Connect America Fund; A National Broadband Plan for Our Future; Establishing Just and Reasonable Rates for Local Exchange Carriers; High-Cost Universal Service Support, 31520-31536 [2012-12950]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 77, Number 103 (Tuesday, May 29, 2012)]
[Rules and Regulations]
[Pages 31520-31536]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-12950]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR parts 51 and 54

[WC Docket Nos. 10-90, 07-135, 05-337, 03-109; GN Docket No. 09-51; CC 
Docket Nos. 01-92, 96-45; WT Docket No. 10-208; FCC 12-47]


Connect America Fund; A National Broadband Plan for Our Future; 
Establishing Just and Reasonable Rates for Local Exchange Carriers; 
High-Cost Universal Service Support

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
reconsiders and modifies certain provisions of its rules that were 
adopted in the USF/ICC Transformation Order. The Commission grants a 
Petition for Reconsideration and Clarification of the National Exchange 
Carrier Association, Inc., Organization for the Promotion and 
Advancement of Small Telecommunications Companies and Western 
Telecommunications Alliance. The Commission grants in part and denies 
in part a Petition for Reconsideration filed by the Independent 
Telephone & Telecommunications Alliance and a Petition for 
Reconsideration and/or Clarification filed by Frontier Communications 
Corp. and Windstream Communications, Inc. Finally, the Commission 
denies a Petition for Reconsideration filed by the United States 
Telecom Association.

DATES: Effective June 28, 2012.

FOR FURTHER INFORMATION CONTACT: Amy Bender, Wireline Competition 
Bureau, (202) 418-1469, Victoria Goldberg, Wireline Competition Bureau, 
(202) 418-1520.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's in WC 
Docket Nos. 10-90, 07-135, 05-337, 03-109; GN Docket No. 09-51; CC 
Docket Nos. 01-92, 96-45; WT Docket No. 10-208; FCC 12-47, released on 
April 25, 2012. The full text of this document is available for public 
inspection during regular business hours in the FCC Reference Center, 
Room CY-A257, 445 12th Street SW., Washington, DC 20554, and at the 
following Internet address: The complete text may be purchased from the 
Commission's duplicating contractor, Best Copy and Printing, Inc. 
(BCPI), Portals II, 445 12th Street SW., Room CY-B402, Washington, DC 
20554, (202) 488-5300, facsimile (202) 488-5563, or via email at 
fcc@bcpiweb.com https://transition.fcc.gov/Daily_Releases/Daily_Business/2012/db0425/FCC-12-47A1.pdf.

I. Introduction

    1. In this Order, we address several issues raised in petitions for 
reconsideration of certain aspects of the USF/ICC Transformation Order. 
The USF/ICC Transformation Order represents a careful balancing of 
policy goals, equities, and budgetary constraints. This balance was 
required in order to advance the fundamental goals of universal service 
and intercarrier compensation reform within a defined budget while 
simultaneously providing sufficient transitions for stakeholders to 
adapt. While reconsideration of a Commission's decision may be 
appropriate when a petitioner demonstrates that the original order 
contains a material error or omission, or raises additional facts that 
were not known or did not exist until after the petitioner's last 
opportunity to present such matters, if a petition simply repeats 
arguments that were previously considered and rejected in the 
proceeding, due to the balancing involved in this proceeding, we are 
likely to deny it.
    2. With this standard in mind, in this Order we take several 
limited actions stemming from reconsideration petitions. We grant a 
request to permit carriers accepting incremental support in Phase I of 
the Connect America Fund (CAF) to receive credit for deploying 
broadband to certain unserved locations in partially served census 
blocks, and deny a number of other requests to modify the rules 
governing CAF Phase I. In addition, we also grant in part a request by 
Frontier-Windstream and the Rural Associations to reconsider the VoIP 
intercarrier compensation rules adopted in the USF/ICC Transformation 
Order. Specifically, we modify our rules to permit LECs, prospectively, 
to tariff a transitional default rate equal to their intrastate 
originating access rates when they originate intrastate toll VoIP 
traffic

[[Page 31521]]

until June 30, 2014. This targeted modification is intended to be 
transitional and temporary and does not alter the overall, uniform, 
national framework for comprehensive intercarrier compensation reform 
which was established in the USF/ICC Transformation Order.

II. Connect America Fund Phase I Incremental Support

    3. In the USF/ICC Transformation Order, the Commission adopted a 
framework for the Connect America Fund that would provide support in 
price cap territories based on a combination of competitive bidding and 
a forward-looking cost model. But, as the Commission observed, 
developing and implementing a new cost model could be expected to take 
some time. So, in order to immediately accelerate broadband deployment 
in such areas, the Commission established Phase I of the CAF to begin 
the process of transitioning high-cost support for price cap carriers 
to the CAF. In Phase I, the Commission froze current high-cost support 
for price cap carriers, and, in addition, committed up to $300 million 
in incremental support to promote deployment of broadband to unserved 
areas within price cap carriers' service territories and their rate of 
return affiliates' service territories. The $300 million in incremental 
support will be allocated among price cap carriers by the use of a 
simplified forward-looking cost estimate based on the prior high cost 
proxy model.
    4. Participation in CAF Phase I is optional: That is, carriers will 
be able to choose how much of their allocated incremental support to 
accept based on the broadband obligations that accompany the support. 
Each carrier will be required to deploy broadband to a number of 
locations equal to the amount of incremental support it accepts divided 
by $775. As the Commission explained, that standard was designed to 
reach as many locations as possible as cost-effectively as possible--to 
``spur immediate broadband deployment to as many unserved locations as 
possible'' with the limited funds available by ``encourag[ing] carriers 
to use the support in lower-cost areas where there is [nevertheless] no 
private sector business case for deployment of broadband.'' And, to 
ensure that these deployments reach those who are otherwise unserved 
and are unlikely to be served in the near future, the Commission 
required carriers to certify, among other things, that the locations 
they would deploy to are shown as unserved by fixed broadband with a 
minimum speed of 768 kbps downstream and 200 kbps upstream on the 
National Broadband Map; that, to the best of the carrier's knowledge, 
the location is not in fact served; and that incremental support would 
not be used to satisfy merger commitments or similar regulatory 
obligations.
    5. Various parties ask us to reconsider aspects of these rules. 
Below, we grant in part a request by the Independent Telephone & 
Telecommunications Alliance (ITTA) that we modify the rules and permit 
carriers, in certain circumstances, to receive credit in CAF Phase I 
for deploying to unserved locations based on a certification that they 
are unserved, even though such locations are identified as served on 
the National Broadband Map. In addition, we deny requests from Frontier 
and Windstream, along with the United States Telecom Association (US 
Telecom), that we reconsider the $775 per-location deployment 
requirement. We also deny their request that we permit carriers to 
receive credit in CAF Phase I for improving broadband service to 
underserved locations--locations where broadband is available, but does 
not meet the requirements for new CAF Phase I deployments. We also deny 
Windstream's request, in the alternative, that we permit carriers to 
use CAF Phase I incremental support to deploy second-mile fiber 
facilities. Finally, we deny a request by Frontier and Windstream that 
the $300 million in incremental support be allocated among carriers by 
calculating distributions ``as if'' the incremental support mechanism 
were distributing both incremental support and frozen high-cost 
support, rather than only incremental support.
    6. First, ITTA asks us to reconsider the rule that carriers 
receiving CAF Phase I incremental support must deploy broadband to 
locations shown on the National Broadband Map as unserved by fixed 
broadband. ITTA argues that the National Broadband Map in some cases 
``overstates fixed broadband coverage'' and that excluding unserved 
areas from eligibility for CAF Phase I deployment because they appear 
as served on the Map would mean that consumers in those areas would not 
benefit from CAF Phase I. ITTA, in an ex parte letter joined by several 
carriers, elaborates on its proposal, asking that we modify the rules 
to permit carriers to serve additional locations in three different 
situations.
    7. Our analysis of ITTA's petition is informed by a balancing of 
considerations. On the one hand, CAF Phase I is an interim measure 
intended to accelerate deployment to those unserved locations that can 
be reached in the near term. Given our goal of deploying new funding 
quickly, we believe it is reasonable to focus deployment on areas where 
it is clear that no broadband exists, rather than to create a 
potentially burdensome and time-consuming process to identify other 
areas without service. On the other hand, we do believe that, where 
adjustments can be made in a way that will not create undue delays, 
modifying the rules to permit carriers to accept as much incremental 
support as possible--and thus deploy broadband to more unserved 
locations--would serve the public interest.
    8. ITTA first notes that in some census blocks, the incumbent local 
exchange provider is the only provider shown by the National Broadband 
Map as offering fixed broadband services. But, as ITTA explains, the 
reporting methodology used to create the Map ``indicates that an entire 
census block is served by the [incumbent] LEC even if only a single 
location in that census block is able to receive broadband.'' In such 
situations, ITTA observes, the incumbent LEC knows which locations are 
actually served and which are actually unserved, and it proposes that 
the carrier should be able to receive credit in CAF Phase I for 
deploying broadband to locations that it certifies were not, in fact, 
already served.
    9. We conclude that modifying our rule to provide additional 
flexibility in this situation will promote the goals of CAF Phase I. 
Accordingly, we will permit carriers accepting CAF Phase I support to 
satisfy their deployment requirement by deploying to locations 
identified on the National Broadband Map as served if the Map reflects 
that the only provider of fixed broadband to the location is the 
incumbent carrier itself, the locations are in fact unserved by 
broadband, and the carrier makes the certifications required by Sec.  
54.312(b)(3) of our rules.
    10. ITTA also argues that some census blocks are shown in some of 
the tools available on the National Broadband Map Web site as being 
served by a carrier other than the incumbent LEC, but that the data 
underlying the Map ``clearly identifies that the non-ILEC provider 
serves only a part of the census block.'' This situation can arise in 
certain situations when, for example, the data underlying the Map show 
that a cable operator offers broadband to only certain locations within 
a census block. ITTA proposes that a carrier receiving CAF Phase I 
support be able to receive credit in CAF Phase I for deploying to 
locations in such blocks to the extent that the data underlying the

[[Page 31522]]

Map confirms that the non-ILEC provider does not serve the location.
    11. We conclude that no change to the rules is necessary to address 
this concern. Section 54.312(b)(3) of our rules requires that a carrier 
certify that the locations to be served to satisfy its deployment 
requirement ``are shown as unserved by fixed broadband on the then-
current version of the National Broadband Map.'' We take this 
opportunity to clarify that if the data underlying the Map show that a 
location is not served by a particular provider, then, for the purposes 
of this rule, the location is ``shown as unserved'' by that provider.
    12. In addition, ITTA claims that there are locations which the 
National Broadband Map indicates are served by a carrier other than the 
incumbent LEC, but which the incumbent LEC reasonably believes are not, 
in fact, served by that other provider. ITTA proposes that carriers 
receive credit for deploying to such areas, if they provide evidence 
that there are unserved locations in the area. Specifically, ITTA 
proposes a CAF Phase I support recipient be permitted to provide a 
certification that, to the best of the carrier's knowledge, there are 
unserved locations in a census block notwithstanding that the Map 
indicates that those locations are served. ITTA proposes that the 
recipient be permitted to--but not required to--provide ``consumer 
declarations or other supporting evidence'' supporting its 
certification. If it does, the certification would not be subject to 
rebuttal. On the other hand, if the carrier does not provide any 
declarations or other supporting evidence, other broadband providers in 
the area would have up to 30 days to respond to the certification. To 
rebut the CAF Phase I recipient's certification, ITTA proposes that 
those other providers would be required to certify that they can 
provide service throughout the relevant area and would be required to 
provide one or more consumer declarations from customers who either 
currently or in the past have subscribed to the provider's service 
within the relevant area. If no provider rebutted the CAF Phase I 
recipient's certification, the CAF Phase I recipient would be permitted 
to deploy to unserved locations in the census block at issue.
    13. We decline to adopt this aspect of ITTA's proposal. ITTA does 
not explain how a CAF Phase I recipient would know which locations--
other than any locations for which it has obtained a consumer's 
declaration--in a census block are actually unserved by any other 
carrier. In addition, we observe that ITTA's proposal would require a 
provider wishing to challenge the CAF Phase I recipient's certification 
to provide a declaration within 30 days from a customer or former 
customer in the census block. That task might be quite time consuming 
given limited resources. Worse, it might not be possible, because a 
provider may have no customers in a particular census block, even 
though it offers service there. Yet ITTA would apparently have us 
provide CAF Phase I incremental support to incumbents to deploy in such 
locations. On balance, we cannot conclude on the record before us that 
adopting ITTA's proposed process, which may not significantly increase 
the number of locations that are likely to receive new broadband, would 
serve the public interest.
    14. ITTA, joined by several carriers, also asks that we permit 
carriers receiving CAF Phase I incremental support to deploy broadband 
to locations that are served by another broadband provider but where 
the service offered by that other provider does not meet defined 
service characteristics. They propose that the other provider offer 
service of at least 768 kbps sustained download speed, with a usage 
limit no lower than 53 gigabytes per month, all at a price no higher 
than the month-to-month price of the highest price for a similar 
product from a wireline provider in the state.
    15. We decline to adopt this proposal for several reasons. We 
acknowledge that some consumers may live in areas ineligible for CAF 
Phase I support even though the broadband available to them does not 
currently meet our goals. The Commission chose in CAF Phase I, however, 
to focus limited resources on deployments to extend broadband to some 
of the millions of unserved Americans who lack access to broadband 
entirely, rather than to drive faster speeds to those who already have 
service. We are not persuaded that the decision about the more pressing 
need was unreasonable. Moreover, we are not persuaded that permitting 
CAF Phase I recipients to overbuild other broadband providers 
represents the most efficient use of limited CAF Phase I support. In 
addition, we conclude that we do not have an adequate record at this 
time to make a determination about how high a competitor's price must 
be--either alone or in combination with usage limits--before we would 
support overbuilding that competitor, a critical component of 
petitioners' request.
    16. Second, Frontier, Windstream and USTelecom seek reconsideration 
of the requirement that a carrier accepting incremental support in CAF 
Phase I deploy broadband to a number of unserved locations equal to the 
amount each carrier accepts divided by $775. In particular, these 
parties take issue with the use of $775 as a nationwide estimate for 
the appropriate amount of per-location support.
    17. In adopting the $775 figure, the Commission recognized that, in 
the absence of a fully developed cost model, the choice of a per-
location support amount necessarily involved an exercise of judgment. 
The Commission weighed a variety of considerations, including the fact 
that resources for this interim mechanism were limited and the goal to 
``spur immediate broadband deployment to as many unserved locations as 
possible.'' The Commission also considered several sources of data, 
including deployment projects undertaken by a mid-size price cap 
carrier under the Rural Utilities Service's Broadband Initiatives 
Program, data from analysis done as part of the National Broadband 
Plan, and an analysis performed using the ABC plan cost model, 
submitted by a group of price cap carriers.
    18. Petitioners argue that the comparison with the BIP deployments 
(which showed an average per-location cost of $557) was faulty, 
because, ``[a]s the Commission acknowledges in the Order, BIP was aimed 
at improving service to underserved locations as well as deploying to 
unserved locations'' and only deployments to the unserved count toward 
satisfaction of the CAF Phase I requirement. But as petitioners 
concede, the Commission acknowledged this concern in the Order, and 
took it into account. Petitioners also complain that the analysis based 
on the National Broadband Plan and the ABC plan cost model focuses on 
deployment costs and fails to account for the cost of maintaining and 
operating existing networks. That complaint misses the mark, however, 
because the goal of CAF Phase I is to provide one-time support to spur 
broadband deployment, not to create a new source of ongoing support. 
Moreover, as the Commission explained in the Order, one part of the 
analysis Commission staff performed suggested that there were 
approximately 1.75 million unserved locations served by price cap 
carriers with costs below $765. Even if all $300 million available in 
Phase I were accepted, carriers would be required to deploy to only 
387,096 locations in total. In other words, the Commission's analysis 
indicates that, nationwide, there are far more unserved locations with 
costs below our deployment requirement than will be reached in Phase I. 
No party disputed the Commission's analysis on this point.

[[Page 31523]]

In sum, nothing in the petitions for reconsideration calls the 
Commission's conclusion into question or suggests that any other 
nationwide number would be more appropriate.
    19. In any event, the heart of Frontier, Windstream and USTelecom's 
argument is that the Commission should adopt carrier-specific 
deployment requirements for CAF Phase I rather than use a nationwide 
figure for the per-location support offered. As Frontier and Windstream 
explain: ``The fact that some locations within another carrier's 
territory might be served for $400 or less does nothing for another 
carrier's consumers when that carrier's least-expensive unserved 
locations would cost $1,000 or more to serve.'' They assert that they 
are in the latter situation: because of their history of aggressively 
deploying broadband, ``there are relatively few, if any, unserved areas 
left in Petitioners' service areas that can be reached for $775 or 
less.'' Petitioners propose that we develop a carrier-specific 
requirement by using the CostQuest Broadband Analysis Tool (CQBAT), a 
cost model submitted as part of a proposal by several large carriers 
for reform of the high-cost universal service support mechanism.
    20. We decline to adopt the proposed carrier-by-carrier approach. 
Petitioners may have deployed to many or all of the locations in their 
territories for which $775 represents an adequate subsidy, but CAF 
Phase I incremental support, as established in the USF/ICC 
Transformation Order, was designed to reach a significant number of 
relatively low-cost locations, not to ensure that the entire $300 
million offered for Phase I is accepted. Indeed, the Commission 
recognized that some incremental support would likely be declined, and 
explained that declined support ``may be used in other ways to advance 
our broadband objectives pursuant to our statutory authority.'' To the 
extent carriers have already deployed to the low-cost areas in their 
territories, then those carriers' remaining unserved areas may be 
better candidates for CAF Phase II, which will be identified, using an 
updated model, along with the appropriate ongoing subsidy amounts for 
areas with costs above a specified benchmark. Further, we note that in 
the Order, the Commission expressly declined to adopt the CQBAT model, 
explaining that it would be premature to rely on it in light of the 
limited opportunity the public had then had to review it. Instead, the 
Commission initiated an open process to develop a robust cost model for 
the Connect America Fund, a process that is now underway. We are not 
persuaded that we should, at this early stage in that ongoing process, 
prejudge the merits of the CQBAT model and adopt it for use in CAF 
Phase I. Accordingly, we decline to relax the nationwide deployment 
requirement and decline to establish carrier-specific requirements.
    21. Third, several parties ask us to modify the broadband 
deployment requirement for CAF Phase I to permit carriers to meet their 
obligations not just by deploying broadband to previously unserved 
locations, but also by upgrading service to locations that are 
``underserved''--locations, for example, that are served by broadband 
at speeds less than the 4 megabits downstream required for new 
deployments in CAF Phase I. Frontier and Windstream argue that 
underserved areas should be eligible for support in CAF Phase I 
because, in order to deploy broadband to unserved locations, ``facility 
upgrades in underserved areas may be required,'' and, what is more, 
those investments may be ``very significant.'' As explained above, 
however, the Commission's focus in CAF Phase I was to spur broadband 
deployment to consumers who lack access to broadband, not to improve 
service for those who already have access to some form of high-speed 
Internet access. We recognize that as they extend broadband to 
previously unserved areas, carriers may need to upgrade network 
facilities shared by both served and unserved locations. However, we 
believe the $775 per newly served location appropriately takes account 
of the cost of these upgrades. That is, we conclude it is only 
appropriate to support such shared investments through CAF Phase I to 
the extent that they do not drive the required subsidy per unserved 
location above $775.
    22. Fourth, in an ex parte letter, Windstream offers a further 
alternative to the nationwide deployment requirement. Windstream 
proposes that carriers should be permitted to use CAF Phase I support 
to deploy second-mile fiber in areas not currently served by fiber. 
Windstream argues that the existing rules will penalize the customers 
of those carriers, like Windstream, that have already deployed Digital 
Subscriber Line Access Multiplexers (DSLAMs) fed by existing copper 
facilities to provide at least some level of broadband service in some 
of their most rural areas, even where there is no business case to 
deploy fiber to the DSLAM. As Windstream observes, residential 
broadband bandwidth demand has increased substantially in recent years. 
Providing support for fiber in such areas, Windstream argues, is 
essential to maintain existing service levels for their consumers; 
driving fiber deeper into the network would also reduce the cost of 
connecting rural wireless cell sites to fiber facilities.
    23. We decline to adopt Windstream's proposal for second-mile fiber 
support. While we agree with Windstream that deploying second-mile 
fiber facilities is a worthwhile endeavor, we reiterate that the focus 
of CAF Phase I is a relatively narrow one: to spur deployment of 
broadband to relatively low-cost locations that nevertheless currently 
have no service at all, while we implement CAF Phase II. It is not 
intended to be a long-term program or to serve all broadband deployment 
needs, such as the need to eventually replace existing broadband 
facilities to meet projected demand. Instead, the need for such 
investments is more appropriately considered in the broader context of 
the CAF Phase II mechanism.
    24. Finally, Frontier and Windstream request that we clarify or 
reconsider how the $300 million allocated to CAF Phase I will be 
distributed among carriers. The USF/ICC Transformation Order freezes 
existing high cost support and uses the CAF Phase I incremental support 
mechanism to allocate an additional $300 million. Frontier and 
Windstream assert that there are two different ways that this $300 
million could be distributed through the incremental support mechanism. 
In the first, the incremental support allocation mechanism could be 
applied only to the $300 million in incremental support. In the second, 
preferred by petitioners, all high-cost support, both frozen support 
and the $300 million incremental support, would be distributed ``as 
if'' it were allocated using the new mechanism, subject to a ``hold 
harmless'' rule that would ensure no carrier would receive less support 
than it previously received.
    25. According to Frontier and Windstream, the two approaches 
``differ markedly in how they allocate the incremental $300 million.'' 
That is so because the CAF Phase I incremental support allocation 
mechanism allocates support ``from the top down.'' Specifically, a per-
location cost is calculated for each wire center; support is then 
calculated for the carrier serving that wire center based on the amount 
by which that per-location cost exceeds a funding threshold, multiplied 
by the total number of locations in the wire center. The funding 
threshold is set so that the specified amount of support, either $300 
million or $1.3 billion, is allocated. Setting the funding threshold to 
distribute $1.3 billion would of course result in a lower threshold 
than

[[Page 31524]]

setting it to distribute $300 million, and a lower threshold would mean 
that more wire centers have per-location costs above the threshold. 
Petitioners argue that spreading incremental support based on a broader 
range of high-cost wire centers (those above the threshold set with 
$1.3 billion) ``would be far more equitable'' than the alternative 
approach. In addition, they argue, their proposal is more consistent 
with the support framework that will be in place during CAF Phase II, 
when the very highest-cost census blocks will likely be served through 
satellite, fixed wireless, or other technologies rather than wireline 
broadband provided by incumbent carriers. CenturyLink opposes these 
petitioners' proposal, arguing that the Commission's ``straightforward 
calculation'' was ``sensible and justified,'' as compared to the multi-
stage, more complex calculation advocated by Frontier and Windstream.
    26. We decline to change the CAF Phase I support calculation as 
advocated by Frontier and Windstream. We remain unconvinced that it 
would be reasonable to allocate the $300 million in incremental CAF 
Phase I support ``as-if'' a different amount of support were being 
allocated. CAF Phase I is an interim support mechanism, designed to be 
a simple, easily administered tool to provide a boost to broadband 
deployment in the near term while the Wireline Competition Bureau 
develops a support model for CAF Phase II. We acknowledge that there 
were other ways the Commission could have established the amounts of 
support each carrier would be eligible for in this interim mechanism. 
But Frontier and Windstream have not shown that their proposed 
methodology, which would add a degree of complexity for an uncertain 
benefit, would likely serve the goals of CAF Phase I more effectively 
than the methodology adopted in the Order, and we decline to adopt it.

III. Intercarrier Compensation for VOIP Traffic

    27. Background. The USF/ICC Transformation Order comprehensively 
reformed the intercarrier compensation system. Significantly, the 
Commission launched long-term intercarrier compensation reform by 
adopting a bill-and-keep methodology as the ultimate uniform, national 
methodology for all telecommunications traffic exchanged with a local 
exchange carrier (LEC). The USF/ICC Transformation Order began this 
transition to bill-and-keep with terminating switched access rates. In 
addition, the Commission addressed specific intercarrier compensation 
issues involving commercial mobile radio service (CMRS)-LEC 
compensation and made clear the prospective payment obligations for 
certain ``VoIP'' traffic, referred to in the USF/ICC Transformation 
Order as ``VoIP-PSTN'' traffic.
    28. In light of new evidence in the record, we reconsider an aspect 
of the transitional intercarrier compensation framework adopted for 
originating VoIP traffic. For purposes of the USF/ICC Transformation 
Order, VoIP-PSTN traffic ``is `traffic exchanged over PSTN facilities 
that originates and/or terminates in IP format.' In this regard, we 
focus specifically on whether the exchange of traffic between a LEC and 
another carrier occurs in Time-Division Multiplexing (TDM) format (and 
not in IP format), without specifying the technology used to perform 
the functions subject to the associated intercarrier compensation 
charges.'' As with the USF/ICC Transformation Order more broadly, the 
VoIP intercarrier compensation framework weighed the benefits of ``a 
more measured transition away from carriers' reliance on intercarrier 
compensation as a significant revenue source.'' The Commission also 
found, however, that VoIP traffic had been a particular source of 
intercarrier compensation disputes and litigation. As a result, 
``carriers may receive some intercarrier compensation payments at 
something less than the full intercarrier compensation rates charged in 
the case of traditional telephone service'' or, in some cases, no 
payment at all. Balancing these and additional considerations led the 
Commission to adopt a middle ground that, prospectively, neither 
``subject[ed] VoIP traffic to the pre-existing intercarrier 
compensation regime that applies in the context of traditional 
telephone service, including full interstate and intrastate access 
charges,'' nor ``immediately adopt[ed] a bill-and-keep methodology for 
VoIP traffic'' or a very low rate. Instead, the Commission's approach 
permitted LECs, starting December 29, 2011, to tariff default 
intercarrier compensation for both originating and terminating toll 
VoIP traffic at rates equal to interstate access rates, with default 
intercarrier compensation for other VoIP traffic at the otherwise-
applicable reciprocal compensation rates. The Commission also adopted 
measures to ensure that its approach to VoIP intercarrier compensation 
was symmetrical to minimize marketplace distortions. This symmetrical 
approach seeks to provide all LECs the opportunity to collect 
intercarrier compensation under the same VoIP intercarrier compensation 
framework for the functions they (and/or their retail VoIP provider 
partner) perform in originating and/or terminating VoIP traffic.
    29. Frontier and Windstream and certain rural associations filed 
petitions, seeking, among other things, clarification that originating 
intrastate toll VoIP traffic was subject to default rates equal to 
intrastate originating access under the USF/ICC Transformation Order. 
If the Commission instead concludes that default rates equal to 
interstate originating access rates applied to all originating toll 
VoIP traffic under the USF/ICC Transformation Order, those petitioners 
advocate that the Commission reconsider that decision. In light of both 
Petitions' focus on VoIP traffic that originates in TDM format, some 
commenters expressed concern that the resulting approach would 
undermine the symmetry of the VoIP intercarrier compensation framework 
adopted in the USF/ICC Transformation Order. Other commenters opposed 
the Petitions more broadly, arguing that the USF/ICC Transformation 
Order established default rates equal to interstate originating access 
for originating intrastate toll VoIP traffic, and that the Commission 
should not deviate from the policy balance underlying that approach.
    30. Discussion. As discussed below, we do not adopt the Frontier-
Windstream Petition's and Rural Associations Petition's interpretation 
of the VoIP intercarrier compensation rules adopted in the USF/ICC 
Transformation Order. However, arguments and evidence from those 
parties and supporting commenters, persuade us to modify the VoIP ICC 
rules on reconsideration in one respect: we permit LECs to tariff 
default charges equal to intrastate originating access for originating 
intrastate toll VoIP traffic (including traffic that originates in IP, 
terminates in IP, or both) at intrastate rates until June 30, 2014. For 
all interstate toll VoIP traffic, interstate access rates continue to 
apply consistent with the default rates adopted in the USF/ICC 
Transformation Order.
    31. The record reveals that there has been some uncertainty 
regarding the default origination charges for intrastate toll VoIP 
traffic under the framework adopted in the USF/ICC Transformation 
Order. However, we ultimately are unpersuaded by the Frontier-
Windstream Petition's and Rural Associations Petition's rationales for 
interpreting the USF/ICC Transformation Order to apply default 
origination charges equal to intrastate--

[[Page 31525]]

rather than interstate--originating access for intrastate toll VoIP 
traffic. We disagree with claims that statements in other sections of 
the USF/ICC Transformation Order discussing, for example, the 
Commission's general intent to address reductions to originating access 
in the FNPRM, imply that the Commission took a particular approach to 
origination charges for VoIP traffic. The USF/ICC Transformation Order 
adopted a distinct prospective intercarrier compensation framework for 
VoIP traffic based on its findings specific to that traffic. Contrary 
to the Petitions' claims, the USF/ICC Transformation Order's treatment 
or discussion of originating access charges in other contexts do not 
constrain the interpretation of permissible origination charges for 
toll VoIP traffic. In addition, although the USF/ICC Transformation 
Order cites illustrative examples of the operation of the VoIP 
intercarrier compensation framework for termination charges, the text 
and the implementing rules demonstrate that the intercarrier 
compensation framework for toll VoIP traffic limits both default 
origination and termination charges to the level of interstate access 
rates. Further, although the Commission built upon the ABC Plan in 
adopting a VoIP intercarrier compensation framework, the Commission did 
not adopt the ABC Plan, and as a result, individual commenters' 
interpretations of the ABC Plan do not dictate a different 
interpretation of the USF/ICC Transformation Order.
    32. More fundamentally, these arguments reflect a mistaken 
understanding of key elements of the USF/ICC Transformation Order. 
Arguments that setting default rates equal to intrastate originating 
access are necessary to avoid ``flash cuts'' or ``reductions'' in 
intercarrier compensation assume that LECs were receiving intrastate 
originating access for intrastate toll VoIP traffic under the status 
quo prior to that Order. Although the marketplace evidence in the 
record on reconsideration demonstrates the accuracy of that position in 
many cases, that assumption is not reflected in the USF/ICC 
Transformation Order itself. Rather, based on the available record 
evidence, the Commission found as a practical matter that compensation 
for VoIP traffic was widely subject to dispute and varied outcomes, and 
that ``the record is clear that many providers did not pay the same 
intercarrier compensation rates for VoIP traffic that would have 
applied to traditional telephone service traffic.'' The Commission did 
not reach a different conclusion in the case of originating access. 
Consequently, the USF/ICC Transformation Order itself does not provide 
a basis for interpreting the requirements of that Order against a 
baseline assumption that intrastate originating access historically had 
been received for intrastate toll VoIP traffic.
    33. The record on reconsideration, however, indicates that prior to 
the USF/ICC Transformation Order, here were fewer disputes and 
instances of non-payment or under-payment of origination charges billed 
at intrastate originating access rates for intrastate toll VoIP traffic 
than was the case for terminating charges for such traffic, 
particularly for calls that originated in TDM format. Consequently, 
several commenters present evidence that they will experience annual 
reductions in originating access revenues under the VoIP intercarrier 
compensation framework adopted in the USF/ICC Transformation Order.
    34. This new evidence regarding the status quo prior to the USF/ICC 
Transformation Order persuades us to reconsider the balancing of policy 
interests underlying the Order's approach to VoIP traffic, consistent 
with Petitioners' request in the alternative to reconsider those rules. 
In light of this new evidence, we conclude that an appropriate, 
measured transition for these revenues is somewhat different from the 
transition that the Commission anticipated based on its findings in the 
USF/ICC Transformation Order. Consequently, on reconsideration we find 
it appropriate to permit LECs, prospectively, to tariff a rate equal to 
their intrastate originating access rates when they originate 
intrastate toll VoIP traffic, albeit for a finite period of time.
    35. In particular, consistent with Frontier's proposal, we amend 
part 51 of our rules to permit LECs to tariff default rates equal to 
their intrastate originating access rates when they originate 
intrastate toll VoIP traffic from the effective date of our the revised 
rules until June 30, 2014--effective July 1, 2014, LECs will be 
permitted to tariff default rates for such traffic equal to their 
interstate originating access rates. This is to be considered a 
transitional rate. We do not find it appropriate to permit default 
origination charges equal to intrastate access rates indefinitely, 
consistent with the Commission's recognized need to ``reduce disputes 
and provide greater certainty to the industry regarding intercarrier 
compensation revenue streams while also reflecting the Commission's 
move away from the pre-existing, flawed intercarrier compensation 
regimes that have applied to traditional telephone service'' under the 
framework adopted in the USF/ICC Transformation Order. We are mindful 
that some providers were receiving compensation for originating VoIP 
traffic, however, we consider the transition of origination charges for 
intrastate toll VoIP traffic in the context of the Commission's overall 
VoIP intercarrier compensation framework. Under this framework, most 
providers will receive, either via negotiated agreements or via 
tariffed charges, additional revenues for previously disputed 
terminating VoIP calls and will also realize savings associated with 
reduced litigation and disputes. In light of these benefits, 
indefinitely permitting origination charges at the level of intrastate 
access for prospective intrastate toll VoIP traffic is not necessary to 
ensure a measured transition and is indeed in tension with our overall 
policy goal of encouraging a migration to all IP networks and moving 
away from reliance on ICC revenues.
    36. Indeed, the USF/ICC Transformation Order makes clear the 
Commission's goal of promoting migration to IP services. As VoIP 
providers observe, actions that may benefit some providers through a 
more measured transition away from reliance on intercarrier 
compensation also burden other providers that are required to bear 
those costs. Other providers likewise explain that these costs flow 
through to their services and, in turn, the services their customers 
provide. In light of these considerations, we believe that a measured 
transition with a time limit on the use of intrastate access charges as 
a default for that time period is necessary to ensure that migration to 
IP services is adequately promoted. The time limit we adopt falls well 
within our uniform, national framework for comprehensive intercarrier 
compensation reform which set forth the overall transition for 
intercarrier compensation rates established in the USF/ICC 
Transformation Order. Within this time period, we predict that carriers 
will have had the opportunity to make significant progress 
transitioning their business plans away from extensive reliance on 
intercarrier compensation.
    37. As with the national VoIP intercarrier compensation framework 
adopted in the USF/ICC Transformation Order, the Commission here is 
specifying rates applicable to LECs' origination of intrastate toll 
VoIP traffic as an exercise of the same legal authority that enables 
the Commission to specify transitional rates for comprehensive 
intercarrier compensation reform under the basic framework of section 
251(b)(5). In the

[[Page 31526]]

USF/ICC Transformation Order, the Commission asserted authority to 
allow transitional origination charges for toll VoIP traffic, and our 
action here relies on that authority. In the USF/ICC Transformation 
Order the Commission noted that ``[t]he legal authority that enables us 
to specify transitional rates for comprehensive intercarrier 
compensation reform also enables us to adopt our transitional VoIP-PSTN 
intercarrier compensation framework pending the transition to bill-and-
keep.'' The Commission also noted that it ``has authority to adopt * * 
* [a] transitional framework for toll VoIP-PSTN traffic based on our 
rulemaking authority to implement section 251(b)(5),'' and that 
``interpreting our rulemaking authority in this manner is consistent 
with court decisions recognizing that `avoiding market disruptions 
pending broader reforms is, of course, a standard and accepted 
justification for a temporary rule.' '' Our actions here likewise do 
not alter states' roles or preexisting Commission decisions regarding 
the treatment of VoIP more generally. In particular, nothing in this 
Order impacts the holding of the Vonage Order. Other than specifying a 
new transitional default rate that LECs are permitted to tariff in the 
context of originating intrastate toll VoIP traffic, we leave the USF/
ICC Transformation Order's transitional national VoIP intercarrier 
compensation framework completely unaltered.
    38. We disagree with commenters who argue that the Commission has 
not sufficiently justified its legal authority to permit transitional 
origination charges for toll VoIP traffic consistent with sections 
251(b)(5) and 251(g) of the Act. As the Commission explained in the 
USF/ICC Transformation Order, traffic previously was not subject to 
compensation under section 251(b)(5) if ``such traffic [was] subject to 
pre-1996 Act obligations regarding `exchange access,' '' and thus 
grandfathered under section 251(g). The Commission concluded that 
``[r]egardless of whether particular VoIP services are 
telecommunications services or information services, there [were] pre-
1996 Act obligations regarding LECs' compensation for the provision of 
exchange access to an IXC or an information service provider''--namely, 
either intercarrier access charges or, if subject to the ESP exemption, 
special access or subscriber line charges. Contrary to some claims, it 
was not necessary for the Commission to resolve which of those exchange 
access charge frameworks applied in particular circumstances 
previously--so long as they were exchange access regulations involving 
the exchange of traffic between a LEC and an interexchange carrier or 
information service provider, they were subject to grandfathering under 
section 251(g) until superseded by the Commission. Moreover, we agree 
with parties arguing that ``the grandfathering provision of section 
251(g) does not require pre-Act compensation regulations to be frozen 
in time'' but allows the Commission ``to `modify LECs' pre-Act 
`restrictions' or `obligations' pending full implementation of relevant 
sections of the Act.'' Thus, in exercising its authority to adopt a 
transitional framework for VoIP intercarrier compensation, the 
Commission was not restricted to adopting precisely the same charges 
that might have applied previously. As commenters observe, ``[t]o find 
otherwise would remove any ability of the Commission to adopt a 
reasonable transition away from pre-Act compensation obligations.'' 
Thus, regardless of whether the ESP exemption framework historically 
applied to VoIP traffic, the Commission had authority to eliminate the 
potential application of that framework to VoIP traffic and adopt 
transitional intercarrier compensation rules, including origination 
charges for toll VoIP traffic, that seek to limit marketplace 
disruptions pending the ultimate transition to bill-and-keep under 
section 251(b)(5).
    39. We also make clear that the new default rate for originating 
intrastate toll VoIP traffic applies regardless of whether the VoIP 
traffic originates in TDM or IP format. The VoIP intercarrier 
compensation rules adopted in the USF/ICC Transformation Order included 
a ``symmetry'' principle that all VoIP traffic will be subject to the 
same intercarrier compensation requirements, regardless of whether TDM 
or IP technology was used to originate or terminate the call. The 
Commission thus ``decline[d] to adopt an asymmetric approach that would 
apply VoIP-specific rates for only IP-originated or only IP-terminated 
traffic.'' Rather, the Commission ``adopt[ed] rules making clear that 
origination and termination charges may be imposed under our 
transitional [VoIP] intercarrier compensation framework, including when 
an entity `uses Internet Protocol facilities to transmit such traffic 
to [or from] the called party's premises.' ''
    40. This ``VoIP symmetry rule'' was incorporated in the codified 
intercarrier compensation rules for toll VoIP traffic. Section 
51.913(a) of the Commission's rules specifies the rate applicable to 
all ``Access Reciprocal Compensation subject to this subpart exchanged 
between a local exchange carrier and another telecommunications carrier 
in Time Division Multiplexing (TDM) format that originates and/or 
terminates in IP format,'' without distinguishing among classes of VoIP 
traffic depending upon whether they originate in TDM or IP. In 
addition, Sec.  51.913(b) of the rules makes clear that a LEC ``shall 
be entitled to assess and collect the full Access Reciprocal 
Compensation charges prescribed by this subpart that are set forth in a 
local exchange carrier's interstate or intrastate tariff for the access 
services defined in Sec.  51.903'' even if the relevant origination or 
termination functions are performed by the LEC's retail VoIP provider 
partner--which, of necessity, would be performing these functions in 
IP, rather than TDM. Likewise, the rules make clear that ``functions 
provided by a LEC as part of transmitting telecommunications between 
designated points using, in whole or in part, technology other than TDM 
transmission'' count equally as access services for purposes of Sec.  
51.903 of the Commission's rules as those performed in TDM.
    41. The Petitions focus on the factual scenario of TDM-originated 
VoIP traffic, and do not request reconsideration of the VoIP symmetry 
rule nor state that interstate rates should continue to apply to IP-
originated VoIP traffic. Precisely because the Petitions did not ask 
the Commission to reconsider the VoIP symmetry rule, however, they 
necessarily implicate the rate regulations for all originating 
intrastate VoIP traffic, because all such traffic would have to be 
considered for the Petitions to be accommodated within the framework of 
the VoIP symmetry rule. As commenters observe, the Petitions would be 
inconsistent with the symmetrical rules adopted in the USF/ICC 
Transformation Order if interpreted as implicating only TDM-originated 
VoIP traffic. Indeed, Frontier and Windstream subsequently joined with 
a number of other stakeholders in advocating that the Commission act on 
their Petition ``by stating that all originating access charges are 
subject to the same treatment pending further reform.'' Consequently, 
we interpret the Petitions as implicating the rate regulations for all 
originating intrastate VoIP traffic, consistent with the rules we adopt 
on reconsideration.
    42. Notably, we would not grant the requests for reconsideration of 
our VoIP intercarrier compensation rules if the symmetry rule were not 
applicable here. The Commission adopted the symmetry requirement in the 
USF/ICC

[[Page 31527]]

Transformation Order to avoid ``marketplace distortions that give one 
category of providers an artificial regulatory advantage in costs and 
revenues relative to other market participants.'' As commenters 
recognized, reconsidering the rules only for intrastate toll VoIP 
traffic originated in TDM could lead to the outcome the Commission's 
symmetry rule sought to avoid, for instance by creating artificial 
incentives for parties to send traffic using TDM technology simply to 
increase their revenues, which likewise would provide competitive 
advantages to such providers relative to providers relying on IP 
networks. The symmetry rule avoids these outcomes, enabling us to grant 
reconsideration on this issue.

IV. Procedural Matters

A. Paperwork Reduction Act

    43. This Second Order on Reconsideration contains no new 
information collection requirements subject to the Paperwork Reduction 
Act of 1995 (PRA), Public Law 104-13, so no review nor approval from 
the Office of Management and Budget (OMB) is required.

B. Final Regulatory Flexibility Act Certification

    44. The Regulatory Flexibility Act (RFA) requires that agencies 
prepare a regulatory flexibility analysis for notice-and-comment 
rulemaking proceedings, unless the agency certifies that ``the rule 
will not have a significant economic impact on a substantial number of 
small entities.'' The RFA generally defines ``small entity'' as having 
the same meaning as the terms ``small business,'' ``small 
organization,'' and ``small governmental jurisdiction.'' In addition, 
the term ``small business'' has the same meaning as the term ``small 
business concern'' under the Small Business Act. A small business 
concern is one which: (1) Is independently owned and operated; (2) is 
not dominant in its field of operation; and (3) satisfies any 
additional criteria established by the Small Business Administration 
(SBA).
    45. This Second Order on Reconsideration adopts revisions to 47 CFR 
parts 51 and 54. We hereby certify that the revision to part 54 will 
not have a significant economic impact on a substantial number of small 
entities. Previously, our rules governing Phase I of the Connect 
America Fund required, among other things, that carriers accepting 
incremental support deploy only to locations shown as unserved on the 
National Broadband Map. In this Order, we revise our rules to expand 
the areas to which such carriers may deploy, by permitting them to also 
deploy to unserved locations that are shown as served by the carrier 
itself, a change we make in recognition of the fact that the Map 
generally shows wireline coverage on a census-block-by-census-block 
basis, and thus shows an entire census block as served by the incumbent 
carrier even when there may be many locations in the block that are, in 
fact, not served. We conclude that this change to our rules will not 
have a significant impact on a substantial number of small entities. 
The Commission will send a copy of this Order, including this 
certification, to the Chief Counsel for Advocacy of the Small Business 
Administration. In addition, the Order (or a summary thereof) and 
certification will be published in the Federal Register.

C. Congressional Review Act

    46. The Commission will send a copy of this Order to Congress and 
the Government Accountability Office pursuant to the Congressional 
Review Act.

D. Final Regulatory Flexibility Analysis

    47. As required by the Regulatory Flexibility Act of 1980 (RFA), as 
amended, Initial Regulatory Flexibility Analyses (IRFAs) were 
incorporated in the Notice of Proposed Rule Making and Further Notice 
of Proposed Rulemaking (USF/ICC Transformation NPRM), in the Notice of 
Inquiry and Notice of Proposed Rulemaking (USF Reform NOI/NPRM), and in 
the Notice of Proposed Rulemaking (Mobility Fund NPRM) for this 
proceeding. The Commission sought written public comment on the 
proposals in the USF/ICC Transformation NPRM, including comment on the 
IRFA. The Commission only received comments on the USF/ICC 
Transformation NPRM IRFA. The comments received were discussed in the 
USF/ICC Transformation Order, and are not discussed further here. This 
Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.
    48. Need for, and Objectives of the Order. In the USF/ICC 
Transformation Order, the Commission adopted policies to transition 
outdated universal service and intercarrier compensation (ICC) systems 
to the Connect America Fund (CAF). In the present order, in addition to 
revising some rules related to universal service, which revisions we 
certify will not have a significant economic impact on a substantial 
number of small entities, we revise the rules adopted in the USF/ICC 
Transformation Order governing intercarrier compensation for Voice over 
Internet Protocol (VoIP). In that Order, the Commission permitted LECs, 
starting December 29, 2011, to tariff default intercarrier compensation 
rates for both originating and terminating toll VoIP traffic at rates 
equal to interstate access rates, with default intercarrier 
compensation for other VoIP traffic at the otherwise-applicable 
reciprocal compensation rates.
    49. In this Second Order on Reconsideration, the Commission 
reconsidered the transitional intercarrier compensation framework 
adopted in the USF/ICC Transformation Order for originating VoIP 
traffic. Specifically, the Commission modified the VoIP ICC rules to 
permit LECs to tariff default charges equal to intrastate originating 
access for originating intrastate toll VoIP traffic at intrastate rates 
until June 30, 2014.
    50. Summary of Significant Issues Raised by Public Comments in 
Response to the IRFA. No comments relating to any of the IRFAs have 
been filed since the Commission released the USF/ICC Transformation 
Order. In making the determinations reflected in the Order, we have 
considered the impact of our actions on small entities.
    51. Description and Estimate of the Number of Small Entities to 
which the Proposed Rules Will Apply. 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 proposed rules, if 
adopted. The RFA generally defines the term ``small entity'' as having 
the same meaning as the terms ``small business,'' ``small 
organization,'' and ``small governmental jurisdiction.'' In addition, 
the term ``small business'' has the same meaning as the term ``small-
business concern'' under the Small Business Act. A ``small-business 
concern'' is one which: (1) Is independently owned and operated; (2) is 
not dominant in its field of operation; and (3) satisfies any 
additional criteria established by the SBA.
    52. Small Businesses. Nationwide, there are a total of 
approximately 27.5 million small businesses, according to the SBA.
    53. Wired Telecommunications Carriers. The SBA has developed a 
small business size standard for Wired Telecommunications Carriers, 
which consists of all such companies having 1,500 or fewer employees. 
According to Census Bureau data for 2007, there were 3,188 firms in 
this category, total, that operated for the entire year. Of this total, 
3,144 firms had employment of 999 or fewer employees, and 44 firms had 
employment of 1,000 employees or more. Thus, under this size standard,

[[Page 31528]]

the majority of firms can be considered small.
    54. Local Exchange Carriers (LECs). Neither the Commission nor the 
SBA has developed a size standard for small businesses specifically 
applicable to local exchange services. The closest applicable size 
standard under SBA rules is for Wired Telecommunications Carriers. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. According to Commission data, 1,307 carriers reported 
that they were incumbent local exchange service providers. Of these 
1,307 carriers, an estimated 1,006 have 1,500 or fewer employees and 
301 have more than 1,500 employees. Consequently, the Commission 
estimates that most providers of local exchange service are small 
entities that may be affected by the rules and policies proposed in the 
Order.
    55. Incumbent Local Exchange Carriers (incumbent LECs). Neither the 
Commission nor the SBA has developed a size standard for small 
businesses specifically applicable to incumbent local exchange 
services. The closest applicable size standard under SBA rules is for 
Wired Telecommunications Carriers. Under that size standard, such a 
business is small if it has 1,500 or fewer employees. According to 
Commission data, 1,307 carriers reported that they were incumbent local 
exchange service providers. Of these 1,307 carriers, an estimated 1,006 
have 1,500 or fewer employees and 301 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 
rules adopted pursuant to the Order.
    56. We have included small incumbent LECs in this present RFA 
analysis. As noted above, a ``small business'' under the RFA is one 
that, inter alia, meets the pertinent small business size standard 
(e.g., a telephone communications business having 1,500 or fewer 
employees), and ``is not dominant in its field of operation.'' The 
SBA's Office of Advocacy contends that, for RFA purposes, small 
incumbent LECs are not dominant in their field of operation because any 
such dominance is not ``national'' in scope. We have therefore included 
small incumbent LECs in this RFA analysis, although we emphasize that 
this RFA action has no effect on Commission analyses and determinations 
in other, non-RFA contexts.
    57. Competitive Local Exchange Carriers (competitive LECs), 
Competitive Access Providers (CAPs), Shared-Tenant Service Providers, 
and Other Local Service Providers. Neither the Commission nor the SBA 
has developed a small business size standard specifically for these 
service providers. The appropriate 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, 1,442 carriers reported that they were 
engaged in the provision of either competitive local exchange services 
or competitive access provider services. Of these 1,442 carriers, an 
estimated 1,256 have 1,500 or fewer employees and 186 have more than 
1,500 employees. In addition, 17 carriers have reported that they are 
Shared-Tenant Service Providers, and all 17 are estimated to have 1,500 
or fewer employees. In addition, 72 carriers have reported that they 
are Other Local Service Providers. Of the 72, seventy have 1,500 or 
fewer employees and two have 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 rules adopted pursuant to the Order.
    58. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a size standard for small businesses specifically 
applicable to interexchange services. The closest applicable size 
standard under SBA rules is for Wired Telecommunications Carriers. 
Under that size standard, such a business is small if it has 1,500 or 
fewer employees. According to Commission data, 359 companies reported 
that their primary telecommunications service activity was the 
provision of interexchange services. Of these 359 companies, an 
estimated 317 have 1,500 or fewer employees and 42 have more than 1,500 
employees. Consequently, the Commission estimates that the majority of 
interexchange service providers are small entities that may be affected 
by rules adopted pursuant to the Order.
    59. 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, 193 carriers have reported that they are 
engaged in the provision of prepaid calling cards. Of these, an 
estimated all 193 have 1,500 or fewer employees and none have 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 rules adopted pursuant to the Order.
    60. 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, 213 carriers have reported 
that they are engaged in the provision of local resale services. Of 
these, an estimated 211 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 
rules adopted pursuant to the Order.
    61. 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, 881 carriers have reported 
that they are engaged in the provision of toll resale services. Of 
these, an estimated 857 have 1,500 or fewer employees and 24 have more 
than 1,500 employees. Consequently, the Commission estimates that the 
majority of toll resellers are small entities that may be affected by 
rules adopted pursuant to the Order.
    62. Other Toll Carriers. Neither the Commission nor the SBA has 
developed a size standard for small businesses specifically applicable 
to Other Toll Carriers. This category includes toll carriers that do 
not fall within the categories of interexchange carriers, operator 
service providers, prepaid calling card providers, satellite service 
carriers, or toll resellers. The closest applicable size standard under 
SBA rules is for Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to Commission data, 284 companies reported that their primary 
telecommunications service activity was the provision of other toll 
carriage. Of these, an estimated 279 have 1,500 or fewer employees and 
five have more than 1,500 employees. Consequently, the Commission 
estimates that most Other Toll Carriers are small entities that may be 
affected by the rules and policies adopted pursuant to the Order.
    63. 800 and 800-Like Service Subscribers. Neither the Commission 
nor the SBA has developed a small

[[Page 31529]]

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, 
877, and 866 numbers in use. According to our data, as of September 
2009, the number of 800 numbers assigned was 7,860,000; the number of 
888 numbers assigned was 5,588,687; the number of 877 numbers assigned 
was 4,721,866; and the number of 866 numbers assigned was 7,867,736. 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 
7,860,000 or fewer small entity 800 subscribers; 5,588,687 or fewer 
small entity 888 subscribers; 4,721,866 or fewer small entity 877 
subscribers; and 7,867,736 or fewer small entity 866 subscribers.
    64. Wireless Telecommunications Carriers (except Satellite). Since 
2007, the SBA has recognized wireless firms within this new, broad, 
economic census category. Prior to that time, such firms were within 
the now-superseded categories of Paging and Cellular and Other Wireless 
Telecommunications. Under the present and prior categories, the SBA has 
deemed a wireless business to be small if it has 1,500 or fewer 
employees. For this category, census data for 2007 show that there were 
1,383 firms that operated for the entire year. Of this total, 1,368 
firms had employment of 999 or fewer employees and 15 had employment of 
1000 employees or more. Similarly, according to Commission data, 413 
carriers reported that they were engaged in the provision of wireless 
telephony, including cellular service, Personal Communications Service 
(PCS), and Specialized Mobile Radio (SMR) Telephony services. Of these, 
an estimated 261 have 1,500 or fewer employees and 152 have more than 
1,500 employees. Consequently, the Commission estimates that 
approximately half or more of these firms can be considered small. 
Thus, using available data, we estimate that the majority of wireless 
firms can be considered small.
    65. Broadband Personal Communications Service. The broadband 
personal communications service (PCS) spectrum is divided into six 
frequency blocks designated A through F, and the Commission has held 
auctions for each block. The Commission defined ``small entity'' for 
Blocks C and F as an entity that has average gross revenues of $40 
million or less in the three previous calendar years. For Block F, an 
additional classification for ``very small business'' was added and is 
defined as an entity that, together with its affiliates, has average 
gross revenues of not more than $15 million for the preceding three 
calendar years. These standards defining ``small entity'' in the 
context of broadband PCS auctions have been approved by the SBA. No 
small businesses, within the SBA-approved small business size standards 
bid successfully for licenses in Blocks A and B. There were 90 winning 
bidders that qualified as small entities in the Block C auctions. A 
total of 93 small and very small business bidders won approximately 40 
percent of the 1,479 licenses for Blocks D, E, and F. In 1999, the 
Commission re-auctioned 347 C, E, and F Block licenses. There were 48 
small business winning bidders. In 2001, the Commission completed the 
auction of 422 C and F Broadband PCS licenses in Auction 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. In 2005, the Commission 
completed an auction of 188 C block licenses and 21 F block licenses in 
Auction 58. There were 24 winning bidders for 217 licenses. Of the 24 
winning bidders, 16 claimed small business status and won 156 licenses. 
In 2007, the Commission completed an auction of 33 licenses in the A, 
C, and F Blocks in Auction 71. Of the 14 winning bidders, six were 
designated entities. In 2008, the Commission completed an auction of 20 
Broadband PCS licenses in the C, D, E and F block licenses in Auction 
78.
    66. Advanced Wireless Services. In 2008, the Commission conducted 
the auction of Advanced Wireless Services (``AWS'') licenses. This 
auction, which as designated as Auction 78, offered 35 licenses in the 
AWS 1710-1755 MHz and 2110-2155 MHz bands (``AWS-1''). The AWS-1 
licenses were licenses for which there were no winning bids in Auction 
66. That same year, the Commission completed Auction 78. A bidder with 
attributed average annual gross revenues that exceeded $15 million and 
did not exceed $40 million for the preceding three years (``small 
business'') received a 15 percent discount on its winning bid. A bidder 
with attributed average annual gross revenues that did not exceed $15 
million for the preceding three years (``very small business'') 
received a 25 percent discount on its winning bid. A bidder that had 
combined total assets of less than $500 million and combined gross 
revenues of less than $125 million in each of the last two years 
qualified for entrepreneur status. Four winning bidders that identified 
themselves as very small businesses won 17 licenses. Three of the 
winning bidders that identified themselves as a small business won five 
licenses. Additionally, one other winning bidder that qualified for 
entrepreneur status won 2 licenses.
    67. Narrowband Personal Communications Services. In 1994, the 
Commission conducted an auction for Narrowband PCS licenses. A second 
auction was also conducted later in 1994. For purposes of the first two 
Narrowband PCS auctions, ``small businesses'' were entities with 
average gross revenues for the prior three calendar years of $40 
million or less. Through these auctions, the Commission awarded a total 
of 41 licenses, 11 of which were obtained by four small businesses. To 
ensure meaningful participation by small business entities in future 
auctions, the Commission adopted a two-tiered small business size 
standard in the Narrowband PCS Second Report and Order. A ``small 
business'' is an entity that, together with affiliates and controlling 
interests, has average gross revenues for the three preceding years of 
not more than $40 million. A ``very small business'' is an entity that, 
together with affiliates and controlling interests, has average gross 
revenues for the three preceding years of not more than $15 million. 
The SBA has approved these small business size standards. A third 
auction was conducted in 2001. Here, five bidders won 317 (Metropolitan 
Trading Areas and nationwide) licenses. Three of these claimed status 
as a small or very small entity and won 311 licenses.
    68. Paging (Private and Common Carrier). In the Paging Third Report 
and Order, we developed a small business size standard for ``small 
businesses'' and ``very small businesses'' for purposes of determining 
their eligibility for special provisions such as bidding credits and 
installment payments. A ``small business'' is an entity that, together 
with

[[Page 31530]]

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. According to Commission 
data, 291 carriers have reported that they are engaged in Paging or 
Messaging Service. Of these, an estimated 289 have 1,500 or fewer 
employees, and two 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. An auction of Metropolitan 
Economic Area licenses commenced on February 24, 2000, and closed on 
March 2, 2000. Of the 2,499 licenses auctioned, 985 were sold. Fifty-
seven companies claiming small business status won 440 licenses. A 
subsequent auction of MEA and Economic Area (``EA'') licenses was held 
in the year 2001. Of the 15,514 licenses auctioned, 5,323 were sold. 
One hundred thirty-two companies claiming small business status 
purchased 3,724 licenses. A third auction, consisting of 8,874 licenses 
in each of 175 EAs and 1,328 licenses in all but three of the 51 MEAs, 
was held in 2003. Seventy-seven bidders claiming small or very small 
business status won 2,093 licenses. A fourth auction, consisting of 
9,603 lower and upper paging band licenses was held in the year 2010. 
Twenty-nine bidders claiming small or very small business status won 
3,016 licenses..
    69. 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 Wireless 
Telecommunications Carriers (except Satellite). Under this category, 
the SBA deems a wireless business to be small if it has 1,500 or fewer 
employees. The Commission estimates that nearly all such licensees are 
small businesses under the SBA's small business size standard that may 
be affected by rules adopted pursuant to the Order.
    70. 220 MHz Radio Service--Phase II Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. The Phase II 220 MHz service is 
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 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.
    71. Specialized Mobile Radio. The Commission awards small business 
bidding credits in auctions for Specialized Mobile Radio (``SMR'') 
geographic area licenses in the 800 MHz and 900 MHz bands to entities 
that had revenues of no more than $15 million in each of the three 
previous calendar years. The Commission awards very small business 
bidding credits to entities that had revenues of no more than $3 
million in each of the three previous calendar years. The SBA has 
approved these small business size standards for the 800 MHz and 900 
MHz SMR Services. The Commission has held auctions for geographic area 
licenses in the 800 MHz and 900 MHz bands. The 900 MHz SMR auction was 
completed in 1996. Sixty bidders claiming that they qualified as small 
businesses under the $15 million size standard won 263 geographic area 
licenses in the 900 MHz SMR band. The 800 MHz SMR auction for the upper 
200 channels was conducted in 1997. Ten bidders claiming that they 
qualified as small businesses under the $15 million size standard won 
38 geographic area licenses for the upper 200 channels in the 800 MHz 
SMR band. A second auction for the 800 MHz band was conducted in 2002 
and included 23 BEA licenses. One bidder claiming small business status 
won five licenses.
    72. The auction of the 1,053 800 MHz SMR geographic area licenses 
for the General Category channels was conducted in 2000. Eleven bidders 
won 108 geographic area licenses for the General Category channels in 
the 800 MHz SMR band qualified as small businesses under the $15 
million size standard. In an auction completed in 2000, a total of 
2,800 Economic Area licenses in the lower 80 channels of the 800 MHz 
SMR service were awarded. Of the 22 winning bidders, 19 claimed small 
business status and won 129 licenses. Thus, combining all three 
auctions, 40 winning bidders for geographic licenses in the 800 MHz SMR 
band claimed status as small business.
    73. In addition, there are numerous incumbent site-by-site SMR 
licensees and licensees with extended implementation authorizations in 
the 800 and 900 MHz bands. We do not know how many firms provide 800 
MHz or 900 MHz geographic area SMR 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. In 
addition, we do not know how many of these firms have 1,500 or fewer 
employees. We assume, for purposes of this analysis, that all of the 
remaining existing extended implementation authorizations are held by 
small entities, as that small business size standard is approved by the 
SBA.
    74. Broadband Radio Service and Educational Broadband Service. 
Broadband Radio Service systems, previously referred to as Multipoint 
Distribution Service (``MDS'') and Multichannel Multipoint Distribution 
Service (``MMDS'') systems, and ``wireless cable,'' transmit video 
programming to subscribers and provide two-way high speed data 
operations using the microwave frequencies of the Broadband Radio 
Service (``BRS'') and Educational Broadband Service (``EBS'') 
(previously referred to as the Instructional Television Fixed Service 
(``ITFS'')). In connection with the 1996 BRS auction, the Commission 
established a small business size standard as an entity that had annual 
average gross revenues of no more than $40 million in the previous 
three calendar years. The BRS auctions resulted in 67 successful 
bidders obtaining licensing opportunities for

[[Page 31531]]

493 Basic Trading Areas (``BTAs''). Of the 67 auction winners, 61 met 
the definition of a small business. BRS also includes licensees of 
stations authorized prior to the auction. At this time, we estimate 
that of the 61 small business BRS auction winners, 48 remain small 
business licensees. In addition to the 48 small businesses that hold 
BTA authorizations, there are approximately 392 incumbent BRS licensees 
that are considered small entities. After adding the number of small 
business auction licensees to the number of incumbent licensees not 
already counted, we find that there are currently approximately 440 BRS 
licensees that are defined as small businesses under either the SBA or 
the Commission's rules. The Commission has adopted three levels of 
bidding credits for BRS: (i) A bidder with attributed average annual 
gross revenues that exceed $15 million and do not exceed $40 million 
for the preceding three years (small business) is eligible to receive a 
15 percent discount on its winning bid; (ii) a bidder with attributed 
average annual gross revenues that exceed $3 million and do not exceed 
$15 million for the preceding three years (very small business) is 
eligible to receive a 25 percent discount on its winning bid; and (iii) 
a bidder with attributed average annual gross revenues that do not 
exceed $3 million for the preceding three years (entrepreneur) is 
eligible to receive a 35 percent discount on its winning bid. In 2009, 
the Commission conducted Auction 86, which offered 78 BRS licenses. 
Auction 86 concluded with ten bidders winning 61 licenses. Of the ten, 
two bidders claimed small business status and won 4 licenses; one 
bidder claimed very small business status and won three licenses; and 
two bidders claimed entrepreneur status and won six licenses.
    75. In addition, the SBA's Cable Television Distribution Services 
small business size standard is applicable to EBS. There are presently 
2,032 EBS licensees. All but 100 of these licenses are held by 
educational institutions. Educational institutions are included in this 
analysis as small entities. Thus, we estimate that at least 1,932 
licensees are small businesses. Since 2007, Cable Television 
Distribution Services have been defined within the broad economic 
census category of Wired Telecommunications Carriers; that category is 
defined as follows: ``This industry comprises establishments primarily 
engaged in operating and/or providing access to transmission facilities 
and infrastructure that they own and/or lease for the transmission of 
voice, data, text, sound, and video using wired telecommunications 
networks. Transmission facilities may be based on a single technology 
or a combination of technologies.'' The SBA defines a small business 
size standard for this category as any such firms having 1,500 or fewer 
employees. The SBA has developed a small business size standard for 
this category, which is: all such firms having 1,500 or fewer 
employees. According to Census Bureau data for 2007, there were a total 
of 955 firms in this previous category that operated for the entire 
year. Of this total, 939 firms had employment of 999 or fewer 
employees, and 16 firms had employment of 1000 employees or more. Thus, 
under this size standard, the majority of firms can be considered small 
and may be affected by rules adopted pursuant to the Order.
    76. Lower 700 MHz Band Licenses. The Commission previously adopted 
criteria for defining three groups of small businesses for purposes of 
determining their eligibility for special provisions such as bidding 
credits. The Commission defined a ``small business'' as an entity that, 
together with its affiliates and controlling principals, has average 
gross revenues not exceeding $40 million for the preceding three years. 
A ``very small business'' is defined as an entity that, together with 
its affiliates and controlling principals, has average gross revenues 
that are not more than $15 million for the preceding three years. 
Additionally, the Lower 700 MHz Band had a third category of small 
business status for Metropolitan/Rural Service Area (``MSA/RSA'') 
licenses, identified as ``entrepreneur'' and defined as an entity that, 
together with its affiliates and controlling principals, has average 
gross revenues that are not more than $3 million for the preceding 
three years. The SBA approved these small size standards. The 
Commission conducted an auction in 2002 of 740 Lower 700 MHz Band 
licenses (one license in each of the 734 MSAs/RSAs and one license in 
each of the six Economic Area Groupings (EAGs)). Of the 740 licenses 
available for auction, 484 licenses were sold to 102 winning bidders. 
Seventy-two of the winning bidders claimed small business, very small 
business or entrepreneur status and won a total of 329 licenses. The 
Commission conducted a second Lower 700 MHz Band auction in 2003 that 
included 256 licenses: 5 EAG licenses and 476 Cellular Market Area 
licenses. Seventeen winning bidders claimed small or very small 
business status and won 60 licenses, and nine winning bidders claimed 
entrepreneur status and won 154 licenses. In 2005, the Commission 
completed an auction of 5 licenses in the Lower 700 MHz Band, 
designated Auction 60. There were three winning bidders for five 
licenses. All three winning bidders claimed small business status.
    77. In 2007, the Commission reexamined its rules governing the 700 
MHz band in the 700 MHz Second Report and Order. The 700 MHz Second 
Report and Order revised the band plan for the commercial (including 
Guard Band) and public safety spectrum, adopted services rules, 
including stringent build-out requirements, an open platform 
requirement on the C Block, and a requirement on the D Block licensee 
to construct and operate a nationwide, interoperable wireless broadband 
network for public safety users. An auction of A, B and E block 
licenses in the Lower 700 MHz band was held in 2008. Twenty winning 
bidders claimed small business status (those with attributable average 
annual gross revenues that exceed $15 million and do not exceed $40 
million for the preceding three years). Thirty three winning bidders 
claimed very small business status (those with attributable average 
annual gross revenues that do not exceed $15 million for the preceding 
three years). In 2011, the Commission conducted Auction 92, which 
offered 16 Lower 700 MHz band licenses that had been made available in 
Auction 73 but either remained unsold or were licenses on which a 
winning bidder defaulted. Two of the seven winning bidders in Auction 
92 claimed very small business status, winning a total of four 
licenses.
    78. Upper 700 MHz Band Licenses. In the 700 MHz Second Report and 
Order, the Commission revised its rules regarding Upper 700 MHz band 
licenses. In 2008, the Commission conducted Auction 73 in which C and D 
block licenses in the Upper 700 MHz band were available. Three winning 
bidders claimed very small business status (those with attributable 
average annual gross revenues that do not exceed $15 million for the 
preceding three years).
    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'' is an entity that, together with its 
affiliates and controlling principals, has average gross revenues not 
exceeding $40 million for the preceding three years. Additionally, a 
``very small business'' is an entity that, together with its affiliates 
and controlling principals, has average

[[Page 31532]]

gross revenues that are not more than $15 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. Cellular Radiotelephone Service. Auction 77 was held to resolve 
one group of mutually exclusive applications for Cellular 
Radiotelephone Service licenses for unserved areas in New Mexico. 
Bidding credits for designated entities were not available in Auction 
77. In 2008, the Commission completed the closed auction of one 
unserved service area in the Cellular Radiotelephone Service, 
designated as Auction 77. Auction 77 concluded with one provisionally 
winning bid for the unserved area totaling $25,002.
    81. Private Land Mobile Radio (``PLMR''). PLMR systems serve an 
essential role in a range of industrial, business, land transportation, 
and public safety activities. These radios are used by companies of all 
sizes operating in all U.S. business categories, and are often used in 
support of the licensee's primary (non-telecommunications) business 
operations. For the purpose of determining whether a licensee of a PLMR 
system is a small business as defined by the SBA, we use the broad 
census category, Wireless Telecommunications Carriers (except 
Satellite). This definition provides that a small entity is any such 
entity employing no more than 1,500 persons. The Commission does not 
require PLMR licensees to disclose information about number of 
employees, so the Commission does not have information that could be 
used to determine how many PLMR licensees constitute small entities 
under this definition. We note that PLMR licensees generally use the 
licensed facilities in support of other business activities, and 
therefore, it would also be helpful to assess PLMR licensees under the 
standards applied to the particular industry subsector to which the 
licensee belongs.
    82. As of March 2010, there were 424,162 PLMR licensees operating 
921,909 transmitters in the PLMR bands below 512 MHz. We note that any 
entity engaged in a commercial activity is eligible to hold a PLMR 
license, and that any revised rules in this context could therefore 
potentially impact small entities covering a great variety of 
industries.
    83. 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''). In the present 
context, we will use the SBA's small business size standard applicable 
to Wireless Telecommunications Carriers (except Satellite), 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 proposed herein.
    84. 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 Wireless Telecommunications Carriers (except Satellite), 
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 and may be affected by rules adopted 
pursuant to the Order.
    85. 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 Wireless Telecommunications Carriers 
(except Satellite), which is 1,500 or fewer employees. Census data for 
2007, which supersede data contained in the 2002 Census, show that 
there were 1,383 firms that operated that year. Of those 1,383, 1,368 
had fewer than 100 employees, and 15 firms had more than 100 employees. 
Most applicants for recreational licenses are individuals. 
Approximately 581,000 ship station 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 and 
may be affected by rules adopted pursuant to the Order.
    86. 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 Wireless Telecommunications Carriers (except Satellite), 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 note, however, that the common carrier 
microwave fixed licensee category includes some large entities.
    87. Offshore Radiotelephone Service. This service operates on 
several UHF

[[Page 31533]]

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. 
The Commission is unable to estimate at this time the number of 
licensees that would qualify as small under the SBA's small business 
size standard for the category of Wireless Telecommunications Carriers 
(except Satellite). Under that SBA small business size standard, a 
business is small if it has 1,500 or fewer employees. Census data for 
2007, which supersede data contained in the 2002 Census, show that 
there were 1,383 firms that operated that year. Of those 1,383, 1,368 
had fewer than 100 employees, and 15 firms had more than 100 employees. 
Thus, under this category and the associated small business size 
standard, the majority of firms can be considered small.
    88. 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 rules adopted 
pursuant to the Order.
    89. 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 986 LMDS licenses began and 
closed in 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. In 1999, the Commission re-
auctioned 161 licenses; there were 32 small and very small businesses 
winning that won 119 licenses.
    90. 218-219 MHz Service. The first auction of 218-219 MHz spectrum 
resulted in 170 entities winning licenses for 594 Metropolitan 
Statistical Area (MSA) licenses. Of the 594 licenses, 557 were won by 
entities qualifying as a small business. For that auction, the small 
business size standard was an entity that, together with its 
affiliates, has no more than a $6 million net worth and, after federal 
income taxes (excluding any carry over losses), has no more than $2 
million in annual profits each year for the previous two years. In the 
218-219 MHz Report and Order and Memorandum Opinion and Order, 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.
    91. 2.3 GHz Wireless Communications Services. This service can be 
used for fixed, mobile, radiolocation, and digital audio broadcasting 
satellite uses. The Commission defined ``small business'' for the 
wireless communications services (``WCS'') auction as an entity with 
average gross revenues of $40 million for each of the three preceding 
years, and a ``very small business'' as an entity with average gross 
revenues of $15 million for each of the three preceding years. The SBA 
has approved these definitions. The Commission auctioned geographic 
area licenses in the WCS service. In the auction, which was conducted 
in 1997, there were seven bidders that won 31 licenses that qualified 
as very small business entities, and one bidder that won one license 
that qualified as a small business entity.
    92. 1670-1675 MHz Band. An auction for one license in the 1670-1675 
MHz band was conducted in 2003. The Commission defined a ``small 
business'' as an entity with attributable average annual gross revenues 
of not more than $40 million for the preceding three years and thus 
would be eligible for a 15 percent discount on its winning bid for the 
1670-1675 MHz band license. Further, the Commission defined a ``very 
small business'' as an entity with attributable average annual gross 
revenues of not more than $15 million for the preceding three years and 
thus would be eligible to receive a 25 percent discount on its winning 
bid for the 1670-1675 MHz band license. One license was awarded. The 
winning bidder was not a small entity.
    93. 3650-3700 MHz band. In March 2005, the Commission released a 
Report and Order and Memorandum Opinion and Order that provides for 
nationwide, non-exclusive licensing of terrestrial operations, 
utilizing contention-based technologies, in the 3650 MHz band (i.e., 
3650-3700 MHz). As of April 2010, more than 1270 licenses have been 
granted and more than 7433 sites have been registered. The Commission 
has not developed a definition of small entities applicable to 3650-
3700 MHz band nationwide, non-exclusive licensees. However, we estimate 
that the majority of these licensees are Internet Access Service 
Providers (ISPs) and that most of those licensees are small businesses.
    94. 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. For 
this service, the Commission uses the SBA small business size standard 
for the category ``Wireless Telecommunications Carriers (except 
satellite),'' which is 1,500 or fewer employees. To gauge small 
business prevalence for these cable services we must, however, use the 
most current census data. Census data for 2007, which supersede data 
contained in the 2002 Census, show that there were 1,383 firms that 
operated that year. Of those 1,383, 1,368 had fewer than 100 employees, 
and 15 firms had more than 100 employees. Thus under this category and 
the associated small business size standard, the majority of firms can 
be considered small. The Commission notes that the Census' use of the 
classifications ``firms'' does not track the number of ``licenses''. 
The Commission believes that there are only two licensees in the 24 GHz 
band that were relocated from the 18 GHz band, Teligent and TRW, Inc. 
It is our understanding that Teligent and its related companies have 
less than 1,500 employees, though this may change in the future. TRW is 
not a small entity. Thus, only one incumbent licensee in the 24 GHz 
band is a small business entity.
    95. 24 GHz--Future Licensees. With respect to new applicants in the 
24 GHz band, the size standard for ``small

[[Page 31534]]

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 a future 24 GHz license 
auction, if held.
    96. Satellite Telecommunications. Since 2007, the SBA has 
recognized satellite firms within this revised category, with a small 
business size standard of $15 million. The most current Census Bureau 
data are from the economic census of 2007, and we will use those 
figures to gauge the prevalence of small businesses in this category. 
Those size standards are for the two census categories of ``Satellite 
Telecommunications'' and ``Other Telecommunications.'' Under the 
``Satellite Telecommunications'' category, a business is considered 
small if it had $15 million or less in average annual receipts. Under 
the ``Other Telecommunications'' category, a business is considered 
small if it had $25 million or less in average annual receipts.
    97. 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 2007 show that there were a total of 512 firms that 
operated for the entire year. Of this total, 464 firms had annual 
receipts of under $10 million, and 18 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 rules adopted pursuant to the Order.
    98. The second category of Other Telecommunications ``primarily 
engaged in providing specialized telecommunications services, such as 
satellite tracking, communications telemetry, and radar station 
operation. This industry also includes establishments primarily engaged 
in providing satellite terminal stations and associated facilities 
connected with one or more terrestrial systems and capable of 
transmitting telecommunications to, and receiving telecommunications 
from, satellite systems. Establishments providing Internet services or 
voice over Internet protocol (VoIP) services via client-supplied 
telecommunications connections are also included in this industry.'' 
For this category, Census Bureau data for 2007 show that there were a 
total of 2,383 firms that operated for the entire year. Of this total, 
2,346 firms had annual receipts of under $25 million. Consequently, we 
estimate that the majority of Other Telecommunications firms are small 
entities that might be affected by our action.
    99. Cable and Other Program Distribution. Since 2007, these 
services have been defined within the broad economic census category of 
Wired Telecommunications Carriers; that category is defined as follows: 
``This industry comprises establishments primarily engaged in operating 
and/or providing access to transmission facilities and infrastructure 
that they own and/or lease for the transmission of voice, data, text, 
sound, and video using wired telecommunications networks. Transmission 
facilities may be based on a single technology or a combination of 
technologies.'' The SBA has developed a small business size standard 
for this category, which is: all such firms having 1,500 or fewer 
employees. According to Census Bureau data for 2007, there were a total 
of 955 firms in this previous category that operated for the entire 
year. Of this total, 939 firms had employment of 999 or fewer 
employees, and 16 firms had employment of 1000 employees or more. Thus, 
under this size standard, the majority of firms can be considered small 
and may be affected by rules adopted pursuant to the Order.
    100. Cable Companies and Systems. The Commission has developed its 
own small business size standards, for the purpose of cable rate 
regulation. Under the Commission's rules, a ``small cable company'' is 
one serving 400,000 or fewer subscribers, nationwide. Industry data 
indicate that, 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 and may be affected by rules 
adopted pursuant to the Order.
    101. Cable System Operators. The Act also contains a size standard 
for small cable system operators, which is ``a cable operator that, 
directly or through an affiliate, serves in the aggregate fewer than 1 
percent of all subscribers in the United States and is not affiliated 
with any entity or entities whose gross annual revenues in the 
aggregate exceed $250,000,000.'' 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.
    102. Open Video Services. The open video system (``OVS'') framework 
was established in 1996, and is one of four statutorily recognized 
options for the provision of video programming services by local 
exchange carriers. The OVS framework provides opportunities for the 
distribution of video programming other than through cable systems. 
Because OVS operators provide subscription services, OVS falls within 
the SBA small business size standard covering cable services, which is 
``Wired Telecommunications Carriers.'' The SBA has developed a small 
business size standard for this category, which is: all such firms 
having 1,500 or fewer employees. According to Census Bureau data for 
2007, there were a total of 955 firms in this previous category that 
operated for the entire year. Of this total, 939 firms had employment 
of 999 or fewer employees, and 16 firms had employment of 1000 
employees or more. Thus, under this second size standard, most cable 
systems are small and may be affected by rules adopted pursuant to the 
Order. In addition, we note that the Commission has certified some OVS 
operators, with some now providing service. Broadband service providers 
(``BSPs'') are currently the only significant holders of OVS 
certifications or local OVS franchises. The Commission does not have 
financial or employment information regarding the entities authorized 
to provide OVS, some of which may not yet be operational. Thus, again, 
at least some of the OVS operators may qualify as small entities.
    103. Internet Service Providers. Since 2007, these services have 
been defined within the broad economic census category of Wired 
Telecommunications

[[Page 31535]]

Carriers; that category is defined as follows: ``This industry 
comprises establishments primarily engaged in operating and/or 
providing access to transmission facilities and infrastructure that 
they own and/or lease for the transmission of voice, data, text, sound, 
and video using wired telecommunications networks. Transmission 
facilities may be based on a single technology or a combination of 
technologies.'' The SBA has developed a small business size standard 
for this category, which is: All such firms having 1,500 or fewer 
employees. According to Census Bureau data for 2007, there were 3,188 
firms in this category, total, that operated for the entire year. Of 
this total, 3144 firms had employment of 999 or fewer employees, and 44 
firms had employment of 1000 employees or more. Thus, under this size 
standard, the majority of firms can be considered small. In addition, 
according to Census Bureau data for 2007, there were a total of 396 
firms in the category Internet Service Providers (broadband) that 
operated for the entire year. Of this total, 394 firms had employment 
of 999 or fewer employees, and two firms had employment of 1000 
employees or more. Consequently, we estimate that the majority of these 
firms are small entities that may be affected by rules adopted pursuant 
to the Order.
    104. Internet Publishing and Broadcasting and Web Search Portals. 
Our action may pertain to interconnected VoIP services, which could be 
provided by entities that provide other services such as email, 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 
``primarily engaged in (1) publishing and/or broadcasting content on 
the Internet exclusively or (2) operating Web sites that use a search 
engine to generate and maintain extensive databases of Internet 
addresses and content in an easily searchable format (and known as Web 
search portals).'' The SBA has developed a small business size standard 
for this category, which is: All such firms having 500 or fewer 
employees. According to Census Bureau data for 2007, there were 2,705 
firms in this category that operated for the entire year. Of this 
total, 2,682 firms had employment of 499 or fewer employees, and 23 
firms had employment of 500 employees or more. Consequently, we 
estimate that the majority of these firms are small entities that may 
be affected by rules adopted pursuant to the Order.
    105. 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 $25 million or less 
in average annual receipts. According to Census Bureau data for 2007, 
there were 8,060 firms in this category that operated for the entire 
year. Of these, 7,744 had annual receipts of under $24,999,999. 
Consequently, we estimate that the majority of these firms are small 
entities that may be affected by rules adopted pursuant to the Order.
    106. All Other Information Services. The Census Bureau defines this 
industry as including ``establishments primarily engaged in providing 
other information services (except news syndicates, libraries, 
archives, Internet publishing and broadcasting, and Web search 
portals).'' Our action pertains to interconnected VoIP services, which 
could be provided by entities that provide other services such as 
email, 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 $7.0 million or less in average annual receipts. According 
to Census Bureau data for 2007, there were 367 firms in this category 
that operated for the entire year. Of these, 334 had annual receipts of 
under $5.0 million, and an additional 11 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.
    107. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements. Under the revised VoIP pricing rules we adopt, 
carriers may tariff default intercarrier compensation charges for 
intrastate originating toll VoIP-PSTN traffic in the absence of an 
agreement for different intercarrier compensation. Service providers 
may need to revise their interstate and intrastate tariffs to account 
for these changes.
    108. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered. The RFA requires an 
agency to describe any significant alternatives that it has considered 
in reaching its 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.
    109. We did not identify any feasible alternatives that would have 
lessened the economic impact on small entities. In the absence of an 
agreement, there is no other way than through a tariff filing to 
effectuate the new default rates where increased rates may be allowed.
    110. 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 Small Business 
Regulatory Enforcement Fairness Act of 1996. In addition, the 
Commission will send a copy of the Order, including the FRFA, to the 
Chief Counsel for Advocacy of the Small Business Administration. A copy 
of the Order and FRFA (or summaries thereof) will also be published in 
the Federal Register.

V. Ordering Clauses

    111. Accordingly, it is ordered, pursuant to the authority 
contained in sections 1, 2, 4(i), 201-206, 214, 218-220, 251, 252, 254, 
256, 303(r), 332, 403 of the Communications Act of 1934, as amended, 
and section 706 of the Telecommunications Act of 1996, 47 U.S.C. 151, 
152, 154(i), 201-206, 214, 218-220, 251, 252, 254, 256, 303(r), 332, 
403, 1302, and Sec. Sec.  1.1 and 1.429 of the Commission's rules, 47 
CFR 1.1 and 1.429, that this Second Order on Reconsideration is 
adopted.
    112. It is further ordered that the Petition for Reconsideration of 
the United States Telecom Association is denied to the extent provided 
herein.
    113. It is further ordered that the Petition for Reconsideration 
and/or Clarification of Frontier Communications Corp. and Windstream 
Communications, Inc., is granted to the extent provided herein and 
denied to the extent provided herein.
    114. It is further ordered that the Petition for Reconsideration 
and Clarification of the National Exchange Carrier Association, Inc., 
Organization for the Promotion and Advancement of Small 
Telecommunications Companies and Western Telecommunications Alliance, 
is granted to the extent provided herein.
    115. It is further ordered that the Petition for Reconsideration of 
the

[[Page 31536]]

Independent Telephone & Telecommunications Alliance is granted to the 
extent provided herein and denied to the extent provided herein.
    116. It is further ordered that part 51 of the Commission's rules, 
47 CFR part 51, is amended, and such rule amendments shall be effective 
45 days after the date of publication of the rule amendments in the 
Federal Register.
    117. It is further ordered that Part 54 of the Commission's rules, 
47 CFR part 54, is amended, and such rule amendments shall be effective 
30 days after the date of publication of the rule amendments in the 
Federal Register.

List of Subjects in 47 CFR Parts 51 and 54

    Communications common carriers, Reporting and recordkeeping 
requirements, Telecommunications, Telephone.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Final Rule

    For the reasons discussed in the Second Order on Reconsideration, 
the Federal Communications Commission amends 47 CFR parts 51 and 54 as 
follows:

PART 51--INTERCONNECTION

0
1. The authority citation for part 51 continues to read as follows:

    Authority:  Sections 1-5, 7, 201-05, 207-09, 218, 220, 225-27, 
251-54, 256, 271, 303(r), 332, 706 of the Telecommunication Act of 
1996, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 151-55, 157, 201-
05, 207-09, 218, 220, 225-27, 251-54, 256, 271, 303(r), 332, 1302, 
47 U.S.C. 157 note, unless otherwise noted.


0
2. Revise Sec.  51.913(a) to read as follows:


Sec.  51.93  Transition for VoIP-PSTN traffic.

    (a)(1) Terminating Access Reciprocal Compensation subject to this 
subpart exchanged between a local exchange carrier and another 
telecommunications carrier in Time Division Multiplexing (TDM) format 
that originates and/or terminates in IP format shall be subject to a 
rate equal to the relevant interstate terminating access charges 
specified by this subpart. Interstate originating Access Reciprocal 
Compensation subject to this subpart exchanged between a local exchange 
carrier and another telecommunications carrier in Time Division 
Multiplexing (TDM) format that originates and/or terminates in IP 
format shall be subject to a rate equal to the relevant interstate 
originating access charges specified by this subpart.
    (2) Until June 30, 2014, intrastate originating Access Reciprocal 
Compensation subject to this subpart exchanged between a local exchange 
carrier and another telecommunications carrier in Time Division 
Multiplexing (TDM) format that originates and/or terminates in IP 
format shall be subject to a rate equal to the relevant intrastate 
originating access charges specified by this subpart. Effective July 1, 
2014, originating Access Reciprocal Compensation subject to this 
subpart exchanged between a local exchange carrier and another 
telecommunications carrier in Time Division Multiplexing (TDM) format 
that originates and/or terminates in IP format shall be subject to a 
rate equal to the relevant interstate originating access charges 
specified by this subpart.
    (3) Telecommunications traffic originates and/or terminates in IP 
format if it originates from and/or terminates to an end-user customer 
of a service that requires Internet protocol-compatible customer 
premises equipment.
* * * * *

PART 54--UNIVERSAL SERVICE

0
3. The authority citation for part 54 continues to read as follows:

    Authority: 47 U.S.C. 151, 154(i), 201, 205, 214, 219, 220, 254, 
303(r), 403, and 1302 unless otherwise noted.


0
4. Section 54.312(b)(3) is revised to read as follows:


Sec.  54.312  Connect America Fund for Price Cap Territories--Phase I.

* * * * *
    (b) * * *
    (3) A carrier may elect to accept or decline incremental support. A 
holding company may do so on a holding-company basis on behalf of its 
operating companies that are eligible telecommunications carriers, 
whose eligibility for incremental support, for these purposes, shall be 
considered on an aggregated basis. A carrier must provide notice to the 
Commission, relevant state commissions, and any affected Tribal 
government, stating the amount of incremental support it wishes to 
accept and identifying the areas by wire center and census block in 
which the designated eligible telecommunications carrier will deploy 
broadband to meet its deployment obligation, or stating that it 
declines incremental support. Such notification must be made within 90 
days of being notified of any incremental support for which it would be 
eligible. Along with its notification, a carrier accepting incremental 
support must also submit a certification that the locations to be 
served to satisfy the deployment obligation are not shown as served by 
fixed broadband provided by any entity other than the certifying entity 
or its affiliate on the then-current version of the National Broadband 
Map; that, to the best of the carrier's knowledge, the locations are, 
in fact, unserved by fixed broadband; that the carrier's current 
capital improvement plan did not already include plans to complete 
broadband deployment within the next three years to the locations to be 
counted to satisfy the deployment obligation; and that incremental 
support will not be used to satisfy any merger commitment or similar 
regulatory obligation.
* * * * *

[FR Doc. 2012-12950 Filed 5-25-12; 8:45 am]
BILLING CODE 6712-01-P