with RULES
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
determining their eligibility for special
provisions such as bidding credits and
installment payments. A ‘‘small
business’’ is an entity that, together with
its affiliates and controlling principals,
has average gross revenues not
exceeding $15 million for the preceding
three years. Additionally, a ‘‘very small
business’’ is an entity that, together with
its affiliates and controlling principals,
has average gross revenues that are not
more than $3 million for the preceding
three years. The SBA has approved
these small business size standards. An
auction of Metropolitan Economic Area
licenses commenced on February 24,
2000, and closed on March 2, 2000. Of
the 985 licenses auctioned, 440 were
sold. Fifty-seven companies claiming
small business status won.
72. Wireless Communications
Services. This service can be used for
fixed, mobile, radiolocation, and digital
audio broadcasting satellite uses. The
Commission established small business
size standards for the wireless
communications services (WCS)
auction. A ‘‘small business’’ is an entity
with average gross revenues of $40
million for each of the three preceding
years, and a ‘‘very small business’’ is an
entity with average gross revenues of
$15 million for each of the three
preceding years. The SBA has approved
these small business size standards. The
Commission auctioned geographic area
licenses in the WCS service. In the
auction, held in April 1997, there were
seven winning bidders that qualified as
‘‘very small business’’ entities, and one
that qualified as a ‘‘small business’’
entity.
73. Wireless Telephony. Wireless
telephony includes cellular, personal
communications services (PCS), and
specialized mobile radio (SMR)
telephony carriers. As noted earlier, the
SBA has developed a small business
size standard for ‘‘Cellular and Other
Wireless Telecommunications’’ services.
Under that SBA small business size
standard, a business is small if it has
1,500 or fewer employees. According to
Commission data, 437 carriers reported
that they were engaged in the provision
of wireless telephony. We have
estimated that 260 of these are small
under the SBA small business size
standard.
74. Broadband Personal
Communications Service. The
broadband Personal Communications
Service (PCS) spectrum is divided into
six frequency blocks designated A
through F, and the Commission has held
auctions for each block. The
Commission defined ‘‘small entity’’ for
Blocks C and F as an entity that has
average gross revenues of $40 million or
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
less in the three previous calendar
years. For Block F, an additional
classification for ‘‘very small business’’
was added and is defined as an entity
that, together with its affiliates, has
average gross revenues of not more than
$15 million for the preceding three
calendar years.’’ These standards
defining ‘‘small entity’’ in the context of
broadband PCS auctions have been
approved by the SBA. No small
businesses, within the SBA-approved
small business size standards bid
successfully for licenses in Blocks A
and B. There were 90 winning bidders
that qualified as small entities in the
Block C auctions. A total of 93 small
and very small business bidders won
approximately 40 percent of the 1,479
licenses for Blocks D, E, and F. On
March 23, 1999, the Commission reauctioned 347 C, D, E, and F Block
licenses. There were 48 small business
winning bidders. On January 26, 2001,
the Commission completed the auction
of 422 C and F Broadband PCS licenses
in Auction No. 35. Of the 35 winning
bidders in this auction, 29 qualified as
‘‘small’’ or ‘‘very small’’ businesses.
Subsequent events, concerning Auction
35, including judicial and agency
determinations, resulted in a total of 163
C and F Block licenses being available
for grant.
75. Narrowband Personal
Communications Services. To date, two
auctions of narrowband personal
communications services (PCS) licenses
have been conducted. For purposes of
the two auctions that have already been
held, ‘‘small businesses’’ were entities
with average gross revenues for the prior
three calendar years of $40 million or
less. Through these auctions, the
Commission has awarded a total of 41
licenses, out of which 11 were obtained
by small businesses. To ensure
meaningful participation of small
business entities in future auctions, the
Commission has adopted a two-tiered
small business size standard in the
Narrowband PCS Second Report and
Order. A ‘‘small business’’ is an entity
that, together with affiliates and
controlling interests, has average gross
revenues for the three preceding years of
not more than $40 million. A ‘‘very
small business’’ is an entity that,
together with affiliates and controlling
interests, has average gross revenues for
the three preceding years of not more
than $15 million. The SBA has
approved these small business size
standards. In the future, the
Commission will auction 459 licenses to
serve Metropolitan Trading Areas
(MTAs) and 408 response channel
licenses. There is also one megahertz of
PO 00000
Frm 00039
Fmt 4700
Sfmt 4700
38791
narrowband PCS spectrum that has been
held in reserve and that the Commission
has not yet decided to release for
licensing. The Commission cannot
predict accurately the number of
licenses that will be awarded to small
entities in future auctions. However,
four of the 16 winning bidders in the
two previous narrowband PCS auctions
were small businesses, as that term was
defined. The Commission assumes, for
purposes of this analysis, that a large
portion of the remaining narrowband
PCS licenses will be awarded to small
entities. The Commission also assumes
that at least some small businesses will
acquire narrowband PCS licenses by
means of the Commission’s partitioning
and disaggregation rules.
76. 220 MHz Radio Service—Phase I
Licensees. The 220 MHz service has
both Phase I and Phase II licenses. Phase
I licensing was conducted by lotteries in
1992 and 1993. There are approximately
1,515 such non-nationwide licensees
and four nationwide licensees currently
authorized to operate in the 220 MHz
band. The Commission has not
developed a small business size
standard for small entities specifically
applicable to such incumbent 220 MHz
Phase I licensees. To estimate the
number of such licensees that are small
businesses, we apply the small business
size standard under the SBA rules
applicable to ‘‘Cellular and Other
Wireless Telecommunications’’
companies. This category provides that
a small business is a wireless company
employing no more than 1,500 persons.
The Commission estimates that nearly
all such licensees are small businesses
under the SBA’s small business size
standard.
77. 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, we adopted a
small business size standard for ‘‘small’’
and ‘‘very small’’ businesses for
purposes of determining their eligibility
for special provisions such as bidding
credits and installment payments. This
small business size standard indicates
that a ‘‘small business’’ is an entity that,
together with its affiliates and
controlling principals, has average gross
revenues not exceeding $15 million for
the preceding three years. A ‘‘very small
business’’ is an entity that, together with
its affiliates and controlling principals,
has average gross revenues that do not
exceed $3 million for the preceding
three years. The SBA has approved
these small business size standards.
Auctions of Phase II licenses
commenced on September 15, 1998, and
closed on October 22, 1998. In the first
E:\FR\FM\10JYR1.SGM
10JYR1
jlentini on PROD1PC65 with RULES
38792
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
auction, 908 licenses were auctioned in
three different-sized geographic areas:
three nationwide licenses, 30 Regional
Economic Area Group (EAG) Licenses,
and 875 Economic Area (EA) Licenses.
Of the 908 licenses auctioned, 693 were
sold. Thirty-nine small businesses won
licenses in the first 220 MHz auction.
The second auction included 225
licenses: 216 EA licenses and 9 EAG
licenses. Fourteen companies claiming
small business status won 158 licenses.
78. 800 MHz and 900 MHz
Specialized Mobile Radio Licenses. The
Commission awards ‘‘small entity’’ and
‘‘very small entity’’ bidding credits in
auctions for Specialized Mobile Radio
(SMR) geographic area licenses in the
800 MHz and 900 MHz bands to firms
that had revenues of no more than $15
million in each of the three previous
calendar years, or that had revenues of
no more than $3 million in each of the
previous calendar years, respectively.
These bidding credits apply to SMR
providers in the 800 MHz and 900 MHz
bands that either hold geographic area
licenses or have obtained extended
implementation authorizations. The
Commission does not know how many
firms provide 800 MHz or 900 MHz
geographic area SMR service pursuant
to extended implementation
authorizations, nor how many of these
providers have annual revenues of no
more than $15 million. One firm has
over $15 million in revenues. The
Commission assumes, for purposes here,
that all of the remaining existing
extended implementation
authorizations are held by small
entities, as that term is defined by the
SBA. The Commission has held
auctions for geographic area licenses in
the 800 MHz and 900 MHz SMR bands.
There were 60 winning bidders that
qualified as small or very small entities
in the 900 MHz SMR auctions. Of the
1,020 licenses won in the 900 MHz
auction, bidders qualifying as small or
very small entities won 263 licenses. In
the 800 MHz auction, 38 of the 524
licenses won were won by small and
very small entities.
79. 700 MHz Guard Band Licensees.
In the 700 MHz Guard Band Order, we
adopted a small business size standard
for ‘‘small businesses’’ and ‘‘very small
businesses’’ for purposes of determining
their eligibility for special provisions
such as bidding credits and installment
payments. A ‘‘small business’’ 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
an entity that, together with its affiliates
and controlling principals, has average
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
gross revenues that are not more than $3
million for the preceding three years.
An auction of 52 Major Economic Area
(MEA) licenses commenced on
September 6, 2000, and closed on
September 21, 2000. Of the 104 licenses
auctioned, 96 licenses were sold to nine
bidders. Five of these bidders were
small businesses that won a total of 26
licenses. A second auction of 700 MHz
Guard Band licenses commenced on
February 13, 2001 and closed on
February 21, 2001. All eight of the
licenses auctioned were sold to three
bidders. One of these bidders was a
small business that won a total of two
licenses.
80. Rural Radiotelephone Service. The
Commission has not adopted a size
standard for small businesses specific to
the Rural Radiotelephone Service. A
significant subset of the Rural
Radiotelephone Service is the Basic
Exchange Telephone Radio System
(BETRS). The Commission uses the
SBA’s small business size standard
applicable to ‘‘Cellular and Other
Wireless Telecommunications,’’ i.e., an
entity employing no more than 1,500
persons. There are approximately 1,000
licensees in the Rural Radiotelephone
Service, and the Commission estimates
that there are 1,000 or fewer small entity
licensees in the Rural Radiotelephone
Service that may be affected by the rules
and policies adopted herein.
81. Air-Ground Radiotelephone
Service. The Commission has not
adopted a small business size standard
specific to the Air-Ground
Radiotelephone Service. We will use
SBA’s small business size standard
applicable to ‘‘Cellular and Other
Wireless Telecommunications,’’ 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 under the SBA small business
size standard.
82. Aviation and Marine Radio
Services. Small businesses in the
aviation and marine radio services use
a very high frequency (VHF) marine or
aircraft radio and, as appropriate, an
emergency position-indicating radio
beacon (and/or radar) or an emergency
locator transmitter. The Commission has
not developed a small business size
standard specifically applicable to these
small businesses. For purposes of this
analysis, the Commission uses the SBA
small business size standard for the
category ‘‘Cellular and Other
Telecommunications,’’ which is 1,500
or fewer employees. Most applicants for
recreational licenses are individuals.
Approximately 581,000 ship station
PO 00000
Frm 00040
Fmt 4700
Sfmt 4700
licensees and 131,000 aircraft station
licensees operate domestically and are
not subject to the radio carriage
requirements of any statute or treaty.
For purposes of our evaluations in this
analysis, we estimate that there are up
to approximately 712,000 licensees that
are small businesses (or individuals)
under the SBA standard. In addition,
between December 3, 1998 and
December 14, 1998, the Commission
held an auction of 42 VHF Public Coast
licenses in the 157.1875–157.4500 MHz
(ship transmit) and 161.775–162.0125
MHz (coast transmit) bands. For
purposes of the auction, the
Commission defined a ‘‘small’’ business
as an entity that, together with
controlling interests and affiliates, has
average gross revenues for the preceding
three years not to exceed $15 million
dollars. In addition, a ‘‘very small’’
business is one that, together with
controlling interests and affiliates, has
average gross revenues for the preceding
three years not to exceed $3 million
dollars. There are approximately 10,672
licensees in the Marine Coast Service,
and the Commission estimates that
almost all of them qualify as ‘‘small’’
businesses under the above special
small business size standards.
83. Fixed Microwave Services. Fixed
microwave services include common
carrier, private operational-fixed, and
broadcast auxiliary radio services. At
present, there are approximately 22,015
common carrier fixed licensees and
61,670 private operational-fixed
licensees and broadcast auxiliary radio
licensees in the microwave services.
The Commission has not created a size
standard for a small business
specifically with respect to fixed
microwave services. For purposes of
this analysis, the Commission uses the
SBA small business size standard for the
category ‘‘Cellular and Other
Telecommunications,’’ which is 1,500
or fewer employees. The Commission
does not have data specifying the
number of these licensees that have
more than 1,500 employees, and thus is
unable at this time to estimate with
greater precision the number of fixed
microwave service licensees that would
qualify as small business concerns
under the SBA’s small business size
standard. Consequently, the
Commission estimates that there are up
to 22,015 common carrier fixed
licensees and up to 61,670 private
operational-fixed licensees and
broadcast auxiliary radio licensees in
the microwave services that may be
small and may be affected by the rules
and policies adopted herein. We noted,
however, that the common carrier
E:\FR\FM\10JYR1.SGM
10JYR1
jlentini on PROD1PC65 with RULES
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
microwave fixed licensee category
includes some large entities.
84. Offshore Radiotelephone Service.
This service operates on several UHF
television broadcast channels that are
not used for television broadcasting in
the coastal areas of states bordering the
Gulf of Mexico. There are presently
approximately 55 licensees in this
service. We are unable to estimate at
this time the number of licensees that
would qualify as small under the SBA’s
small business size standard for
‘‘Cellular and Other Wireless
Telecommunications’’ services. Under
that SBA small business size standard,
a business is small if it has 1,500 or
fewer employees.
85. 39 GHz Service. The Commission
created a special small business size
standard for 39 GHz licenses—an entity
that has average gross revenues of $40
million or less in the three previous
calendar years. An additional size
standard for ‘‘very small business’’ is: an
entity that, together with affiliates, has
average gross revenues of not more than
$15 million for the preceding three
calendar years. The SBA has approved
these small business size standards. The
auction of the 2,173 39 GHz licenses
began on April 12, 2000 and closed on
May 8, 2000. The 18 bidders who
claimed small business status won 849
licenses. Consequently, the Commission
estimates that 18 or fewer 39 GHz
licensees are small entities that may be
affected by the rules and polices
adopted herein.
86. Multipoint Distribution Service,
Multichannel Multipoint Distribution
Service, and ITFS. Multichannel
Multipoint Distribution Service (MMDS)
systems, often referred to as ‘‘wireless
cable,’’ transmit video programming to
subscribers using the microwave
frequencies of the Multipoint
Distribution Service (MDS) and
Instructional Television Fixed Service
(ITFS). In connection with the 1996
MDS auction, the Commission
established a small business size
standard as an entity that had annual
average gross revenues of less than $40
million in the previous three calendar
years. The MDS auctions resulted in 67
successful bidders obtaining licensing
opportunities for 493 Basic Trading
Areas (BTAs). Of the 67 auction
winners, 61 met the definition of a small
business. MDS also includes licensees
of stations authorized prior to the
auction. In addition, the SBA has
developed a small business size
standard for Cable and Other Program
Distribution, which includes all such
companies generating $12.5 million or
less in annual receipts. According to
Census Bureau data for 1997, there were
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
a total of 1,311 firms in this category,
total, that had operated for the entire
year. Of this total, 1,180 firms had
annual receipts of under $10 million
and an additional 52 firms had receipts
of $10 million or more but less than $25
million. Consequently, we estimate that
the majority of providers in this service
category are small businesses that may
be affected by the rules and policies
adopted herein. This SBA small
business size standard also appears
applicable to ITFS. There are presently
2,032 ITFS licensees. All but 100 of
these licenses are held by educational
institutions. Educational institutions are
included in this analysis as small
entities. Thus, we tentatively conclude
that at least 1,932 licensees are small
businesses.
87. Local Multipoint Distribution
Service. Local Multipoint Distribution
Service (LMDS) is a fixed broadband
point-to-multipoint microwave service
that provides for two-way video
telecommunications. The auction of the
1,030 Local Multipoint Distribution
Service (LMDS) licenses began on
February 18, 1998 and closed on March
25, 1998. The Commission established a
small business size standard for LMDS
licenses as an entity that has average
gross revenues of less than $40 million
in the three previous calendar years. An
additional small business size standard
for ‘‘very small business’’ was added as
an entity that, together with its affiliates,
has average gross revenues of not more
than $15 million for the preceding three
calendar years. The SBA has approved
these small business size standards in
the context of LMDS auctions. There
were 93 winning bidders that qualified
as small entities in the LMDS auctions.
A total of 93 small and very small
business bidders won approximately
277 A Block licenses and 387 B Block
licenses. On March 27, 1999, the
Commission re-auctioned 161 licenses;
there were 40 winning bidders. Based
on this information, we conclude that
the number of small LMDS licenses
consists of the 93 winning bidders in
the first auction and the 40 winning
bidders in the re-auction, for a total of
133 small entity LMDS providers.
88. 218–219 MHz Service. The first
auction of 218–219 MHz spectrum
resulted in 170 entities winning licenses
for 594 Metropolitan Statistical Area
(MSA) licenses. Of the 594 licenses, 557
were won by entities qualifying as a
small business. For that auction, the
small business size standard was an
entity that, together with its affiliates,
has no more than a $6 million net worth
and, after federal income taxes
(excluding any carry over losses), has no
more than $2 million in annual profits
PO 00000
Frm 00041
Fmt 4700
Sfmt 4700
38793
each year for the previous two years. In
the 218–219 MHz Report and Order and
Memorandum Opinion and Order, we
established a small business size
standard for a ‘‘small business’’ as an
entity that, together with its affiliates
and persons or entities that hold
interests in such an entity and their
affiliates, has average annual gross
revenues not to exceed $15 million for
the preceding three years. A ‘‘very small
business’’ is defined as an entity that,
together with its affiliates and persons
or entities that hold interests in such an
entity and its affiliates, has average
annual gross revenues not to exceed $3
million for the preceding three years.
These size standards will be used in
future auctions of 218–219 MHz
spectrum.
89. 24 GHz—Incumbent Licensees.
This analysis may affect incumbent
licensees who were relocated to the 24
GHz band from the 18 GHz band, and
applicants who wish to provide services
in the 24 GHz band. The applicable SBA
small business size standard is that of
‘‘Cellular and Other Wireless
Telecommunications’’ companies. This
category provides that such a company
is small if it employs no more than
1,500 persons. We believe that there are
only two licensees in the 24 GHz band
that were relocated from the 18 GHz
band, Teligent and TRW, Inc. It is our
understanding that Teligent and its
related companies have less than 1,500
employees, though this may change in
the future. TRW is not a small entity.
Thus, only one incumbent licensee in
the 24 GHz band is a small business
entity.
90. 24 GHz—Future Licensees. With
respect to new applicants in the 24 GHz
band, the small business size standard
for ‘‘small business’’ is an entity that,
together with controlling interests and
affiliates, has average annual gross
revenues for the three preceding years
not in excess of $15 million. ‘‘Very
small business’’ in the 24 GHz band is
an entity that, together with controlling
interests and affiliates, has average gross
revenues not exceeding $3 million for
the preceding three years. The SBA has
approved these small business size
standards. These size standards will
apply to the future auction, if held.
d. Cable and OVS Operators
91. Cable and Other Program
Distribution. The Census Bureau defines
this category as follows: ‘‘This industry
comprises establishments primarily
engaged as third-party distribution
systems for broadcast programming. The
establishments of this industry deliver
visual, aural, or textual programming
received from cable networks, local
E:\FR\FM\10JYR1.SGM
10JYR1
jlentini on PROD1PC65 with RULES
38794
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
television stations, or radio networks to
consumers via cable or direct-to-home
satellite systems on a subscription or fee
basis. These establishments do not
generally originate programming
material.’’ The SBA has developed a
small business size standard for Cable
and Other Program Distribution, which
is: All such firms having $13.5 million
or less in annual receipts. According to
Census Bureau data for 2002, there were
a total of 1,191 firms in this category
that operated for the entire year. Of this
total, 1,087 firms had annual receipts of
under $10 million, and 43 firms had
receipts of $10 million or more but less
than $25 million. Thus, under this size
standard, the majority of firms can be
considered small.
92. Cable Companies and Systems.
The Commission has also developed its
own small business size standards, for
the purpose of cable rate regulation.
Under the Commission’s rules, a ‘‘small
cable company’’ is one serving 400,000
or fewer subscribers, nationwide.
Industry data indicate that, of 1,076
cable operators nationwide, all but
eleven are small under this size
standard. In addition, under the
Commission’s rules, a ‘‘small system’’ is
a cable system serving 15,000 or fewer
subscribers. Industry data indicate that,
of 7,208 systems nationwide, 6,139
systems have under 10,000 subscribers,
and an additional 379 systems have
10,000–19,999 subscribers. Thus, under
this second size standard, most cable
systems are small.
93. Cable System Operators. The
Communications Act of 1934, as
amended, also contains a size standard
for small cable system operators, which
is ‘‘a cable operator that, directly or
through an affiliate, serves in the
aggregate fewer than 1 percent of all
subscribers in the United States and is
not affiliated with any entity or entities
whose gross annual revenues in the
aggregate exceed $250,000,000.’’ The
Commission has determined that an
operator serving fewer than 677,000
subscribers shall be deemed a small
operator, if its annual revenues, when
combined with the total annual
revenues of all its affiliates, do not
exceed $250 million in the aggregate.
Industry data indicate that, of 1,076
cable operators nationwide, all but ten
are small under this size standard. We
note that the Commission neither
requests nor collects information on
whether cable system operators are
affiliated with entities whose gross
annual revenues exceed $250 million,
and therefore we are unable to estimate
more accurately the number of cable
system operators that would qualify as
small under this size standard.
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
94. Open Video Services. Open Video
Service (OVS) systems provide
subscription services. As noted above,
the SBA has created a small business
size standard for Cable and Other
Program Distribution. This standard
provides that a small entity is one with
$13.5 million or less in annual receipts.
The Commission has certified
approximately 25 OVS operators to
serve 75 areas, and some of these are
currently providing service. Affiliates of
Residential Communications Network,
Inc. (RCN) received approval to operate
OVS systems in New York City, Boston,
Washington, D.C., and other areas. RCN
has sufficient revenues to assure that
they do not qualify as a small business
entity. Little financial information is
available for the other entities that are
authorized to provide OVS and are not
yet operational. Given that some entities
authorized to provide OVS service have
not yet begun to generate revenues, the
Commission concludes that up to 24
OVS operators (those remaining) might
qualify as small businesses that may be
affected by the rules and policies
adopted herein.
e. Internet Service Providers
95. Internet Service Providers. The
SBA has developed a small business
size standard for Internet Service
Providers (ISPs). ISPs ‘‘provide clients
access to the Internet and generally
provide related services such as web
hosting, web page designing, and
hardware or software consulting related
to Internet connectivity.’’ Under the
SBA size standard, such a business is
small if it has average annual receipts of
$23 million or less. According to Census
Bureau data for 2002, there were 2,529
firms in this category that operated for
the entire year. Of these, 2,437 firms had
annual receipts of under $10 million,
and an additional 47 firms had receipts
of between $10 million and $24,
999,999. Consequently, we estimate that
the majority of these firms are small
entities that may be affected by our
action.
f. Other Internet-Related Entities
96. Web Search Portals. Our action
pertains to VoIP services, which could
be provided by entities that provide
other services such as e-mail, online
gaming, web browsing, video
conferencing, instant messaging, and
other, similar IP-enabled services. The
Commission has not adopted a size
standard for entities that create or
provide these types of services or
applications. However, the Census
Bureau has identified firms that
‘‘operate web sites that use a search
engine to generate and maintain
PO 00000
Frm 00042
Fmt 4700
Sfmt 4700
extensive databases of Internet
addresses and content in an easily
searchable format. Web search portals
often provide additional Internet
services, such as e-mail, connections to
other web sites, auctions, news, and
other limited content, and serve as a
home base for Internet users.’’ The SBA
has developed a small business size
standard for this category; that size
standard is $6.5 million or less in
average annual receipts. According to
Census Bureau data for 2002, there were
342 firms in this category that operated
for the entire year. Of these, 303 had
annual receipts of under $5 million, and
an additional 15 firms had receipts of
between $5 million and $9,999,999.
Consequently, we estimate that the
majority of these firms are small entities
that may be affected by our action.
97. Data Processing, Hosting, and
Related Services. Entities in this
category ‘‘primarily * * * provid[e]
infrastructure for hosting or data
processing services.’’ The SBA has
developed a small business size
standard for this category; that size
standard is $23 million or less in
average annual receipts. According to
Census Bureau data for 2002, there were
6,877 firms in this category that
operated for the entire year. Of these,
6,418 had annual receipts of under $10
million, and an additional 251 firms had
receipts of between $10 million and
$24,999,999. Consequently, we estimate
that the majority of these firms are small
entities that may be affected by our
action.
98. All Other Information Services.
‘‘This industry comprises
establishments primarily engaged in
providing other information services
(except new syndicates and libraries
and archives).’’ Our action pertains to
VoIP services, which could be provided
by entities that provide other services
such as e-mail, online gaming, web
browsing, video conferencing, instant
messaging, and other, similar IP-enabled
services. The SBA has developed a
small business size standard for this
category; that size standard is $6.5
million or less in average annual
receipts. According to Census Bureau
data for 2002, there were 155 firms in
this category that operated for the entire
year. Of these, 138 had annual receipts
of under $5 million, and an additional
four firms had receipts of between $5
million and $9,999,999. Consequently,
we estimate that the majority of these
firms are small entities that may be
affected by our action.
99. Internet Publishing and
Broadcasting. ‘‘This industry comprises
establishments engaged in publishing
and/or broadcasting content on the
E:\FR\FM\10JYR1.SGM
10JYR1
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
jlentini on PROD1PC65 with RULES
Internet exclusively. These
establishments do not provide
traditional (non-Internet) versions of the
content that they publish or broadcast.’’
The SBA has developed a small
business size standard for this census
category; that size standard is 500 or
fewer employees. According to Census
Bureau data for 2002, there were 1,362
firms in this category that operated for
the entire year. Of these, 1,351 had
employment of 499 or fewer employees,
and six firms had employment of
between 500 and 999. Consequently, we
estimate that the majority of these firms
small entities that may be affected by
our action.
100. Software Publishers. These
companies may design, develop or
publish software and may provide other
support services to software purchasers,
such as providing documentation or
assisting in installation. The companies
may also design software to meet the
needs of specific users. The SBA has
developed a small business size
standard of $23 million or less in
average annual receipts for all of the
following pertinent categories: Software
Publishers, Custom Computer
Programming Services, and Other
Computer Related Services. For
Software Publishers, Census Bureau
data for 2002 indicate that there were
6,155 firms in the category that operated
for the entire year. Of these, 7,633 had
annual receipts of under $10 million,
and an additional 403 firms had receipts
of between $10 million and
$24,999,999. For providers of Custom
Computer Programming Services, the
Census Bureau data indicate that there
were 32,269 firms that operated for the
entire year. Of these, 31,416 had annual
receipts of under $10 million, and an
additional 565 firms had receipts of
between $10 million and $24,999,999.
For providers of Other Computer
Related Services, the Census Bureau
data indicate that there were 6,357 firms
that operated for the entire year. Of
these, 6,187 had annual receipts of
under $10 million, and an additional
101 firms had receipts of between $10
million and $24,999,999. Consequently,
we estimate that the majority of the
firms in each of these three categories
are small entities that may be affected
by our action.
4. Description of Projected Reporting,
Recordkeeping, and Other Compliance
Requirements
101. As discussed in detail in the
Order, the modifications to the reporting
system only expand the scope of entities
that are required to report to include
interconnected VoIP service providers.
Under the modified reporting system,
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
contributors will continue to report
projected and historical revenues on
Form 499–Q and their annual revenues
on the Form 499–A. Failure to file the
required form by the applicable
deadline, or failure to file accurate
information on the form, could subject
a contributor to enforcement action. In
addition, we note that we retain the
requirement for an officer to certify to
the truthfulness and accuracy of the
Form 499 submitted to USAC. To ensure
that contributors report correct
information, we also require all
contributors to maintain records and
documentation to justify the
information reported in the Form 499,
and to provide such records and
documentation to the Commission and
to USAC upon request.
102. Our action today raises the
wireless safe harbor and imposes new
USF contribution obligations on
interconnected VoIP providers. We note,
however, that neither wireless providers
nor interconnected VoIP providers are
required to use the safe harbors
established in this order; they have the
additional options of basing their
contributions on actual interstate and
international revenues, or of relying on
a traffic study. We emphasize once
again that the interim actions adopted in
the Order are necessary to ensure that
all interstate telecommunications
carriers and providers of
telecommunications contribute, on an
equitable, competitively neutral, and
nondiscriminatory basis, to our
mechanism for preserving and
advancing universal service.
5. Steps Taken To Minimize Significant
Economic Impact on Small Entities, and
Significant Alternatives Considered
103. The RFA requires an agency to
describe any significant alternatives that
it has considered in reaching its
proposed approach, which may include
the following four alternatives (among
others): ‘‘(1) the establishment of
differing compliance or reporting
requirements or timetables that take into
account the resources available to small
entities; (2) the clarification,
consolidation, or simplification of
compliance or reporting requirements
under the rule for small entities; (3) the
use of performance, rather than design,
standards; and (4) an exemption from
coverage of the rule, or any part thereof,
for small entities.’’
104. With respect to wireless
providers, the Commission considered
and rejected setting the interim safe
harbor higher than the 37.1 percent
established in this Order. Similarly, the
Commission considered and rejected a
requirement that interconnected VoIP
PO 00000
Frm 00043
Fmt 4700
Sfmt 4700
38795
providers contribute on 100 percent of
their end-user revenues. Thus both
wireless and interconnected VoIP
providers—especially smaller entities—
benefit from being able to use a lower
safe harbor to report their interstate and
international end-user revenues.
105. The Commission’s application of
the de minimis exception to
interconnected VoIP providers remains
the best means of minimizing the
impact on small entities of adopting our
interim changes to USF contribution
methodology. The de minimis exception
protects small businesses and ensures
that compliance costs associated with
contributing to universal service do not
exceed actual contribution amounts. As
noted by several commenters, the de
minimis exemption is critical to
curtailing the potential administrative
costs of contributing for small entities.
106. Report to Congress: The
Commission will send a copy of the
Order, including this FRFA, in a report
to be sent to Congress and the
Government Accountability Office
pursuant to the Congressional Review
Act. In addition, the Commission will
send a copy of the Order, including this
FRFA, to the Chief Counsel for
Advocacy of the SBA. A copy of this
present summarized Order and FRFA is
also hereby published in the Federal
Register.
Ordering Clauses
107. Accordingly, it is ordered that,
pursuant to sections 1, 2, 4(i), 4(j), 201,
202, 218–220, 254, and 303(r) of the
Communications Act of 1934, as
amended, 47 U.S.C. 151, 152, 154(i)–(j),
201, 202, 218–220, 254, and 303(r), this
Report and Order and Notice of
Proposed Rulemaking in WC Docket No.
06–122, CC Docket No. 96–45, CC
Docket No. 98–171, CC Docket No. 90–
571, CC Docket No. 92–237/NSD File
No. L–00–72, CC Docket No. 99–200, CC
Docket No. 95–116, CC Docket No. 98–
170, and WC Docket No. 04–36 is
adopted, part 54 of the Commission’s
rules, 47 CFR Part 54, is amended as set
forth in Appendix A, Form 499–A is
amended as set forth in Appendix C,
and Form 499–Q is amended as set forth
in Appendix D. These rules contain
information collection requirements that
have not been approved by OMB. The
Commission will publish a document in
the Federal Register announcing the
effective date.
108. It is further ordered that,
pursuant to sections 1, 2, 4(i), 4(j), 201,
202, 218–220, 254, and 303(r) of the
Communications Act of 1934, as
amended, 47 U.S.C. 151, 152, 154(i)–(j),
201, 202, 218–220, 254, and 303(r), any
mobile wireless provider that uses a
E:\FR\FM\10JYR1.SGM
10JYR1
38796
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
traffic study to report actual interstate
revenue data for universal service
contribution purposes shall submit the
traffic study to the Commission and to
USAC.
109. It is further ordered that,
pursuant to sections 1, 2, 4(i), 4(j), 201,
202, 218–220, 254, and 303(r) of the
Communications Act of 1934, as
amended, 47 U.S.C. 151, 152, 154(i)–(j),
201, 202, 218–220, 254, and 303(r), any
provider of interconnected VoIP service
that proposes to use a traffic study to
report actual interstate revenue data for
universal service contribution purposes
shall petition the Commission for
approval of its proposed traffic study.
110. It is further ordered that the
Commission’s Consumer and
Governmental Affairs Bureau, Reference
Information Center, shall send a copy of
this Report and Order, including the
Final Regulatory Flexibility Analysis, to
the Chief Counsel for Advocacy of the
Small Business Administration.
List of Subjects in 47 CFR Parts 1 and
54
Interconnected voice over Internet
protocol services, Communications,
Telecommunications, Telephone,
Reporting and recordkeeping
requirements.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Final Rules
For the reasons discussed in the
preamble, the Federal Communications
Commission amends 47 CFR parts 1 and
54 as follows:
I
PART 1—PRACTICE AND
PROCEDURE
1. The authority citation for part 1
continues to read as follows:
I
Authority: 15 U.S.C. 79 et seq.; 47 U.S.C.
151, 154(i), 154(j), 155, 157, 225, and 303(r).
2. Amend § 1.47 by revising paragraph
(h) to read as follows:
I
§ 1.47 Service of documents and proof of
service.
jlentini on PROD1PC65 with RULES
*
*
*
*
*
(h) Every common carrier and
interconnected VoIP provider, as
defined in § 54.5 of this chapter, that is
subject to the Communications Act of
1934, as amended, shall designate an
agent in the District of Columbia, and
may designate additional agents if it so
chooses, upon whom service of all
notices, process, orders, decisions, and
requirements of the Commission may be
made for and on behalf of such carrier
or interconnected VoIP provider in any
proceeding before the Commission.
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
Such designation shall include, for both
the carrier or interconnected VoIP
provider and its designated agents, a
name, business address, telephone or
voicemail number, facsimile number,
and, if available, Internet e-mail
address. Such carrier or interconnected
VoIP provider shall additionally list any
other names by which it is known or
under which it does business, and, if the
carrier or interconnected VoIP provider
is an affiliated company, the parent,
holding, or management company.
Within thirty (30) days of the
commencement of provision of service,
such carrier or interconnected VoIP
provider shall file such information
with the Chief of the Enforcement
Bureau’s Market Disputes Resolution
Division. Such carriers and
interconnected VoIP providers may file
a hard copy of the relevant portion of
the Telecommunications Reporting
Worksheet, as delineated by the
Commission in the Federal Register, to
satisfy this requirement. Each
Telecommunications Reporting
Worksheet filed annually by a common
carrier or interconnected VoIP provider
must contain a name, business address,
telephone or voicemail number,
facsimile number, and, if available,
Internet e-mail address for its
designated agents, regardless of whether
such information has been revised since
the previous filing. Carriers and
interconnected VoIP providers must
notify the Commission within one week
of any changes in their designation
information by filing revised portions of
the Telecommunications Reporting
Worksheet with the Chief of the
Enforcement Bureau’s Market Disputes
Resolution Division. A paper copy of
this designation list shall be maintained
in the Office of the Secretary of the
Commission. Service of any notice,
process, orders, decisions or
requirements of the Commission may be
made upon such carrier or
interconnected VoIP provider by leaving
a copy thereof with such designated
agent at his office or usual place of
residence. If such carrier or
interconnected VoIP provider fails to
designate such an agent, service of any
notice or other process in any
proceeding before the Commission, or of
any order, decision, or requirement of
the Commission, may be made by
posting such notice, process, order,
requirement, or decision in the Office of
the Secretary of the Commission.
PART 54—UNIVERSAL SERVICE
3. The authority citation for part 54
continues to read as follows:
I
PO 00000
Frm 00044
Fmt 4700
Sfmt 4700
Authority: 47 U.S.C. 1, 4(i), 201, 205, 214,
and 254 unless otherwise noted.
4. Amend § 54.5 by revising the
definition of ‘‘contributor’’ and adding
the definition of ‘‘interconnected VoIP
provider’’ in alphabetical order to read
as follows:
I
§ 54.5
Terms and definitions.
*
*
*
*
*
Contributor. The term ‘‘contributor’’
shall refer to an entity required to
contribute to the universal service
support mechanisms pursuant to
§ 54.706.
*
*
*
*
*
Interconnected VoIP Provider. An
‘‘interconnected VoIP provider’’ is an
entity that provides interconnected VoIP
service, as that term is defined in
section 9.3 of these rules.
*
*
*
*
*
I 5. Amend § 54.706 by revising
paragraphs (a) introductory text, (a)(16),
(a)(17), by adding paragraph (a)(18), and
by revising paragraphs (b) and (c) to
read as follows:
§ 54.706
Contributions.
(a) Entities that provide interstate
telecommunications to the public, or to
such classes of users as to be effectively
available to the public, for a fee will be
considered telecommunications carriers
providing interstate telecommunications
services and must contribute to the
universal service support mechanisms.
Certain other providers of interstate
telecommunications, such as payphone
providers that are aggregators, providers
of interstate telecommunications for a
fee on a non-common carrier basis, and
interconnected VoIP providers, also
must contribute to the universal service
support mechanisms. Interstate
telecommunications include, but are not
limited to:
*
*
*
*
*
(16) Resale of interstate services;
(17) Payphone services; and
(18) Interconnected VoIP services.
(b) Except as provided in paragraph
(c) of this section, every entity required
to contribute to the federal universal
service support mechanisms under
paragraph (a) of this section shall
contribute on the basis of its projected
collected interstate and international
end-user telecommunications revenues,
net of projected contributions.
(c) Any entity required to contribute
to the federal universal service support
mechanisms whose projected collected
interstate end-user telecommunications
revenues comprise less than 12 percent
of its combined projected collected
interstate and international end-user
telecommunications revenues shall
E:\FR\FM\10JYR1.SGM
10JYR1
Federal Register / Vol. 71, No. 131 / Monday, July 10, 2006 / Rules and Regulations
contribute based only on such entity’s
projected collected interstate end-user
telecommunications revenues, net of
projected contributions. For purposes of
this paragraph, an ‘‘entity’’ shall refer to
the entity that is subject to the universal
service reporting requirements in
§ 54.711 and shall include all of that
entity’s affiliated providers of interstate
and international telecommunications
and telecommunications services.
*
*
*
*
*
I 6. Amend § 54.708 by adding a new
sentence after the first sentence to read
as follows:
annual closure of the shrimp fishery in
the exclusive economic zone (EEZ) off
Texas. The closure is normally from
May 15 to July 15 each year. For 2006,
the closure began on May 15, and will
end at 30 minutes after sunset on July
10. The Texas closure is intended to
prohibit the harvest of brown shrimp
during their major emigration from
Texas estuaries to the Gulf of Mexico so
the shrimp may reach a larger, more
valuable size and to prevent the waste
of brown shrimp that would be
discarded in fishing operations because
of their small size.
§ 54.708
DATES:
De minimis exemption.
* * * The foregoing notwithstanding,
all interconnected VoIP providers,
including those whose contributions
would be de minimis, must file the
Telecommunications Reporting
Worksheet. * * *
I 7. Amend § 54.712 by revising the
section heading and paragraph (a) to
read as follows:
§ 54.712 Contributor recovery of universal
service costs from end users.
(a) Federal universal service
contribution costs may be recovered
through interstate telecommunicationsrelated charges to end users. If a
contributor chooses to recover its
federal universal service contribution
costs through a line item on a
customer’s bill the amount of the federal
universal service line-item charge may
not exceed the interstate
telecommunications portion of that
customer’s bill times the relevant
contribution factor.
*
*
*
*
*
[FR Doc. 06–6059 Filed 7–7–06; 8:45 am]
BILLING CODE 6712–01–P
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric
Administration
50 CFR Part 622
[I.D. 070306A]
Fisheries of the Caribbean, Gulf of
Mexico, and South Atlantic; Shrimp
Fishery of the Gulf of Mexico; Texas
Closure
National Marine Fisheries
Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA),
Commerce.
ACTION: Adjustment of the ending date
of the Texas closure.
jlentini on PROD1PC65 with RULES
AGENCY:
SUMMARY: NMFS announces an
adjustment to the ending date of the
VerDate Aug<31>2005
16:29 Jul 07, 2006
Jkt 208001
38797
Classification
This action is authorized by 50 CFR
622.34(h)(2) and is exempt from review
under Executive Order 12866.
Authority: 16 U.S.C. 1801 et seq.
Dated: July 3, 2006.
Alan D. Risenhoover,
Acting Director, Office of Sustainable
Fisheries, National Marine Fisheries Service.
[FR Doc. 06–6098 Filed 7–5–06; 2:20 pm]
BILLING CODE 3510–22–S
DEPARTMENT OF COMMERCE
The EEZ off Texas is open to
trawl fishing from 30 minutes after
sunset on July 10, 2006.
National Oceanic and Atmospheric
Administration
Dr.
Steve Branstetter, 727–824–5305; fax:
727–824–5308; e-mail:
Steve.Branstetter@noaa.gov.
50 CFR Part 679
FOR FURTHER INFORMATION CONTACT:
The Gulf
of Mexico shrimp fishery is managed
under the Fishery Management Plan for
the Shrimp Fishery of the Gulf of
Mexico (FMP). The FMP was prepared
by the Gulf of Mexico Fishery
Management Council and is
implemented by regulations at 50 CFR
part 622 under the authority of the
Magnuson-Stevens Fishery
Conservation and Management Act. The
EEZ off Texas is normally closed to all
trawling each year from 30 minutes after
sunset on May 15 to 30 minutes after
sunset on July 15. The regulations at 50
CFR 622.34(h) describe the area of the
Texas closure and provide for
adjustments to the beginning and
ending dates by the Regional
Administrator, Southeast Region,
NMFS, under procedures and
restrictions specified in the FMP.
The beginning and ending dates of the
Texas closure are based on biological
sampling by Texas Parks and Wildlife
Department (TPWD). The closure date is
established based on projected times
that brown shrimp in Texas bays and
estuaries will reach a mean size of 90
mm, and begin strong emigrations out of
the bays and estuaries during maximum
duration ebb tides. The waters off Texas
are re-opened to shrimping when
projections indicate that brown shrimp
will reach a mean size of 112 mm, in
concurrence with maximum duration
ebb tides. Biological data collected by
TPDW indicate that the criteria to end
the Texas closure will be met on July 10,
2006. Accordingly, the time and date for
ending the Texas closure is changed
from 30 minutes after sunset on July 15,
2006, to 30 minutes after sunset on July
10, 2006.
SUPPLEMENTARY INFORMATION:
PO 00000
Frm 00045
Fmt 4700
Sfmt 4700
[Docket No. 060216045–6045–01; I.D.
070506A]
Fisheries of the Exclusive Economic
Zone Off Alaska; Pacific Ocean Perch
in the Eastern Aleutian District of the
Bering Sea and Aleutian Islands
Management Area
National Marine Fisheries
Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA),
Commerce.
ACTION: Temporary rule; closure.
AGENCY:
SUMMARY: NMFS is prohibiting directed
fishing for Pacific ocean perch in the
Eastern Aleutian District of the Bering
Sea and Aleutian Islands management
area (BSAI). This action is necessary to
prevent exceeding the 2006 Pacific
ocean perch total allowable catch (TAC)
in the Eastern Aleutian District of the
BSAI.
DATES: Effective 1200 hrs, Alaska local
time (A.l.t.), July 5, 2006, through 2400
hrs, A.l.t., December 31, 2006.
FOR FURTHER INFORMATION CONTACT: Josh
Keaton, 907–586–7228.
SUPPLEMENTARY INFORMATION: NMFS
manages the groundfish fishery in the
BSAI according to the Fishery
Management Plan for Groundfish of the
Bering Sea and Aleutian Islands
Management Area (FMP) prepared by
the North Pacific Fishery Management
Council under authority of the
Magnuson-Stevens Fishery
Conservation and Management Act.
Regulations governing fishing by U.S.
vessels in accordance with the FMP
appear at subpart H of 50 CFR part 600
and 50 CFR part 679.
The 2006 Pacific ocean perch TAC in
the Eastern Aleutian District of the BSAI
is 2,849 metric tons (mt) as established
by the 2006 and 2007 final harvest
specifications for groundfish in the
BSAI (71 FR 10894, March 3, 2006).
E:\FR\FM\10JYR1.SGM
10JYR1
Agencies
[Federal Register Volume 71, Number 131 (Monday, July 10, 2006)]
[Rules and Regulations]
[Pages 38781-38797]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-6059]
=======================================================================
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 1 and 54
[CC Docket No. 96-45, WC Docket No. 04-36; FCC 06-94]
Federal-State Joint Board on Universal Service; IP-Enabled
Services
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In this document, the Federal Communications Commission
(Commission or FCC) adopts rules that make interim modifications to the
existing approach for assessing contributions to the federal universal
service fund (USF or Fund) in order to provide stability while the
Commission continues to examine more fundamental reform. First, the
Commission raises the interim wireless safe harbor from its current
28.5 percent level to 37.1 percent. Second, the Commission establishes
universal service contribution obligations for providers of
interconnected voice over Internet Protocol (VoIP) service. These rules
are essential for securing the viability of universal service--a
fundamental goal of communications policy as expressed in the
Communications Act--in the near-term.
DATES: Effective Date: These rules contain information collection
requirements that have not been approved by the Office of Management
and Budget (OMB). The Commission will publish a document in the Federal
Register announcing the effective date.
Comment Date: Written comments by the public on the new and/or
modified information collection requirements are due September 8, 2006.
FOR FURTHER INFORMATION CONTACT: Amy Bender, Wireline Competition
Bureau, (202) 418-1469, or via e-mail at Amy.Bender@fcc.gov.
For additional information concerning the Paperwork Reduction Act
information collection requirements contained in this document, contact
Judith B. Herman at (202) 418-0214, or via e-mail at Judith-
B.Herman@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order (Order) in CC Docket No. 96-45 and WC Docket No. 04-36, FCC
06-94, adopted June 21, 2006, and released June 27, 2006. The complete
text of this document is available for inspection and copying during
normal business hours in the FCC Reference Information Center, Portals
II, 445 12th Street, SW., Room CY-A257, Washington, DC 20554. This
document may also be purchased from the Commission's duplicating
contractor, Best Copy and Printing, Inc., 445 12th Street, SW., Room
CY-B402, Washington, DC 20554, telephone (800) 378-3160 or (202) 863-
2893, facsimile (202) 863-2898, or via e-mail at www.bcpiweb.com. It is
also available on the Commission's Web site at https://www.fcc.gov.
In addition to filing comments with the Office of the Secretary, a
copy of any comments on the Paperwork Reduction Act information
collection requirements contained herein should be submitted to Judith
B. Herman, Federal Communications Commission, Room 1-C804, 445 12th
Street, SW., Washington,
[[Page 38782]]
DC 20554, or via the Internet to Judith-B.Herman@fcc.gov.
Compliance Dates: Providers of interconnected VoIP service must
file FCC Form 499-Q quarterly, beginning with the August 1, 2006
filing. Interconnected VoIP providers must file Blocks 1, 2, and 6 of
FCC Form 499-A prior to filing the FCC Form 499-Q on August 1, 2006.
Interconnected VoIP providers must complete and file FCC Form 499-A
beginning on April 1, 2007.
Synopsis of the Report and Order
1. Background. In 1996, Congress directed the Commission and the
states to take the steps necessary to establish support mechanisms to
ensure the delivery of affordable telecommunications services to all
Americans in a changing competitive environment. Since then, the
Commission has undertaken a number of reforms to fulfill the universal
service goals established by Congress, and this Order takes additional
steps to continue to satisfy these goals.
2. The interim revisions adopted in this Order respond to changes
that have occurred in recent years in the telecommunications market,
but retain the essential elements of the current approach to USF
contributions. Specifically, while stand-alone interstate long distance
revenues have been declining, wireless services and interconnected VoIP
services, both of which typically include bundled long distance
service, have been growing dramatically. As noted below, from December
2000 to December 2004, the number of wireless subscribers grew from
approximately 101 million to approximately 181 million, and wireless
providers' revenues grew from approximately $70 billion to
approximately $122 billion. Similarly, the number of VoIP subscribers
has grown from about 150 thousand at the end of 2003 to about 4.2
million at the end of 2005. The interim revisions made in this Order
respond to these growing pressures on the stability and sustainability
of the Fund.
3. Of particular relevance to this Order are three prior Commission
actions. First, in 2002, the Commission sought additional comment on
the ability of mobile wireless providers to report actual interstate
end-user telecommunications revenue and whether the Commission should
eliminate the interim safe harbor of 28.5 percent that it had
established for mobile wireless providers. Second, as part of its
efforts to ensure the long-term stability and sufficiency of the
universal service support system in an increasingly competitive
marketplace, the Commission began a proceeding to revisit the universal
service contribution methodology in May 2001. In its Notice of Proposed
Rulemaking, the Commission sought comment generally on whether and how
to streamline and reform the contribution assessment methodology. Among
other things, the Commission sought comment on whether to modify the
existing revenue-based methodology, as well as whether to replace that
methodology with one that assesses contributions on the basis of a
flat-fee charge, such as a per-line charge. Finally, on March 10, 2004,
the Commission initiated a proceeding to examine issues relating to
Internet Protocol (IP)-enabled services--services and applications
making use of the IP, including, but not limited to, VoIP services. In
the IP-Enabled Services Notice, the Commission asked commenters to
address, among other things, the universal service contribution
obligations of both facilities-based and non-facilities-based providers
of IP-enabled services.
4. Discussion. In this Order, we adopt interim revisions to the
existing approach for assessing contributions for the federal USF that
will preserve and advance universal service in the short term, while we
continue to explore more fundamental reform. These interim revisions
comport with the requirements of section 254 of the 1996 Act, and do so
in a manner that responds to recent developments in the communications
industry marketplace. See 47 U.S.C. 254. First, we raise the interim
mobile wireless safe harbor from 28.5 percent to 37.1 percent. Second,
we establish universal service contribution obligations for providers
of interconnected VoIP service.
5. We conclude that immediate interim measures to revise the
existing approach to USF contributions are necessary and in the public
interest to preserve and advance universal service. There is widespread
agreement that the Fund is currently under significant strain. The size
of the Fund has grown significantly, with disbursements rising from
approximately $4.4 billion in 2000 to approximately $6.5 billion in
2005, and projected to grow even further in the coming years. Moreover,
changing market conditions, including the decline in long distance
revenue and the growth of wireless and interconnected VoIP services,
are eroding the assumptions that form the basis for the current
revenue-based system.
6. When the revenue-based system was adopted in 1997, assessable
interstate revenues were growing. The total assessable revenue base has
recently declined, however, from about $79.0 billion in 2000 to about
$74.7 billion in 2004, while Fund disbursements grew from approximately
$4.4 billion in 2000 to approximately $5.7 billion in 2004, and
continued to grow to approximately $6.5 billion in 2005. Declines in
the contribution base combined with growth in the size of the Fund
increasingly have placed upward pressure on the percentage of
assessable revenues that must be contributed to the Fund (the
``contribution factor''). The contribution factor grew from 5.9 percent
in the first quarter of 2000 to 8.9 percent in the fourth quarter of
2004, and is 10.9 percent for the second quarter of 2006. The pressure
caused by a declining revenue base combined with growing disbursement
needs jeopardizes the immediate sufficiency and stability of the
support mechanisms, demonstrating the need for immediate, interim USF
improvements, while we continue to pursue long-term fundamental reform
of the contribution methodology.
7. In making our decision today, we considered the voluminous
record in light of the current pressures on the Fund. We decline to
adopt, at this time, more fundamental changes to the entire universal
service program or to the contribution methodology. For example, one
commenter has suggested that the entire universal service program is
``broken'' and advocated that a ``holistic, coordinated rational reform
of all universal support mechanisms'' is necessary. It argued that
reforming the contribution methodology in isolation, without addressing
distribution issues, is ill-advised. Other parties advocate
fundamentally reforming the contribution methodology by moving away
from a revenue-based approach. The scale of reforming universal service
is considerable, and we will continue to work towards stabilizing the
Fund, as well as the entire universal service system. We note, however,
that a consensus approach to reform has not developed. Thus, while we
recognize that there may be merit to fundamental reform of the current
USF contribution methodology, we find, at this time, that the discrete
interim reforms we make to expand the contribution base will best
promote the statutory requirements set forth in section 254 of the 1996
Act in the near-term, while providing the Commission with the
opportunity to continue to address the challenges of fundamental
reform.
8. Wireless Provider Contributions. To sustain the sufficiency of
the Fund at this time, we raise the current interim safe harbor for
mobile wireless providers from 28.5 percent to 37.1 percent, a level
that better reflects that
[[Page 38783]]
industry's interstate revenues in light of the extraordinary growth of
wireless services since 2002, the last time the Commission revisited
this issue. We also require mobile wireless providers that use traffic
studies (rather than use the safe harbor) to report interstate revenues
to submit those traffic studies to USAC and to the Commission for
review.
9. The revised interim safe harbor of 37.1 percent is the highest
percentage of interstate and international usage by a wireless company
supported in the record. Specifically, according to a traffic study
conducted by TNS Telecoms for TracFone Wireless, the (then) seven large
national mobile wireless service providers' interstate minutes of use
ranged from 11.9 percent to 37.1 percent. Accordingly, consistent with
the Commission's previous rationale for raising the interim wireless
safe harbor to the highest level in the record, and based on the record
now before us, we set the revised interim wireless safe harbor at 37.1
percent. Mobile wireless providers that choose to use the revised
interim safe harbor must report 37.1 percent of their
telecommunications revenues as interstate beginning with fourth quarter
2006 projected revenues that they will report on the August 1, 2006 FCC
Form 499-Q.
10. We disagree with those parties that assert that the Commission
should not rely on the TNS Telecoms traffic study because of concerns
with sample size and methodology. Notably, no other wireless provider
has proposed an alternative safe harbor level or submitted a traffic
study that looks at various wireless providers to support a different,
updated, interim safe harbor level. Indeed, none of the parties that
criticize the TNS Telecoms study have submitted any data or statistical
analysis that would show a specific upward bias in the TNS Telecoms
study.
11. In light of apparent data discrepancies revealed in a
preliminary review by Commission staff of FCC Form 499-A filings and
other reports filed by wireless telephony providers, we take an
additional step to ensure the accuracy of reported revenue data.
Currently, a mobile wireless provider that reports actual revenue data
must provide, upon request, documentation to support the reporting of
actual interstate telecommunications revenues. We note that a mobile
wireless provider may use a traffic study as a proxy for calculating
its total amount of actual interstate revenues. We are concerned that
the use of traffic studies may be, in part, a cause of these data
reporting problems. For example, mobile wireless providers have
incentives to bias any traffic studies to minimize their amount of
interstate and international end-user revenues and thereby minimize
their Fund contributions; there are no countervailing market forces to
offset these incentives. Consequently, we now require any mobile
wireless provider that uses a traffic study to determine its interstate
end-user revenues for universal service contribution purposes to submit
the study to the Commission and to USAC for review. Any mobile wireless
provider using a traffic study shall submit the traffic study no later
than the deadline for submitting the FCC Form 499-Q for the same time
period. We also remind wireless carriers that, while they are permitted
to continue to report revenues at either the legal entity level or on a
consolidated basis, they are required to decide whether to report
either actual or safe harbor revenues for all of their affiliated legal
entities within the same safe harbor category.
12. Accordingly, we take this opportunity to caution universal
service contributors (and other entities reporting data to the
Commission) that we will not hesitate to use our enforcement authority
to investigate and remedy these and other discrepancies in data
reported to the Commission. Moreover, we expect filers that have made
reporting errors to re-file the relevant FCC forms or reports as soon
as possible (regardless of whether the forms are due to the Commission,
USAC, or another entity). To the extent that filers determine that they
should have made additional contributions to the Fund, we further
expect those entities to work with USAC to resolve their contribution
obligations.
13. Interconnected VoIP Services. We require providers of
``interconnected VoIP services,'' as defined by the Commission, to
contribute to the federal USF under the existing contribution
methodology on an interim basis. As described above, the number of VoIP
subscribers in the United States has grown significantly in recent
years, and we expect that trend to continue. At the same time, the USF
contribution base has been shrinking, and the contribution factor has
risen considerably as a result. We therefore find that extending USF
contribution obligations to providers of interconnected VoIP services
is necessary at this time in order to respond to these growing
pressures on the stability and sustainability of the Fund.
14. The Commission has not yet classified interconnected VoIP
services as ``telecommunications services'' or ``information services''
under the definitions of the Act. Again here, we do not classify these
services. To the extent interconnected VoIP services are
telecommunications services, they are of course subject to the
mandatory contribution requirement of section 254(d). Absent our final
decision classifying interconnected VoIP services, we analyze the
issues addressed in this Order under our permissive authority pursuant
to section 254(d) and our Title I ancillary jurisdiction. Specifically,
we find that interconnected VoIP providers are ``providers of
interstate telecommunications'' under section 254(d), and we assert the
Commission's permissive authority to require interconnected VoIP
providers ``to contribute to the preservation and advancement of
universal service'' because ``the public interest so requires.'' We
also exercise our ancillary jurisdiction to extend contribution
obligations to interconnected VoIP providers. We note that both Vonage
and the VON Coalition have stated on the record in this proceeding
their belief that interconnected VoIP providers should be required to
contribute to the Fund, apparently conceding that the Commission has
the authority to impose such a requirement. Finally, we address
implementation issues related to our requirement that interconnected
VoIP providers contribute to the USF.
15. Scope. We extend universal service obligations to providers of
interconnected VoIP services, as previously defined by the Commission.
The Commission has defined ``interconnected VoIP services'' as those
VoIP services that: (1) Enable real-time, two-way voice communications;
(2) require a broadband connection from the user's location; (3)
require IP-compatible customer premises equipment; and (4) permit users
to receive calls from and terminate calls to the PSTN. We emphasize
that interconnected VoIP service offers the capability for users to
receive calls from and terminate calls to the PSTN; the obligations we
establish apply to all VoIP communications made using an interconnected
VoIP service, even those that do not involve the PSTN. Furthermore,
these obligations apply regardless of how the interconnected VoIP
provider facilitates access to and from the PSTN, whether directly or
by making arrangements with a third party. Finally, we recognize that
the definition of interconnected VoIP services may need to expand as
new VoIP services increasingly substitute for traditional phone
service.
16. We believe that it is appropriate to require USF contributions
from
[[Page 38784]]
interconnected VoIP providers because this approach is consistent with
important principles that the Commission has established in its
implementation of section 254 of the Act. Specifically, the Commission
has previously found it appropriate to extend universal service
contribution obligations to classes of providers that benefit from
universal service through their interconnection with the PSTN. In
addition, in the Universal Service First Report and Order, the
Commission established competitive neutrality as a principle to guide
the development of universal service policies. As discussed in more
detail below, we find that these two principles support our conclusion
that extending universal service contribution obligations to this
particular category of providers is in the public interest.
17. Permissive Authority Under Section 254(d). Section 254(d)
states that the Commission may require ``[a]ny other provider of
interstate telecommunications'' to contribute to universal service,
``if the public interest so requires.'' Pursuant to the Act's
definitions, a ``provider of interstate telecommunications'' provides
``the transmission, between or among points specified by the user, of
information of the user's choosing, without change in the form or
content of the information as sent and received.'' Unlike providers of
interstate telecommunications services, however, providers of
interstate telecommunications do not necessarily ``offer''
telecommunications ``for a fee directly to the public.'' The Commission
has previously used this permissive authority to require private
carriers and payphone aggregators to contribute to the Fund. In the IP-
Enabled Services Notice, the Commission sought comment on, among other
things, its authority, including mandatory and permissive authority
under section 254(d), to require universal service contributions by IP-
enabled service providers.
18. Providers of Interstate Telecommunications. We find that
interconnected VoIP providers are ``providers of interstate
telecommunications'' as required for the use of the permissive
authority pursuant section 254(d). Specifically, using the Act's
definitions, we find that interconnected VoIP providers ``provide''
``the transmission, between or among points specified by the user, of
information of the user's choosing, without change in the form or
content of the information as sent and received.''
19. First, we must consider whether interconnected VoIP providers
``provide'' telecommunications. Congress did not define the term
``provide'' or ``provider,'' but the structure of the Act informs us
that ``provide'' is a different and more inclusive term than ``offer.''
It is settled law that the determination of what is ``offered,'' under
the Act's definitions, ``turns on the nature of the functions the end
user is offered.'' Had Congress intended us to look at the same factors
in analyzing our permissive authority under section 254(d), it would
have referred to ``other offerors of telecommunications.'' Because
Congress used a different term--``providers''--we understand Congress
to have meant something broader. Common definitions of the term
``provide'' suggest that we should consider the meaning of ``provide''
from a supply side, i.e., from the provider's point of view. For
example, Black's Law Dictionary defines ``provide'' to mean ``[t]o
make, procure, or furnish for future use, prepare. To supply; to
afford; to contribute.'' Transmission is an input into the finished
service ``offered'' to the customer. But from the interconnected VoIP
provider's point of view, we believe that the provider ``provides''
more than just a finished service. We believe that it is reasonable to
conclude that a provider ``furnishes'' or ``supplies'' components of a
service, in this case, transmission.
20. Second, we determine that interconnected VoIP providers provide
``telecommunications.'' As the Commission has recognized, ``the heart
of `telecommunications' is transmission.'' The Commission has
previously concluded that interconnected VoIP services involve
``transmission of [voice] by aid of wire, cable, or other like
connection'' and/or ``transmission by radio'' of voice. Indeed, by
definition, interconnected VoIP services are those ``permitting users
to receive calls from and terminate calls to the PSTN.'' To provide
this capability, interconnected VoIP providers may rely on their own
facilities or provide access to the PSTN through others. ``Over the
top'' interconnected VoIP providers generally purchase access to the
PSTN from a telecommunications carrier who accepts outgoing traffic
from and delivers incoming traffic to the interconnected VoIP
provider's media gateway. The telecommunications carrier supplies
transmission to or from the PSTN user, or transmits the communication
to another carrier that can transmit the communication to the PSTN
user. Facilities-based interconnected VoIP providers similarly enter
into arrangements with telecommunications carriers to complete
communications to and from the PSTN. The telecommunications carriers
involved in originating or terminating a communication via the PSTN are
by definition offering ``telecommunications.'' Just as the Commission
has previously found resellers to be supplying telecommunications to
their customers even though they do not own or operate the transmission
facilities, we find interconnected VoIP providers to be ``providing''
telecommunications regardless of whether they own or operate their own
transmission facilities or they obtain transmission from third parties.
In contrast to services that merely use the PSTN to supply a finished
product to end users, interconnected VoIP supplies PSTN transmission
itself to end users.
21. Finally, the Commission previously determined that Vonage's
interconnected VoIP service is a jurisdictionally mixed service in
which part of the service is interstate in nature. We believe that
other interconnected VoIP services similarly are jurisdictionally mixed
and thus are subject to USF contributions on interstate and
international revenues. For these reasons, we conclude that
interconnected VoIP providers are ``providers of interstate
telecommunications'' under section 254(d).
22. Public Interest. Next, we must consider whether requiring
interconnected VoIP providers to contribute to the USF is in the public
interest. We conclude that it is. The Commission has previously found
it in the public interest to extend universal service contribution
obligations to classes of providers that benefit from universal service
through their interconnection with the PSTN. We believe that providers
of interconnected VoIP services similarly benefit from universal
service because much of the appeal of their services to consumers
derives from the ability to place calls to and receive calls from the
PSTN, which is supported by universal service mechanisms. As the Fifth
Circuit explained, ``Congress designed the universal service scheme to
exact payments from those companies benefiting from the provision of
universal service.'' Like other contributors to the Fund,
interconnected VoIP providers are ``dependent on the widespread
telecommunications network for the maintenance and expansion of their
business,'' and they ``directly benefit[] from a larger and larger
network.'' It is therefore
[[Page 38785]]
consistent with Commission precedent to impose obligations that
correspond with the benefits of universal service that these providers
already enjoy.
23. We also find that the principle of competitive neutrality
supports our conclusion that we should require interconnected VoIP
providers to contribute to the support mechanisms. Competitive
neutrality means that ``universal service support mechanisms and rules
neither unfairly advantage nor disadvantage one provider over another,
and neither unfairly favor nor disfavor one technology over another.''
As the Commission has noted, interconnected VoIP service ``is
increasingly used to replace analog voice service.'' As the
interconnected VoIP service industry continues to grow, and to attract
subscribers who previously relied on traditional telephone service, it
becomes increasingly inappropriate to exclude interconnected VoIP
service providers from universal service contribution obligations.
Moreover, we do not want contribution obligations to shape decisions
regarding the technology that interconnected VoIP providers use to
offer voice services to customers or to create opportunities for
regulatory arbitrage. The approach we adopt today reduces the
possibility that carriers with universal service obligations will
compete directly with providers without such obligations. We therefore
find that the principle of competitive neutrality is served by
extending universal service obligations to interconnected VoIP service
providers.
24. Thus, based on the record before us, we find that
interconnected VoIP providers, like telecommunications carriers, have
built their businesses, or a part of their businesses, on access to the
PSTN. For these reasons, we find that the public interest requires
interconnected VoIP providers, as providers of interstate
telecommunications, to contribute to the preservation and advancement
of universal service in the same manner as carriers that provide
interstate telecommunications services. Finally, we note that the
inclusion of such providers as contributors to the support mechanisms
will broaden the funding base, lessening contribution requirements on
telecommunications carriers or any particular class of
telecommunications providers.
25. Ancillary Jurisdiction. In addition to permissive authority
under section 254(d), we exercise our ancillary jurisdiction under
Title I of the Act to extend universal service contribution obligations
to interconnected VoIP providers. We conclude that regardless of the
statutory classification of these services, the Commission has
ancillary jurisdiction to promote universal service by adopting
universal service contribution rules for interconnected VoIP services,
and commenters largely agree. Ancillary jurisdiction may be employed,
in the Commission's discretion, when Title I of the Act gives the
Commission subject matter jurisdiction over the service to be regulated
and the assertion of jurisdiction is ``reasonably ancillary to the
effective performance of [its] various responsibilities.'' Both
predicates for ancillary jurisdiction are satisfied here.
26. First, as we concluded in the VoIP 911 Order, interconnected
VoIP services fall within the subject matter jurisdiction granted to us
in the Act. Second, our analysis requires us to evaluate whether
imposing universal service contribution obligations is reasonably
ancillary to the effective performance of the Commission's various
responsibilities. Based on the record in this matter, we find that
section 254 and section 1 of the Act provide the requisite nexus.
27. Section 254 requires the Commission to establish ``specific,
predictable, and sufficient mechanisms * * * to preserve and advance
universal service.'' The Act requires telecommunications carriers to
contribute to those mechanisms on a mandatory basis, and as discussed
above, section 254(d) grants the Commission permissive authority to
require other ``providers of interstate telecommunications'' to
contribute. As discussed above, we recognize that interconnected VoIP
service ``is increasingly used to replace analog voice service.'' We
expect that trend to continue. If we do not require interconnected VoIP
providers to contribute, the revenue base that supports the Fund will
continue to shrink, while these providers continue to benefit from
their interconnection to the PSTN. We believe that this trend threatens
the stability of the Fund and our action to extend contributions
obligations to interconnected VoIP providers is ``reasonably ancillary
to the effective performance of [our] responsibilities'' under section
254. Thus, we determine, as required, that the approach we adopt today
``will `further the achievement of long-established regulatory goals'
'' to preserve and advance universal service through specific,
predictable, and sufficient contribution mechanisms.
28. In addition, section 1 of the Act charges the Commission with
responsibility to ``make available, so far as possible, to all the
people of the United States, * * * a rapid, efficient, Nation-wide, * *
* wire and radio communication service with adequate facilities at
reasonable charges.'' In light of this statutory mandate, promoting
universal service became one of the Commission's primary
responsibilities under the Act even before Congress adopted section 254
in 1996. Before the 1996 Act, the Commission relied exclusively on its
Title I ancillary jurisdiction to adopt regulations establishing a fund
to further this statutory goal. In Rural Telephone Coalition v. FCC,
the United States Court of Appeals for the District of Columbia Circuit
upheld the Commission's assertion of ancillary jurisdiction to
establish a funding mechanism to support universal service in the
absence of specific statutory authority as ancillary to its
responsibilities under section 1 of the Act to ``further the objective
of making communications service available to all Americans at
reasonable charges.'' We conclude that as more consumers begin to rely
on interconnected VoIP services for their communications needs, the
action we take here ensures that the Commission continues to ``further
the achievement of long-established regulatory goals'' to ``make
available * * * communication service with adequate facilities at
reasonable charges.'' Thus, pursuant to our ancillary jurisdiction, we
extend USF contribution obligations to providers of interconnected VoIP
services.
29. Implementation. In this section, we address implementation
issues related to our requirement that interconnected VoIP providers
contribute to the USF. Because we are expanding the base of
contributors, certain entities that in the past have not been required
to report interstate and international revenues will now be required to
do so. For that reason, we provide a brief overview of our reporting
requirements. This Order does not fully explain all of the Commission's
requirements. Interconnected VoIP providers that are new to the USF
procedures should familiarize themselves with the Commission's USF
rules and with FCC Forms 499-A and 499-Q Telecommunications Reporting
Worksheets and the accompanying instructions.
30. Identifying Revenues for Reporting Purposes. Most
interconnected VoIP providers offer packages of services to consumers
for a single price that include telecommunications, as discussed above,
along with CPE and/or features that may be information services. To the
extent that an interconnected VoIP provider has
[[Page 38786]]
chosen to structure its offerings in this manner, it may use the safe
harbors established in the CPE Bundling Order to determine the
appropriate amount of telecommunications revenues to be reported (as
distinguished from revenue derived from non-telecommunications).
Interconnected VoIP service providers are not obligated to use either
of the safe harbors in the CPE Bundling Order, but we emphasize that
other allocation methods may not be considered reasonable and will be
evaluated on a case-by-case basis in an audit context.
31. Interconnected VoIP providers must report and contribute to the
USF on all their interstate and international end-user
telecommunications revenues. To fulfill this obligation, interconnected
VoIP providers have three options: (1) They may use the interim safe
harbor established in this Order; (2) they may report based on their
actual interstate telecommunications revenues; or (3) they may rely on
traffic studies, subject to the conditions described below.
32. As we recognized in the Vonage Order, it is difficult for some
interconnected VoIP providers to separate their traffic on a
jurisdictional basis. Indeed, many of these VoIP providers have
advocated to us in other proceedings that their services are
``inherently interstate.'' Consistent with this advocacy and based on
the conclusions in the Vonage Order, we find that it would be
reasonable for us to treat the interconnected VoIP traffic as 100
percent interstate for USF purposes. Indeed, in another context where
providers were unable to separate their interstate telecommunications
revenues from other revenues, the Commission found a safe harbor of 100
percent to be reasonable. Nevertheless, we establish a safe harbor that
is lower than 100 percent as a convenient alternative for
interconnected VoIP providers. Our safe harbor is necessarily the
product of line drawing. In adopting a safe harbor we consider what
would be an appropriate analogue. One industry report has estimated
that 83.8 percent of VoIP traffic in 2004 was either long distance or
international and only 16.2 percent was local. Thus, it appears that
VoIP traffic is predominantly long distance or international. As such,
it is much like wireline toll service which similarly offers
interstate, intrastate toll, and international services. In fact as
described below, VoIP services are often marketed as a substitute for
wireline toll service. The percentage of interstate revenues reported
to the Commission by wireline toll providers is 64.9 percent. We
therefore find that establishing a safe harbor of 64.9 percent is
reasonable for purposes of this interim action.
33. Moreover, we believe that setting the safe harbor at 64.9
percent is reasonable pending the completion of the accompanying NPRM
where we seek comment on whether to change or eliminate all of the safe
harbors. To set the safe harbor lower would permit providers that
actually provide more interstate service to escape universal service
contribution obligations for some of their interstate traffic, thus
undermining our actions to preserve and advance the goals of universal
service. Furthermore, to the extent the safe harbor percentage is
higher than some providers' actual interstate use, providers may
instead contribute to the fund based on actual revenue allocations or
by conducting a traffic study, as described below. We encourage
interconnected VoIP providers to explore these more precise avenues for
determining the jurisdictional nature of their revenues.
34. We do not believe that the percentage used as the wireless safe
harbor would serve as a reasonable safe harbor for interconnected VoIP.
Indeed, the record reflects that interconnected VoIP service is often
marketed as an economical way to make interstate and international
calls, as a lower-cost substitute for wireline toll service. For
purposes of a safe harbor, it is reasonable to account for the many
customers who purchase these services to place a high volume of
interstate and international calls, and benefit from the pricing plans
the providers offer for such services. We believe that these
characteristics differentiate it from wireless service. Accordingly, we
find that the interconnected VoIP safe harbor should be substantially
higher than the wireless safe harbor in order to properly capture
interstate revenues.
35. While, as stated above, interconnected VoIP providers may
report their actual interstate telecommunications revenues, we
recognize that some interconnected VoIP providers do not currently have
the ability to identify whether customer calls are interstate and
therefore subject to the section 254(d) contribution requirement.
Indeed, a fundamental premise of our decision to preempt Minnesota's
regulations in the Vonage Order was that it was impossible to determine
whether calls by Vonage's customers stay within or cross state
boundaries. Therefore, an interconnected VoIP provider may rely on
traffic studies or the safe harbor described above in calculating its
federal universal service contributions. Alternatively, to the extent
that an interconnected VoIP provider develops the capability to track
the jurisdictional confines of customer calls, it may calculate its
universal service contributions based on its actual percentage of
interstate calls. Under this alternative, however, we note that an
interconnected VoIP provider with the capability to track the
jurisdictional confines of customer calls would no longer qualify for
the preemptive effects of our Vonage Order and would be subject to
state regulation. This is because the central rationale justifying
preemption set forth in the Vonage Order would no longer be applicable
to such an interconnected VoIP provider.
36. In lieu of using the interim safe harbor or reporting actual
interstate telecommunications revenues, interconnected VoIP providers
may rely on traffic studies, as noted above, and as wireless carriers
may do. The record indicates that traffic studies are a feasible option
for providers of interconnected VoIP service. However, before it can
begin to base its USF contributions on a traffic study, an
interconnected VoIP provider must submit its proposed traffic study to
the Commission for approval. While prior Commission approval of traffic
studies is not required for wireless carriers, we have nonetheless
identified concerns in the wireless context with the use of traffic
studies as a replacement for reporting actual revenues, and we now
require wireless carriers to submit their traffic studies to the
Commission and to USAC. If we were to allow interconnected VoIP
providers to rely on unapproved traffic studies, we would risk
extending the problems we have identified with the use of traffic
studies by wireless carriers to a new technology, possibly creating
unforeseen problems. For these reasons, we find it appropriate to
require prior Commission approval of any traffic study on which an
interconnected VoIP provider proposes to rely. Until the Commission has
approved an interconnected VoIP provider's proposed traffic study, that
provider may use the interim safe harbor. We may extend this treatment
to wireless traffic studies in the future, but we decline to do so
today. While there would be a benefit to parity of requirements between
wireless and interconnected VoIP providers, a pre-approval requirement
for wireless traffic studies would be disruptive to wireless
contributors who, unlike interconnected VoIP providers, are already
relying on the current regime.
37. We take one additional interim action here to ensure the health
of the USF pending broader reform. As we stated earlier, we have not
yet classified
[[Page 38787]]
interconnected VoIP as either a telecommunications service or an
information service. Because we have not yet made that classification,
some interconnected VoIP providers may hold themselves out as
telecommunications carriers, but others do not, considering themselves
instead to be ``end users.'' Carriers that provide telecommunications
service inputs to the latter group of interconnected VoIP providers
therefore have been reporting the resulting revenues as end-user
revenues and including them in their bases. Because we do not classify
interconnected VoIP today, nor do we attempt to quantify the magnitude
of USF contributions from carriers that supply wholesale inputs to
interconnected VoIP providers, carriers supplying telecommunications
services to interconnected VoIP providers who are not themselves
carriers should continue to include the revenues derived therefrom in
their own contribution bases for two full quarters after the effective
date of this Order. Wholesale carriers may not exclude these revenues
by invoking the ``carrier's carrier'' rule during this interim period.
To the extent required, we waive here Commission rule 54.706(b) for the
duration of this requirement.
38. We recognize that, by requiring on an interim basis that both
the underlying carrier and the interconnected VoIP provider contribute
based (in part) on the revenues derived from providing the underlying
transmission, the Fund may receive contributions from
telecommunications revenues associated with the same facilities two
times. We emphasize that this is a temporary measure, and we do not
take this step lightly. We are concerned, however, that if carriers are
permitted to invoke the carrier's carrier rule immediately to exclude
revenues from interconnected VoIP providers, the result could be a net
decrease in the Fund in the short term. Such a result would be
inconsistent with our obligation to ensure a sufficient and sustainable
Fund and to preserve and advance universal service. By continuing to
require contributions from carriers supplying transmission facilities
to interconnected VoIP providers for an additional two quarters, we
eliminate any risk of decreasing the Fund while we implement
contribution obligations for interconnected VoIP providers. Further, we
find nothing in section 254 of the 1996 Act that prohibits this interim
approach.
39. Reporting Requirements. Providers of interconnected VoIP
services will follow the same basic USF reporting procedures as other
providers of interstate and international telecommunications, using the
same forms and filing instructions. Contributors to USF report
historical gross-billed, projected gross-billed, and projected
collected end-user interstate and international revenues quarterly on
FCC Form 499-Q. Interconnected VoIP service providers will be required
to file FCC Form 499-Q beginning on August 1, 2006. Contributors report
gross-billed and actual collected end-user interstate and international
revenues on FCC Form 499-A on April 1 of each year. Interconnected VoIP
service providers will be required to file a completed FCC Form 499-A
beginning on April 1, 2007. Interconnected VoIP providers who will be
submitting the FCC Form 499-Q for the first time because of this Order
are not required to complete lines 115-118 on the Form until they
submit the Form for the February 1, 2007 deadline. All other portions
of the Form must be completed beginning with the submissions due August
1, 2006.
40. Under Commission rules, a provider of interstate and
international telecommunications whose annual universal service
contribution is expected to be less than $10,000 is not required to
contribute to the USF, or to file a Telecommunications Reporting
Worksheet unless it is required to contribute to other support and cost
recovery mechanisms. Interconnected VoIP providers that satisfy this de
minimis exemption need not contribute to the Fund. We find, however,
that it is appropriate to require all providers of interconnected VoIP
services--including those that satisfy the de minimis exemption--to
register with the Commission in order to facilitate our enforcement of
the obligations the Commission has imposed in this Order on providers
of interconnected VoIP services. In order to fulfill this reporting
requirement, every interconnected VoIP provider that has not already
registered with the Commission (and designated an agent for service of
process) must complete and file an FCC Form 499-A with blocks 1, 2, and
6 completed. Providers should refer to the instructions on the revised
FCC Form 499-A for additional details on how to complete this
registration requirement. Interconnected VoIP providers will receive an
FCC Registration Number (FRN) when they register with the Commission.
Because providers must have an FRN in order to submit required USF
filings, it is the responsibility of the interconnected VoIP provider
to register with the Commission and obtain an FRN prior to the August
1, 2006 deadline for filing FCC Form 499-Q.
41. Finally, interconnected VoIP providers must comply with the
Commission's rules with respect to recovering USF contributions from
their customers. Contributors may choose to recover part or all of
their universal service contributions from their customers, but they
are prohibited from marking up universal service line-item amounts
above the relevant contribution factor.
42. Technical Matters. On our own motion, we amend section 54.5 of
our rules to correct a typographical error. Section 54.5 currently
defines ``contributor'' as ``an entity required to contribute to the
universal service support mechanisms pursuant to Sec. 54.703.''
Section 54.706 addresses which entities are required to contribute to
the universal service support mechanisms, not section 54.703.
Accordingly, we amend section 54.5 to define ``contributor'' as ``an
entity required to contribute to the universal service support
mechanisms pursuant to Sec. 54.706.'' Further, in the sections of our
rules that we revise to conform to this Order, we also remove
references to our contribution methodology prior to April 1, 2003 which
are now outdated. Because these rule changes are non-substantive, the
notice and comment and effective date provisions of the Administrative
Procedure Act are inapplicable.
Final Paperwork Reduction Act Analysis
43. This document contains new information collection requirements.
The Commission, as part of its continuing effort to reduce paperwork
burdens, invites the general public to comment on the information
collection requirements contained in this Report and Order as required
by the Paperwork Reduction Act of 1995, Public Law 104-13. Public and
agency comments are due September 8, 2006.
Final Regulatory Flexibility Analysis
44. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the FNPRM in CC Docket No. 96-45 and into the NPRM in
WC Docket No. 04-36. The Commission sought written public comment on
the proposals in the NPRMs, including comment on the IRFAs. This
present Final Regulatory Flexibility Analysis (FRFA) conforms to the
RFA. To the extent that any statement in this FRFA is perceived as
creating ambiguity with respect to our rules or statements made in
preceding
[[Page 38788]]
sections of this Order, the rules and statements set forth in those
preceding sections shall be controlling.
1. Need for, and Objectives of, the Rules
45. In the Report and Order (Order), the Commission makes interim
modifications to the existing approach for assessing contributions to
the federal universal service fund (USF or Fund) in order to maintain
the stability and sufficiency of the Fund in the near-term in response
to marketplace changes while we continue to examine more fundamental
reform. Under the revised approach, the Commission raises the interim
wireless safe harbor from its current 28.5 percent level to 37.1
percent. The Commission also establishes universal service contribution
obligations for providers of interconnected voice over Internet
Protocol (VoIP) service. As detailed in the Order, interconnected VoIP
providers must report and contribute to the USF on all their interstate
and international end-user telecommunications revenues. To fulfill this
obligation, interconnected VoIP providers have three options: (1) They
may use the interim safe harbor of 64.9 percent established in this
Order; (2) they may report based on their actual interstate
telecommunications revenues; or (3) they may rely on traffic studies.
The interim changes made in the Order are essential for securing the
viability of universal service--a fundamental goal of communications
policy as expressed in the Communications Act--in the near-term.
46. The interim modifications adopted in the Order respond to
marketplace developments and minimize the impact of changes to the
current system on consumers, service providers, and universal service
administration, while we continue to work towards more fundamental
reform. Specifically, the revised approach to USF contributions will
ensure that all interstate telecommunications carriers and providers of
telecommunications contribute, on an equitable, competitively neutral,
and nondiscriminatory basis, to our mechanism for preserving and
advancing universal service. For example, applying universal service
obligations to providers of interconnected VoIP service is consistent
with the principle of competitive neutrality. In the Universal Service
First Report and Order, the Commission established competitive
neutrality as a principle to guide the development of universal service
policies. Competitive neutrality means that ``universal service support
mechanisms and rules neither unfairly advantage nor disadvantage one
provider over another, and neither unfairly favor nor disfavor one
technology over another.'' The Commission has recognized that
interconnected VoIP service is increasingly seen by consumers as a
potential substitute for traditional telephone service. As
interconnected VoIP service continues to grow, and to attract
subscribers who previously relied on traditional telephone service, it
becomes increasingly inappropriate to exclude interconnected VoIP
service providers from universal service contribution obligations.
47. The interim modifications will provide near-term stability and
sustainability for the Fund by responding to the fundamental changes in
the telecommunications market while retaining the essential elements of
the current approach to USF contributions. They also ensure that
telecommunications carriers and providers of telecommunications
contribute on an equitable, competitively neutral, and
nondiscriminatory basis, to our mechanism for preserving and advancing
universal service. For these reasons, the Order revises the existing
approach for assessing contributions to the Fund.
2. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA
48. On June 15, 2006, the Office of Advocacy of the U.S. Small
Business Administration (SBA) filed an ex parte letter with the
Commission. In its letter, the SBA challenges the sufficiency of the
Commission's IRFA released with the notice of proposed rulemaking in
the IP-Enabled Services proceeding. The SBA states that the item itself
``did not propose specific regulations and the IRFA released with the
proposal reflected this lack of specificity.'' The SBA states that the
IP-Enabled Services IRFA ``makes no conclusions regarding which
regulations, if any, would apply to any entity, including small
entities.'' This analysis leads SBA to conclude that the Commission has
not analyzed the economic impact of the actions taken in the Order on
small businesses, and to recommend that the Commission defer action and
complete an IRFA that it believes would meet the requirements of the
RFA.
49. We disagree with SBA that the Commission should postpone taking
action in this proceeding to change the safe harbor percentage for
wireless carriers and to impose universal service obligations on
interconnected VoIP providers, and instead issue a supplemental IRFA
identifying and analyzing the economic impacts on small entities and
less burdensome alternatives. We believe the additional steps suggested
by SBA are unnecessary because small entities already have received
sufficient notice of the issues addressed in today's Order and because
the Commission has considered the economic impact on small entities and
what ways are feasible to minimize the burdens imposed on those
entities, and, to the extent feasible, has implemented less burdensome
alternatives. Moreover, SBA's proposal to postpone and thus further
delay these interim actions is antithetical to the core purpose of the
Order, which is to ensure the near-term stability and sufficiency of
the USF.
50. The Commission also received some general small business-
related comments. Some commenters, for example, asserted that a
connection-based methodology would be inequitable and burdensome for
small businesses, particularly with respect to assessment of multi-line
business connections based on the proposed tiers of capacity outlined
in the Further Notice. Other commenters maintained that a de minimis
exemption was essential to any contribution system adopted by the
Commission. To the extent that these commenters' concerns are
implicated by today's actions, they are discussed throughout the Order.
3. Description and Estimate of the Number of Small Entities to Which
Rules Will Apply
51. The RFA directs agencies to provide a description of, and,
where feasible, an estimate of the number of small entities that may be
affected by the rules adopted herein. The RFA generally defines the
term ``small entity'' as having the same meaning as the terms ``small
business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small business concern'' under the Small Business
Act, unless the Commission has developed one or more definitions that
are appropriate to its activities. 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).
52. 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
[[Page 38789]]
annually in its Trends in Telephone Service report. According to data
in the most recent report, there are 5,679 interstate carriers. These
carriers include, inter alia, incumbent local exchange carriers,
competitive local exchange carriers, competitive access providers,
interexchange carriers, other wireline carriers and service providers
(including shared-tenant service providers and private carriers),
operator service providers, pay telephone operators, providers of
telephone toll service, wireless carriers and services providers, and
resellers.
53. Nationwide, there are a total of approximately 22.4 million
small businesses, according to SBA data. 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
2002, there were approximately 1.6 million small organizations. The
term ``small governmental jurisdiction'' is defined generally as
``governments of cities, towns, townships, villages, school districts,
or special districts, with a population of less than fifty thousand.''
Census Bureau data for 2002 indicate that there were 87,525 local
governmental jurisdictions in the United States. We estimate that, of
this total, 84,377 entities were ``small governmental jurisdictions.''
Thus, we estimate that most governmental jurisdictions are small.
54. We have perhaps been overbroad in our list of entities directly
affected, below, in an effort to encourage comment.
a. Wireline Carriers and Service Providers
55. We have included small incumbent local exchange carriers in
this present RFA analysis. As noted above, a ``small business'' under
the RFA is one that, inter alia, meets the pertinent small business
size standard (e.g., a telephone communications business having 1,500
or fewer employees), and ``is not dominant in its field of operation.''
The SBA's Office of Advocacy contends that, for RFA purposes, small
incumbent local exchange carriers are not dominant in their field of
operation because any such dominance is not ``national'' in scope. We
have therefore included small incumbent local exchange carriers in this
RFA analysis, although we emphasize that this RFA action has no effect
on Commission analyses and determinations in other, non-RFA contexts.
56. Incumbent Local Exchange Carriers (LECs). Neither the
Commission nor the SBA has developed a small business size standard
specifically for incumbent local exchange services. The appropriate
size standard under SBA rules is for the category Wired
Telecommunications Carriers. Under that size standard, such a business
is small if it has 1,500 or fewer employees. According to Commission
data, 1,303 carriers have reported that they are engaged in the
provision of incumbent local exchange services. Of these 1,303
carriers, an estimated 1,020 have 1,500 or fewer employees and 283 have
more than 1,500 employees. Consequently, the Commission estimates that
most providers of incumbent local exchange service are small businesses
that may be affected by our action.
57. Competitive Local Exchange Carriers (CLECs), Competitive Access
Providers (CAPs), ``Shared-Tenant Service Providers.'' and ``Other
Local Service Providers.'' Neither the Commission nor the SBA has
developed a small business size standard specifically for these service
providers. The appropriate size standard under SBA rules is for the
category Wired Telecommunications Carriers. Under that size standard,
such a business is small if it has 1,500 or fewer employees. According
to Commission data, 769 carriers have reported that they are engaged in
the provision of either competitive access provider services or
competitive local exchange carrier services. Of these 769 carriers, an
estimated 676 have 1,500 or fewer employees and 93 have more than 1,500
employees. In addition, 12 carriers have reported that they are
``Shared-Tenant Service Providers,'' and all 12 are estimated to have
1,500 or fewer employees. In addition, 37 carriers have reported that
they are ``Other Local Service Providers.'' Of the 39, an estimated 38
have 1,500 or fewer employees and one has more than 1,500 employees.
Consequently, the Commission estimates that most providers of
competitive local exchange service, competitive access providers,
``Shared-Tenant Service Providers,'' and ``Other Local Service
Providers'' are small entities that may be affected by our action.
58. Local Resellers. The SBA has developed a small business size
standard for the category of Telecommunications Resellers. Under that
size standard, such a business is small if it has 1,500 or fewer
employees. According to Commission data, 143 carriers have reported
that they are engaged in the provision of local resale services. Of
these, an estimated 141 have 1,500 or fewer employees and two have more
than 1,500 employees. Consequently, the Commission estimates that the
majority of local resellers are small entities that may be affected by
our action.
59. Toll Resellers. The SBA has developed a small business size
standard for the category of Telecommunications Resellers. Under that
size standard, such a business is small if it has 1,500 or fewer
employees. According to Commission data, 770 carriers have reported
that they are engaged in the provision of toll resale services. Of
these, an estimated 747 have 1,500 or fewer employees and 23 have more
than 1,500 employees. Consequently, the Commission estimates that the
majority of toll resellers are small entities that may be affected by
our action.
60. Payphone Service Providers (PSPs). Neither the Commission nor
the SBA has developed a small business size standard specifically for
payphone services providers. The appropriate size standard under SBA
rules is for the category Wired Telecommunications Carriers. Under that
size standard, such a business is small if it has 1,500 or fewer
employees. According to Commission data, 654 carriers have reported
that they are engaged in the provision of payphone services. Of these,
an estimated 652 have 1,500 or fewer employees and two have more than
1,500 employees. Consequently, the Commission estimates that the
majority of payphone service providers are small entities that may be
affected by our action.
61. Interexchange Carriers (IXCs). Neither the Commission nor the
SBA has developed a small business size standard specifically for
providers of interexchange services. The appropriate size standard
under SBA rules is for the category Wired Telecommunications Carriers.
Under that size standard, such a business is small if it has 1,500 or
fewer employees. According to Commission data, 316 carriers have
reported that they are engaged in the provision of interexchange
service. Of these, an estimated 292 have 1,500 or fewer employees and
24 have more than 1,500 employees. Consequently, the Commission
estimates that the majority of IXCs are small entities that may be
affected by our action.
62. Operator Service Providers (OSPs). Neither the Commission nor
the SBA has developed a small business size standard specifically for
operator service providers. The appropriate size standard under SBA
rules is for the category Wired Telecommunications Carriers. Under that
size standard, such a business is small if it has 1,500 or fewer
employees. According to
[[Page 38790]]
Commission data, 23 carriers have reported that they are engaged in the
provision of operator services. Of these, an estimated 20 have 1,500 or
fewer employees and three have more than 1,500 employees. Consequently,
the Commission estimates that the majority of OSPs are small entities
that may be affected by our action.
63. Prepaid Calling Card Providers. Neither the Commission nor the
SBA has developed a small business size standard specifically for
prepaid calling card providers. The appropriate size standard under SBA
rules is for the category Telecommunications Resellers. Under that size
standard, such a business is small if it has 1,500 or fewer employees.
According to Commission data, 89 carriers have reported that they are
engaged in the provision of prepaid calling cards. Of these, an
estimated 88 have 1,500 or fewer employees and one has more than 1,500
employees. Consequently, the Commission estimates that the majority of
prepaid calling card providers are small entities that may be affected
by our action.
64. 800 and 800-Like Service Subscribers. Neither the Commission
nor the SBA has develop