Schools and Libraries Universal Service Support Mechanism and A National Broadband Plan for Our Future, 23877-23882 [2013-09421]
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Federal Register / Vol. 78, No. 78 / Tuesday, April 23, 2013 / Proposed Rules
FEDERAL COMMUNICATIONS
COMMISSION
47 CFR Part 54
[CC Docket No. 02–6, GN Docket No. 09–
51; DA 13–592]
Schools and Libraries Universal
Service Support Mechanism and A
National Broadband Plan for Our
Future
Federal Communications
Commission.
ACTION: Proposed rule.
AGENCY:
In this document, the Federal
Communications Commission
(Commission) seeks comment on a
proposal to clarify the schools and
libraries universal service support
program (E-rate program) requirements
for bundling devices, equipment and
services that are ineligible for E-rate
support. Under this proposal, beginning
in funding year 2014, service providers
may no longer offer bundled ineligible
components as E-rate eligible even if
they determine the bundled offering
falls within the scope of the Gift Rule
Clarification Order.
DATES: Comments are due on or before
May 23, 2013 and reply comments are
due on June 7, 2013.
ADDRESSES: You may submit comments,
identified by CC Docket No. 02–6, GN
Docket No. 09–51; DA 13–592, by any
of the following methods:
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Federal Communications
Commission’s Web site: https://
fjallfoss.fcc.gov/ecfs2/. Follow the
instructions for submitting comments.
• People with Disabilities: Contact the
FCC to request reasonable
accommodations (accessible format
documents, sign language interpreters,
CART, etc.) by email: FCC504@fcc.gov
or phone: (202) 418–0530 or TTY: (202)
418–0432.
For detailed instructions for
submitting comments and additional
information on the rulemaking process,
see the SUPPLEMENTARY INFORMATION
section of this document.
FOR FURTHER INFORMATION CONTACT:
Bryan Boyle or Cara Voth, Wireline
Competition Bureau, (202) 418–7400 or
TTY: (202) 418–0484.
SUPPLEMENTARY INFORMATION: This is a
synopsis of the Commission’s Public
Notice in CC Docket No. 02–6, GN
Docket No. 09–51, and DA 13–592,
released April 9, 2013. The complete
text of this document is available for
inspection and copying during normal
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SUMMARY:
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business hours in the FCC Reference
Information Center, Portals II, 445 12th
Street SW., Room CY–A257,
Washington, DC 20554. The document
may also be purchased from the
Commission’s duplicating contractor,
Best Copy and Printing, Inc. (BCPI), 445
12th Street SW., Room CY–B402,
Washington, DC 20554, telephone (800)
378–3160 or (202) 863–2893, facsimile
(202) 863–2898, or via the Internet at
https://www.bcpiweb.com. It is also
available on the Commission’s Web site
at https://www.fcc.gov.
Pursuant to §§ 1.415 and 1.419 of the
Commission’s rules, 47 CFR 1.415,
1.419, interested parties may file
comments and reply comments on or
before the dates indicated on the first
page of this document. Comments may
be filed using the Commission’s
Electronic Comment Filing System
(ECFS). See Electronic Filing of
Documents in Rulemaking Proceedings,
63 FR 24121 (1998).
• Electronic Filers: Comments may be
filed electronically using the Internet by
accessing the ECFS: https://
fjallfoss.fcc.gov/ecfs2/.
• Paper Filers: Parties who choose to
file by paper must file an original and
one copy of each filing. If more than one
docket or rulemaking number appears in
the caption of this proceeding, filers
must submit two additional copies for
each additional docket or rulemaking
number.
Filings can be sent by hand or
messenger delivery, by commercial
overnight courier, or by first-class or
overnight U.S. Postal Service mail. All
filings must be addressed to the
Commission’s Secretary, Office of the
Secretary, Federal Communications
Commission.
• All hand-delivered or messengerdelivered paper filings for the
Commission’s Secretary must be
delivered to FCC Headquarters at 445
12th St. SW., Room TW–A325,
Washington, DC 20554. The filing hours
are 8:00 a.m. to 7:00 p.m. All hand
deliveries must be held together with
rubber bands or fasteners. Any
envelopes and boxes must be disposed
of before entering the building.
• Commercial overnight mail (other
than U.S. Postal Service Express Mail
and Priority Mail) must be sent to 9300
East Hampton Drive, Capitol Heights,
MD 20743.
• U.S. Postal Service first-class,
Express, and Priority mail must be
addressed to 445 12th Street SW.,
Washington DC 20554.
People with Disabilities: To request
materials in accessible formats for
people with disabilities (braille, large
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print, electronic files, audio format),
send an email to fcc504@fcc.gov or call
the Consumer & Governmental Affairs
Bureau at 202–418–0530 (voice), 202–
418–0432 (tty).
Furthermore, two copies of each
pleading must be sent to Charles Tyler,
Telecommunications Access Policy
Division, Wireline Competition Bureau,
445 12th Street SW., Room 5–A452,
Washington, DC 20554; email:
Charles.Tyler@fcc.gov and one copy to
Bryan P. Boyle, Telecommunications
Access Policy Division, Wireline
Competition Bureau, 445 12th Street
SW., Room 6–A100, Washington, DC
20554; email: Bryan.Boyle@fcc.gov.
I. Introduction
1. In the Public Notice, the Wireline
Competition Bureau (Bureau) seeks
comment on a proposal to clarify the
schools and libraries universal service
support program (informally known as
the E-rate program) requirements for
bundling devices, equipment and
services that are ineligible for E-rate
support (‘‘ineligible components’’) with
E-rate eligible services and products. In
2012, the Bureau sought comment on a
petition filed by the State E-rate
Coordinators Alliance (SECA) seeking
clarification of how the Commission’s
rules requiring cost allocation of
ineligible components aligns with
language in the Bureau’s 2010 Gift Rule
Clarification Order (Order) (DA 10–
2355) that allowed, under limited
circumstances, the bundling of
ineligible end-user devices and
equipment without cost allocation.
Having considered the comments filed
in response to the SECA Petition Public
Notice, the Bureau now proposes and
seeks comment on additional
clarifications to remove any potential
uncertainty regarding the Commission’s
requirement for applicants to cost
allocate ineligible components when
those ineligible components are
bundled with eligible services.
II. Discussion
2. Based on several unexpected issues
that have arisen since the Order was
released, we have determined that it
may be in the best interest of E-rate
applicants, service providers, and the
public, for the Bureau to interpret the
Commission’s rules regarding bundled
ineligible components differently than
was reflected in the Order. Specifically,
we propose to clarify that beginning
with applications seeking discounts for
E-rate funding year 2014, any ineligible
components must be cost allocated,
even if bundled with E-rate eligible
services and offered to the public or
some class of users. As further described
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herein, we seek comment on this
proposal.
A. Requirements for Bundled Ineligible
Components
3. We propose that, beginning in
funding year 2014, service providers
may no longer offer bundled ineligible
components as E-rate eligible even if
they determine the bundled offering
falls within the scope of the Order. Erate applicants may seek E-rate funding
for the eligible services portion of any
bundled offering but must provide a
cost allocation for any ineligible
components including, but not limited
to, telephone handsets, computers, cell
phones, and other components. We
make this proposal out of our concern
that the Order language that allowed,
under limited circumstances, an
exemption of our cost allocation
requirements, may lead to unintended
consequences. We are persuaded by
those interested parties who have
expressed concern that an open-ended
interpretation and widespread use and
expansion of this exception could lead
to further strain on the E-rate fund,
which is capped and already oversubscribed. Moreover, the out-of-pocket
expenses at issue are for ineligible
components that recipients have always
understood to be ineligible for E-rate
support. Additionally, to the extent that
the real cost to the provider of the ‘‘free’’
or reduced price ineligible component
results in a more expensive bundle, the
money saved by not paying for the
entire bundle will result in more funds
being available to other E-rate recipients
for E-rate eligible services. We seek
further comment on these concerns and
related matters.
4. We make this proposal primarily
because the record developed on this
issue thus far demonstrates a lack of
clarity about the rules regarding cost
allocation for bundled ineligible
components. We are also not persuaded
that the clarifications suggested by
stakeholders would be effective because
those suggestions could result in
excessively burdensome procedures for
applicants, service providers and the
administrator of the E-rate program,
USAC. For example, SECA’s proposals
and other potential outcomes that
include procedures to determine which
bundled offerings qualify for an
exemption from cost allocation are
likely to be administratively unworkable
and ultimately costly for the E-rate
program. Also, assigning a specific
measurement as a maximum threshold
for a bundled ineligible component,
such as a percentage of a contract price
or a specific dollar amount, as at least
one commenter recommends, could in
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turn encourage recipients to set that
dollar amount as a goal for spending or
might prompt service providers to price
equipment just under that maximum.
This could further deplete funds, and
could have other unintended negative
consequences on participant purchasing
decisions. Finally, determining whether
a bundled service offering is a
commercially common practice within
the industry, and not a unique offering
of an individual service provider, and
that the bundled arrangement is
currently available to the public and not
just to a designated class of subscribers,
would require both USAC and
ultimately the Commission to perform
analysis of individual service provider
offerings on a case-by-case basis. We
agree that it would be difficult to
administer this exemption on a
consistent basis without posing a drain
on E-rate resources, because it could
require additional personnel and market
trend analysis that USAC is not
prepared for or structured to perform.
We seek comment on whether putting
measurements and procedures in place
to implement the bundling exemption
in the Order will cost more to the
program than any savings that might be
gained by some applicants if we
continue to allow the exemption.
5. We also seek comment on any
alternatives to our proposal. We ask
commenters that support our proposal
to provide a specific rationale for their
position. To the extent commenters
believe that other interpretations would
better serve the Commission’s goals,
including other proposals that might
improve program efficiency while
protecting E-rate funds, commenters
should provide detailed descriptions of
their proposals in their comments. We
also welcome suggested alternatives that
minimize the impact of these proposals
on small businesses as well as
comments regarding the cost and
benefits of implementing our proposal.
B. Cost Allocation Procedures
6. We considered as part of this
proposal the likely impact on applicants
and we do not anticipate it will cause
an unreasonable burden. E-rate program
participants have always been required
to detail the costs of ineligible
components and our proposal would
merely require them to apply this
requirement to any bundled ineligible
components they may have believed to
fall within the purview of the Order.
Although this may increase the amount
of time applicants spend on their
applications, we do not believe that this
increase will be significant. We
recognize, however, that applicants may
desire additional guidance on how to
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best derive the costs of ineligible enduser devices. For example, for situations
where component costs are not easily
obtained and applicants must rely on
their service providers for cost
allocation percentages, how can
applicants confirm such percentages?
We seek comment on whether we
should further clarify our current
standard for cost allocations to provide
additional guidance concerning enduser equipment. We also seek comment
whether there are additional ways the
Commission could reduce the burden
on E-rate recipients that are required to
cost allocate bundled components that
they may have believed to be exempt
from cost allocation in more recent
funding years.
C. Ancillary Components
7. Finally, our proposal addresses
only the cost allocation language in the
Order pertaining to the treatment of
ineligible components and does not
purport to alter the Commission’s cost
allocation rule, 47 CFR 54.504(e). Other
than the Order language, the only
existing exception to the cost allocation
rules is the exception for ancillary
components. An insignificant and
strictly ‘‘ancillary’’ component can be
bundled into a much broader product or
service without cost allocation if the
ineligible component is ancillary to the
principle use of the eligible component,
and is the most cost-effective means of
receiving the eligible component
functionality. In order for an ineligible
component to be ancillary, however, its
price cannot be determined separately
and independently from the price of the
eligible components. SECA asserts that
in addition to the Order language, the
rules concerning ancillary components
may lack clarity and should be
addressed by the Bureau. Therefore, we
seek comment on whether it is
necessary to make changes and, if so,
what clarifications could be made to
ensure that ineligible components are
not bundled under the guise of being
ancillary to a much broader product or
service. For example, under what
circumstances would it be appropriate
for an applicant or service provider to
assert that a separate piece of
equipment, such as a telephone handset,
cell phone or tablet, is ancillary to the
eligible service it is paired with?
Because their prices can almost always
be determined independent of any
eligible components, we do not think
end-user devices could ever be
considered ancillary to the services with
which they are paired. We seek
comment on this position.
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III. Procedural Matters
A. Initial Regulatory Flexibility Analysis
8. As required by the Regulatory
Flexibility Act of 1980, as amended
(RFA), the Commission has prepared its
Initial Regulatory Flexibility Analysis
(IRFA) of the possible significant
economic impact on a substantial
number of small entities by the rules
proposed in this Public Notice. Written
comments are requested on this IRFA.
Comments must be identified as
responses to the IRFA and must be filed
by the deadlines for comments on the
Public Notice. The Commission will
send a copy of the Public Notice,
including this IRFA, to the Chief
Counsel for Advocacy of the Small
Business Administration (SBA).
B. Need for, and Objectives of, the
Proposed Rules
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9. The public notice seeks comment
on requirements that apply when
service providers seek to bundle
devices, equipment and services that are
ineligible for E-rate support with E-rate
eligible services and products. In the
public notice, we propose to clarify that
beginning with applications seeking
discounts for E-rate fund year 2014, any
ineligible components must be cost
allocated, even if bundled with E-rate
eligible services and offered to the
public or some class of users. The
Bureau’s objective for the proposed rule
is to provide clarity to E-rate recipients
and service providers and stabilize fund
expenditures. The current requirement
as interpreted in the Order could further
strain the E-rate program because it
permits E-rate funding to pay for
ineligible components and also lacks
sufficient clarity to be interpreted on a
consistent and fair basis in the
marketplace. This Public Notice seeks
comment on the Commission’s
definition of ancillary services and its
relation to E-rate offerings with bundled
ineligible components.
10. The prudent use of limited E-rate
funding and clarity about E-rate rules
are important to the long-term efficacy
of the fund. The proposal contained in
this public notice will help to achieve
the Commission’s goal of maintaining
fund solvency and providing clear rules
to E-rate recipients.
C. Legal Basis
11. The legal basis for any action that
may be taken pursuant to the public
notice is contained in sections 1 through
4, 201–205, 254, 303(r), and 403 of the
Communications Act of 1934, 47 U.S.C.
151 through 154, 201 through 205, 254,
303(r), and 403.
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D. Description and Estimate of the
Number of Small Entities To Which the
Proposed Rules May Apply
12. 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 that: (1) Is
independently owned and operated; (2)
is not dominant in its field of operation;
and (3) satisfies any additional criteria
established by the Small Business
Administration (SBA). Nationwide,
there are a total of approximately 27.5
million small businesses, according to
the SBA. A ‘‘small organization’’ is
generally ‘‘any not-for-profit enterprise
which is independently owned and
operated and is not dominant in its
field.’’
13. Nationwide, as of 2002, there were
approximately 1.6 million small
organizations. The term ‘‘small
governmental jurisdiction’’ is defined
generally as ‘‘governments of cities,
towns, townships, villages, school
districts, or special districts, with a
population of less than fifty thousand.’’
Census Bureau data for 2002 indicate
that there were 87,525 local
governmental jurisdictions in the
United States. We estimate that, of this
total, 84,377 entities were ‘‘small
governmental jurisdictions.’’ Thus, we
estimate that most governmental
jurisdictions are small.
14. Small entities potentially affected
by the proposals herein include eligible
schools and libraries and the eligible
service providers offering them
discounted services.
15. Schools and Libraries. As noted,
‘‘small entity’’ includes non-profit and
small government entities. Under the
schools and libraries universal service
support mechanism, which provides
support for elementary and secondary
schools and libraries, an elementary
school is generally ‘‘a non-profit
institutional day or residential school
that provides elementary education, as
determined under state law.’’ A
secondary school is generally defined as
‘‘a non-profit institutional day or
residential school that provides
secondary education, as determined
under state law,’’ and not offering
education beyond grade 12. For-profit
schools and libraries, and schools and
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libraries with endowments in excess of
$50,000,000, are not eligible to receive
discounts under the program, nor are
libraries whose budgets are not
completely separate from any schools.
Certain other statutory definitions apply
as well. The SBA has defined for-profit,
elementary and secondary schools and
libraries having $6 million or less in
annual receipts as small entities. In
funding year 2007 approximately
105,500 schools and 10,950 libraries
received funding under the schools and
libraries universal service mechanism.
Although we are unable to estimate with
precision the number of these entities
that would qualify as small entities
under SBA’s size standard, we estimate
that fewer than 105,500 schools and
10,950 libraries might be affected
annually by our action, under current
operation of the program.
16. Telecommunications Service
Providers. First, neither the Commission
nor the SBA has developed a size
standard for small incumbent local
exchange services. The closest 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
incumbent carriers reported that they
were engaged in the provision of local
exchange services. Of these 1,307
carriers, an estimated 1,006 have 1,500
or fewer employees and 301 have more
than 1,500 employees. Thus, under this
category and associated small business
size standard, we estimate that the
majority of entities are small. We have
included small incumbent local
exchange carriers in this RFA analysis.
A ‘‘small business’’ under the RFA is
one that, inter alia, meets the pertinent
small business size standard (e.g., a
telephone communications business
having 1,500 or fewer employees), and
‘‘is not dominant in its field of
operation.’’ The SBA’s Office of
Advocacy contends that, for RFA
purposes, small incumbent local
exchange carriers are not dominant in
their field of operation because any such
dominance is not ‘‘national’’ in scope.
We have therefore included small
incumbent carriers in this RFA analysis,
although we emphasize that this RFA
action has no effect on the
Commission’s analyses and
determinations in other, non-RFA
contexts.
17. Second, neither the Commission
nor the SBA has developed a definition
of small entities specifically applicable
to providers of interexchange services
(IXCs). The closest applicable definition
under the SBA rules is for wired
telecommunications carriers. This
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provides that a wired
telecommunications carrier is a small
entity if it employs no more than 1,500
employees. According to the
Commission’s 2010 Trends Report, rel.
Sept. 2012, 359 companies reported that
they were engaged in the provision of
interexchange services. Of these 300
IXCs, an estimated 317 have 1,500 or
few employees and 42 have more than
1,500 employees. Consequently, the
Commission estimates that most
providers of interexchange services are
small businesses.
18. Third, neither the Commission nor
the SBA has developed a definition of
small entities specifically applicable to
competitive access services providers
(CAPs). The closest applicable
definition under the SBA rules is for
wired telecommunications carriers. This
provides that a wired
telecommunications carrier is a small
entity if it employs no more than 1,500
employees. According to the 2010
Trends Report, 1,442 CAPs and
competitive local exchange carriers
(competitive LECs) reported that they
were engaged in the provision of
competitive local exchange services. Of
these 1,442 CAPs and competitive LECs,
an estimated 1,256 have 1,500 or fewer
employees and 186 have more than
1,500 employees. Consequently, the
Commission estimates that most
providers of competitive exchange
services are small businesses.
19. Wireless Telecommunications
Carriers (except Satellite). Since 2007,
the Census Bureau has placed wireless
firms within this new, broad, economic
census category. Prior to that time, such
firms were within the now-superseded
categories of ‘‘Paging’’ and ‘‘Cellular and
Other Wireless Telecommunications.’’
Under the present and prior categories,
the SBA has deemed a wireless business
to be small if it has 1,500 or fewer
employees. Because Census Bureau data
are not yet available for the new
category, we will estimate small
business prevalence using the prior
categories and associated data. For the
category of Paging, data for 2002 show
that there were 807 firms that operated
for the entire year. Of this total, 804
firms had employment of 999 or fewer
employees, and three firms had
employment of 1,000 employees or
more. For the category of Cellular and
Other Wireless Telecommunications,
data for 2002 show that there were 1,397
firms that operated for the entire year.
Of this total, 1,378 firms had
employment of 999 or fewer employees,
and 19 firms had employment of 1,000
employees or more. Thus, we estimate
that the majority of wireless firms are
small.
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20. Wireless telephony includes
cellular, personal communications
services, and specialized mobile radio
telephony carriers. As noted, the SBA
has developed a small business size
standard for Wireless
Telecommunications Carriers (except
Satellite). Under the SBA small business
size standard, a business is small if it
has 1,500 or fewer employees.
According to the 2010 Trends Report,
413 carriers reported that they were
engaged in wireless telephony. Of these,
an estimated 261 have 1,500 or fewer
employees and 152 have more than
1,500 employees. We have estimated
that 261 of these are small under the
SBA small business size standard.
21. Common Carrier Paging. As noted,
since 2007 the Census Bureau has
placed paging providers within the
broad economic census category of
Wireless Telecommunications Carriers
(except Satellite). Prior to that time,
such firms were within the nowsuperseded category of ‘‘Paging.’’ Under
the present and prior categories, the
SBA has deemed a wireless business to
be small if it has 1,500 or fewer
employees. Because Census Bureau data
are not yet available for the new
category, we will estimate small
business prevalence using the prior
category and associated data. The data
for 2002 show that there were 807 firms
that operated for the entire year. Of this
total, 804 firms had employment of 999
or fewer employees, and three firms had
employment of 1,000 employees or
more. Thus, we estimate that the
majority of paging firms are small.
22. In addition, in the Paging Second
Report and Order, 12 FCC Rcd 2732, rel.
Feb. 24, 1997, the Commission adopted
a size standard for ‘‘small businesses’’
for purposes of determining their
eligibility for special provisions such as
bidding credits and installment
payments. A small business is an entity
that, together with its affiliates and
controlling principals, has average gross
revenues not exceeding $15 million for
the preceding three years. The SBA has
approved this definition. An initial
auction of Metropolitan Economic Area
(‘‘MEA’’) licenses was conducted in the
year 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 thirtytwo 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
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in 2003. Seventy-seven bidders claiming
small or very small business status won
2,093 licenses.
23. Currently, there are approximately
74,000 Common Carrier Paging licenses.
According to the most recent Trends in
Telephone Service, rel. Sept. 2012, 291
carriers reported that they were engaged
in the provision of ‘‘paging and
messaging’’ services. Of these, an
estimated 289 have 1,500 or fewer
employees and two have more than
1,500 employees. We estimate that the
majority of common carrier paging
providers would qualify as small
entities under the SBA definition.
24. Internet Service Providers. The
2007 Economic Census places these
firms, whose services might include
voice over Internet protocol (VoIP), in
either of two categories, depending on
whether the service is provided over the
provider’s own telecommunications
facilities (e.g., cable and DSL ISPs), or
over client-supplied
telecommunications connections (e.g.,
dial-up ISPs). The former are within the
category of Wired Telecommunications
Carriers, which has an SBA small
business size standard of 1,500 or fewer
employees. The latter are within the
category of All Other
Telecommunications, which has a size
standard of annual receipts of $25
million or less. The most current Census
Bureau data for all such firms, however,
are the 2002 data for the previous
census category called Internet Service
Providers. That category had a small
business size standard of $21 million or
less in annual receipts, which was
revised in late 2005 to $23 million. The
2002 data show that there were 2,529
such firms that operated for the entire
year. Of those, 2,437 firms had annual
receipts of under $10 million, and an
additional 47 firms had receipts of
between $10 million and $24,999,999.
Consequently, we estimate that the
majority of ISP firms are small entities.
25. Vendors of Internal Connections:
Telephone Apparatus Manufacturing.
The Census Bureau defines this category
as follows: ‘‘This industry comprises
establishments primarily engaged in
manufacturing wire telephone and data
communications equipment. These
products may be standalone or boardlevel components of a larger system.
Examples of products made by these
establishments are central office
switching equipment, cordless
telephones (except cellular), PBX
equipment, telephones, telephone
answering machines, LAN modems,
multi-user modems, and other data
communications equipment, such as
bridges, routers, and gateways.’’ The
SBA has developed a small business
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size standard for Telephone Apparatus
Manufacturing, which is: all such firms
having 1,000 or fewer employees.
According to Census Bureau data for
2002, there were a total of 518
establishments in this category that
operated for the entire year. Of this
total, 511 had employment of under
1,000, and an additional seven had
employment of 1,000 to 2,499. Thus,
under this size standard, the majority of
firms can be considered small.
26. Vendors of Internal Connections:
Radio and Television Broadcasting and
Wireless Communications Equipment
Manufacturing. The Census Bureau
defines this category as follows: ‘‘This
industry comprises establishments
primarily engaged in manufacturing
radio and television broadcast and
wireless communications equipment.
Examples of products made by these
establishments are: transmitting and
receiving antennas, cable television
equipment, GPS equipment, pagers,
cellular phones, mobile
communications equipment, and radio
and television studio and broadcasting
equipment.’’ The SBA has developed a
small business size standard for firms in
this category, which is: all such firms
having 750 or fewer employees.
According to Census Bureau data for
2002, there were a total of 1,041
establishments in this category that
operated for the entire year. Of this
total, 1,010 had employment of under
500, and an additional 13 had
employment of 500 to 999. Thus, under
this size standard, the majority of firms
can be considered small.
27. Vendors of Internal Connections:
Other Communications Equipment
Manufacturing. The Census Bureau
defines this category as follows: ‘‘This
industry comprises establishments
primarily engaged in manufacturing
communications equipment (except
telephone apparatus, and radio and
television broadcast, and wireless
communications equipment).’’ The SBA
has developed a small business size
standard for Other Communications
Equipment Manufacturing, which is
having 750 or fewer employees.
According to Census Bureau data for
2002, there were a total of 503
establishments in this category that
operated for the entire year. Of this
total, 493 had employment of under
500, and an additional 7 had
employment of 500 to 999. Thus, under
this size standard, the majority of firms
can be considered small.
VerDate Mar<15>2010
15:03 Apr 22, 2013
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E. Description of Projected Reporting,
Recordkeeping, and Other Compliance
Requirements for Small Entities
28. In the Public Notice, the Bureau
seeks public comment on proposals for
cost allocating bundled ineligible
components. The proposed rule could
result in minimal additional reporting
requirements.
29. These requirements are already
part of 47 CFR 54.504(e) which require
a clear delineation of eligible and
ineligible services that are included on
an application requesting E-rate
discounts. The result of the Public
Notice could be that small entities that
had not been cost allocating certain
bundled ineligible components per the
Order would again be required to
comply with 47 CFR 54.504(e)
requirements for cost allocating these
components. Small entities that are
service providers and vendors in the Erate program would also be required to
reexamine offerings in accordance to
any changed requirements.
F. Steps Taken To Minimize Significant
Economic Impact on Small Entities, and
Significant Alternatives Considered
30. The RFA requires an agency to
describe any significant, specifically
small business, alternatives that it has
considered in reaching its proposed
approach, which may include the
following four alternatives (among
others): ‘‘(1) The establishment of
differing compliance or reporting
requirements or timetables that take into
account the resources available to small
entities; (2) the clarification,
consolidation, or simplification of
compliance and reporting requirements
under the rule for such 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 such small entities.’’
31. The proposed rulemaking could
impose minimal additional burden on
small entities. The only additional
administrative burden the proposed
rulemaking could impose on small
entities, however, would be requiring
them to cost allocate ineligible
components that they may have
presumed were exempted from the cost
allocation requirements per the Order.
Cost allocation requires determining the
costs of eligible and ineligible
components and reporting the
delineation of those costs in a request
for E-rate discounts on the FCC Form
471. E-rate recipients had been required
to cost allocate ineligible components
bundled with eligible services prior to
the Order, and are already generally
required to cost allocate all ineligible
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Sfmt 4702
23881
components. Thus, this rulemaking
merely removes a short-term exemption
that may have been applicable to certain
equipment that met the limited
qualifications outlined in the Order.
G. Federal Rules That May Duplicate,
Overlap, or Conflict With the Proposed
Rules
32. None.
H. Initial Paperwork Reduction Act of
1995 Analysis
33. This document seeks comment on
a potential new or revised information
collection requirement. If the
Commission adopts any new or revised
information collection requirement, the
Commission will publish a separate
notice in the Federal Register inviting
the public to comment on the
requirement, as required by the
Paperwork Reduction Act of 1995,
Public Law 104–13 (44 U.S.C. 3501–
3520). In addition, pursuant to the
Small Business Paperwork Relief Act of
2002, Public Law 107–198, see 44 U.S.C.
3506(c)(4), the Commission seeks
specific comment on how it might
‘‘further reduce the information
collection burden for small business
concerns with fewer than 25
employees.’’
I. Ex Parte Presentations
34. Permit-But-Disclose. The
proceeding this Public Notice initiates
shall be treated as a ‘‘permit-butdisclose’’ proceeding in accordance
with the Commission’s ex parte rules,
47 CFR 1.1200 through 1.1216. Persons
making ex parte presentations must file
a copy of any written presentation or a
memorandum summarizing any oral
presentation within two business days
after the presentation (unless a different
deadline applicable to the Sunshine
period applies). Persons making oral ex
parte presentations are reminded that
memoranda summarizing the
presentation must (1) list all persons
attending or otherwise participating in
the meeting at which the ex parte
presentation was made, and (2)
summarize all data presented and
arguments made during the
presentation. If the presentation
consisted in whole or in part of the
presentation of data or arguments
already reflected in the presenter’s
written comments, memoranda or other
filings in the proceeding, the presenter
may provide citations to such data or
arguments in his or her prior comments,
memoranda, or other filings (specifying
the relevant page and/or paragraph
numbers where such data or arguments
can be found) in lieu of summarizing
them in the memorandum. Documents
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shown or given to Commission staff
during ex parte meetings are deemed to
be written ex parte presentations and
must be filed consistent with § 1.1206(b)
of the Commission’s rules. In
proceedings governed by § 1.49(f) of the
Commission’s rules or for which the
Commission has made available a
method of electronic filing, written ex
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15:03 Apr 22, 2013
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parte presentations and memoranda
summarizing oral ex parte
presentations, and all attachments
thereto, must be filed through the
electronic comment filing system
available for that proceeding, and must
be filed in their native format (e.g., .doc,
.xml, .ppt, searchable .pdf). Participants
in this proceeding should familiarize
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themselves with the Commission’s ex
parte rules.
Federal Communications Commission.
Kimberly Scardino,
Division Chief, Telecommunications Access
Policy Division, Wireline Competition Bureau.
[FR Doc. 2013–09421 Filed 4–22–13; 8:45 am]
BILLING CODE 6712–01–P
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Agencies
[Federal Register Volume 78, Number 78 (Tuesday, April 23, 2013)]
[Proposed Rules]
[Pages 23877-23882]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-09421]
[[Page 23877]]
=======================================================================
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 54
[CC Docket No. 02-6, GN Docket No. 09-51; DA 13-592]
Schools and Libraries Universal Service Support Mechanism and A
National Broadband Plan for Our Future
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: In this document, the Federal Communications Commission
(Commission) seeks comment on a proposal to clarify the schools and
libraries universal service support program (E-rate program)
requirements for bundling devices, equipment and services that are
ineligible for E-rate support. Under this proposal, beginning in
funding year 2014, service providers may no longer offer bundled
ineligible components as E-rate eligible even if they determine the
bundled offering falls within the scope of the Gift Rule Clarification
Order.
DATES: Comments are due on or before May 23, 2013 and reply comments
are due on June 7, 2013.
ADDRESSES: You may submit comments, identified by CC Docket No. 02-6,
GN Docket No. 09-51; DA 13-592, by any of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
Federal Communications Commission's Web site: https://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting
comments.
People with Disabilities: Contact the FCC to request
reasonable accommodations (accessible format documents, sign language
interpreters, CART, etc.) by email: FCC504@fcc.gov or phone: (202) 418-
0530 or TTY: (202) 418-0432.
For detailed instructions for submitting comments and additional
information on the rulemaking process, see the SUPPLEMENTARY
INFORMATION section of this document.
FOR FURTHER INFORMATION CONTACT: Bryan Boyle or Cara Voth, Wireline
Competition Bureau, (202) 418-7400 or TTY: (202) 418-0484.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Public Notice in CC Docket No. 02-6, GN Docket No. 09-51, and DA 13-
592, released April 9, 2013. The complete text of this document is
available for inspection and copying during normal business hours in
the FCC Reference Information Center, Portals II, 445 12th Street SW.,
Room CY-A257, Washington, DC 20554. The document may also be purchased
from the Commission's duplicating contractor, Best Copy and Printing,
Inc. (BCPI), 445 12th Street SW., Room CY-B402, Washington, DC 20554,
telephone (800) 378-3160 or (202) 863-2893, facsimile (202) 863-2898,
or via the Internet at https://www.bcpiweb.com. It is also available on
the Commission's Web site at https://www.fcc.gov.
Pursuant to Sec. Sec. 1.415 and 1.419 of the Commission's rules,
47 CFR 1.415, 1.419, interested parties may file comments and reply
comments on or before the dates indicated on the first page of this
document. Comments may be filed using the Commission's Electronic
Comment Filing System (ECFS). See Electronic Filing of Documents in
Rulemaking Proceedings, 63 FR 24121 (1998).
Electronic Filers: Comments may be filed electronically
using the Internet by accessing the ECFS: https://fjallfoss.fcc.gov/ecfs2/.
Paper Filers: Parties who choose to file by paper must
file an original and one copy of each filing. If more than one docket
or rulemaking number appears in the caption of this proceeding, filers
must submit two additional copies for each additional docket or
rulemaking number.
Filings can be sent by hand or messenger delivery, by commercial
overnight courier, or by first-class or overnight U.S. Postal Service
mail. All filings must be addressed to the Commission's Secretary,
Office of the Secretary, Federal Communications Commission.
All hand-delivered or messenger-delivered paper filings
for the Commission's Secretary must be delivered to FCC Headquarters at
445 12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours
are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together
with rubber bands or fasteners. Any envelopes and boxes must be
disposed of before entering the building.
Commercial overnight mail (other than U.S. Postal Service
Express Mail and Priority Mail) must be sent to 9300 East Hampton
Drive, Capitol Heights, MD 20743.
U.S. Postal Service first-class, Express, and Priority
mail must be addressed to 445 12th Street SW., Washington DC 20554.
People with Disabilities: To request materials in accessible
formats for people with disabilities (braille, large print, electronic
files, audio format), send an email to fcc504@fcc.gov or call the
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).
Furthermore, two copies of each pleading must be sent to Charles
Tyler, Telecommunications Access Policy Division, Wireline Competition
Bureau, 445 12th Street SW., Room 5-A452, Washington, DC 20554; email:
Charles.Tyler@fcc.gov and one copy to Bryan P. Boyle,
Telecommunications Access Policy Division, Wireline Competition Bureau,
445 12th Street SW., Room 6-A100, Washington, DC 20554; email:
Bryan.Boyle@fcc.gov.
I. Introduction
1. In the Public Notice, the Wireline Competition Bureau (Bureau)
seeks comment on a proposal to clarify the schools and libraries
universal service support program (informally known as the E-rate
program) requirements for bundling devices, equipment and services that
are ineligible for E-rate support (``ineligible components'') with E-
rate eligible services and products. In 2012, the Bureau sought comment
on a petition filed by the State E-rate Coordinators Alliance (SECA)
seeking clarification of how the Commission's rules requiring cost
allocation of ineligible components aligns with language in the
Bureau's 2010 Gift Rule Clarification Order (Order) (DA 10-2355) that
allowed, under limited circumstances, the bundling of ineligible end-
user devices and equipment without cost allocation. Having considered
the comments filed in response to the SECA Petition Public Notice, the
Bureau now proposes and seeks comment on additional clarifications to
remove any potential uncertainty regarding the Commission's requirement
for applicants to cost allocate ineligible components when those
ineligible components are bundled with eligible services.
II. Discussion
2. Based on several unexpected issues that have arisen since the
Order was released, we have determined that it may be in the best
interest of E-rate applicants, service providers, and the public, for
the Bureau to interpret the Commission's rules regarding bundled
ineligible components differently than was reflected in the Order.
Specifically, we propose to clarify that beginning with applications
seeking discounts for E-rate funding year 2014, any ineligible
components must be cost allocated, even if bundled with E-rate eligible
services and offered to the public or some class of users. As further
described
[[Page 23878]]
herein, we seek comment on this proposal.
A. Requirements for Bundled Ineligible Components
3. We propose that, beginning in funding year 2014, service
providers may no longer offer bundled ineligible components as E-rate
eligible even if they determine the bundled offering falls within the
scope of the Order. E-rate applicants may seek E-rate funding for the
eligible services portion of any bundled offering but must provide a
cost allocation for any ineligible components including, but not
limited to, telephone handsets, computers, cell phones, and other
components. We make this proposal out of our concern that the Order
language that allowed, under limited circumstances, an exemption of our
cost allocation requirements, may lead to unintended consequences. We
are persuaded by those interested parties who have expressed concern
that an open-ended interpretation and widespread use and expansion of
this exception could lead to further strain on the E-rate fund, which
is capped and already over-subscribed. Moreover, the out-of-pocket
expenses at issue are for ineligible components that recipients have
always understood to be ineligible for E-rate support. Additionally, to
the extent that the real cost to the provider of the ``free'' or
reduced price ineligible component results in a more expensive bundle,
the money saved by not paying for the entire bundle will result in more
funds being available to other E-rate recipients for E-rate eligible
services. We seek further comment on these concerns and related
matters.
4. We make this proposal primarily because the record developed on
this issue thus far demonstrates a lack of clarity about the rules
regarding cost allocation for bundled ineligible components. We are
also not persuaded that the clarifications suggested by stakeholders
would be effective because those suggestions could result in
excessively burdensome procedures for applicants, service providers and
the administrator of the E-rate program, USAC. For example, SECA's
proposals and other potential outcomes that include procedures to
determine which bundled offerings qualify for an exemption from cost
allocation are likely to be administratively unworkable and ultimately
costly for the E-rate program. Also, assigning a specific measurement
as a maximum threshold for a bundled ineligible component, such as a
percentage of a contract price or a specific dollar amount, as at least
one commenter recommends, could in turn encourage recipients to set
that dollar amount as a goal for spending or might prompt service
providers to price equipment just under that maximum. This could
further deplete funds, and could have other unintended negative
consequences on participant purchasing decisions. Finally, determining
whether a bundled service offering is a commercially common practice
within the industry, and not a unique offering of an individual service
provider, and that the bundled arrangement is currently available to
the public and not just to a designated class of subscribers, would
require both USAC and ultimately the Commission to perform analysis of
individual service provider offerings on a case-by-case basis. We agree
that it would be difficult to administer this exemption on a consistent
basis without posing a drain on E-rate resources, because it could
require additional personnel and market trend analysis that USAC is not
prepared for or structured to perform. We seek comment on whether
putting measurements and procedures in place to implement the bundling
exemption in the Order will cost more to the program than any savings
that might be gained by some applicants if we continue to allow the
exemption.
5. We also seek comment on any alternatives to our proposal. We ask
commenters that support our proposal to provide a specific rationale
for their position. To the extent commenters believe that other
interpretations would better serve the Commission's goals, including
other proposals that might improve program efficiency while protecting
E-rate funds, commenters should provide detailed descriptions of their
proposals in their comments. We also welcome suggested alternatives
that minimize the impact of these proposals on small businesses as well
as comments regarding the cost and benefits of implementing our
proposal.
B. Cost Allocation Procedures
6. We considered as part of this proposal the likely impact on
applicants and we do not anticipate it will cause an unreasonable
burden. E-rate program participants have always been required to detail
the costs of ineligible components and our proposal would merely
require them to apply this requirement to any bundled ineligible
components they may have believed to fall within the purview of the
Order. Although this may increase the amount of time applicants spend
on their applications, we do not believe that this increase will be
significant. We recognize, however, that applicants may desire
additional guidance on how to best derive the costs of ineligible end-
user devices. For example, for situations where component costs are not
easily obtained and applicants must rely on their service providers for
cost allocation percentages, how can applicants confirm such
percentages? We seek comment on whether we should further clarify our
current standard for cost allocations to provide additional guidance
concerning end-user equipment. We also seek comment whether there are
additional ways the Commission could reduce the burden on E-rate
recipients that are required to cost allocate bundled components that
they may have believed to be exempt from cost allocation in more recent
funding years.
C. Ancillary Components
7. Finally, our proposal addresses only the cost allocation
language in the Order pertaining to the treatment of ineligible
components and does not purport to alter the Commission's cost
allocation rule, 47 CFR 54.504(e). Other than the Order language, the
only existing exception to the cost allocation rules is the exception
for ancillary components. An insignificant and strictly ``ancillary''
component can be bundled into a much broader product or service without
cost allocation if the ineligible component is ancillary to the
principle use of the eligible component, and is the most cost-effective
means of receiving the eligible component functionality. In order for
an ineligible component to be ancillary, however, its price cannot be
determined separately and independently from the price of the eligible
components. SECA asserts that in addition to the Order language, the
rules concerning ancillary components may lack clarity and should be
addressed by the Bureau. Therefore, we seek comment on whether it is
necessary to make changes and, if so, what clarifications could be made
to ensure that ineligible components are not bundled under the guise of
being ancillary to a much broader product or service. For example,
under what circumstances would it be appropriate for an applicant or
service provider to assert that a separate piece of equipment, such as
a telephone handset, cell phone or tablet, is ancillary to the eligible
service it is paired with? Because their prices can almost always be
determined independent of any eligible components, we do not think end-
user devices could ever be considered ancillary to the services with
which they are paired. We seek comment on this position.
[[Page 23879]]
III. Procedural Matters
A. Initial Regulatory Flexibility Analysis
8. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), the Commission has prepared its Initial Regulatory
Flexibility Analysis (IRFA) of the possible significant economic impact
on a substantial number of small entities by the rules proposed in this
Public Notice. Written comments are requested on this IRFA. Comments
must be identified as responses to the IRFA and must be filed by the
deadlines for comments on the Public Notice. The Commission will send a
copy of the Public Notice, including this IRFA, to the Chief Counsel
for Advocacy of the Small Business Administration (SBA).
B. Need for, and Objectives of, the Proposed Rules
9. The public notice seeks comment on requirements that apply when
service providers seek to bundle devices, equipment and services that
are ineligible for E-rate support with E-rate eligible services and
products. In the public notice, we propose to clarify that beginning
with applications seeking discounts for E-rate fund year 2014, any
ineligible components must be cost allocated, even if bundled with E-
rate eligible services and offered to the public or some class of
users. The Bureau's objective for the proposed rule is to provide
clarity to E-rate recipients and service providers and stabilize fund
expenditures. The current requirement as interpreted in the Order could
further strain the E-rate program because it permits E-rate funding to
pay for ineligible components and also lacks sufficient clarity to be
interpreted on a consistent and fair basis in the marketplace. This
Public Notice seeks comment on the Commission's definition of ancillary
services and its relation to E-rate offerings with bundled ineligible
components.
10. The prudent use of limited E-rate funding and clarity about E-
rate rules are important to the long-term efficacy of the fund. The
proposal contained in this public notice will help to achieve the
Commission's goal of maintaining fund solvency and providing clear
rules to E-rate recipients.
C. Legal Basis
11. The legal basis for any action that may be taken pursuant to
the public notice is contained in sections 1 through 4, 201-205, 254,
303(r), and 403 of the Communications Act of 1934, 47 U.S.C. 151
through 154, 201 through 205, 254, 303(r), and 403.
D. Description and Estimate of the Number of Small Entities To Which
the Proposed Rules May Apply
12. 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 that: (1) Is independently owned
and operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the Small Business
Administration (SBA). Nationwide, there are a total of approximately
27.5 million small businesses, according to the SBA. A ``small
organization'' is generally ``any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field.''
13. Nationwide, as of 2002, there were approximately 1.6 million
small organizations. The term ``small governmental jurisdiction'' is
defined generally as ``governments of cities, towns, townships,
villages, school districts, or special districts, with a population of
less than fifty thousand.'' Census Bureau data for 2002 indicate that
there were 87,525 local governmental jurisdictions in the United
States. We estimate that, of this total, 84,377 entities were ``small
governmental jurisdictions.'' Thus, we estimate that most governmental
jurisdictions are small.
14. Small entities potentially affected by the proposals herein
include eligible schools and libraries and the eligible service
providers offering them discounted services.
15. Schools and Libraries. As noted, ``small entity'' includes non-
profit and small government entities. Under the schools and libraries
universal service support mechanism, which provides support for
elementary and secondary schools and libraries, an elementary school is
generally ``a non-profit institutional day or residential school that
provides elementary education, as determined under state law.'' A
secondary school is generally defined as ``a non-profit institutional
day or residential school that provides secondary education, as
determined under state law,'' and not offering education beyond grade
12. For-profit schools and libraries, and schools and libraries with
endowments in excess of $50,000,000, are not eligible to receive
discounts under the program, nor are libraries whose budgets are not
completely separate from any schools. Certain other statutory
definitions apply as well. The SBA has defined for-profit, elementary
and secondary schools and libraries having $6 million or less in annual
receipts as small entities. In funding year 2007 approximately 105,500
schools and 10,950 libraries received funding under the schools and
libraries universal service mechanism. Although we are unable to
estimate with precision the number of these entities that would qualify
as small entities under SBA's size standard, we estimate that fewer
than 105,500 schools and 10,950 libraries might be affected annually by
our action, under current operation of the program.
16. Telecommunications Service Providers. First, neither the
Commission nor the SBA has developed a size standard for small
incumbent local exchange services. The closest 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 incumbent carriers reported that
they were engaged in the provision of local exchange services. Of these
1,307 carriers, an estimated 1,006 have 1,500 or fewer employees and
301 have more than 1,500 employees. Thus, under this category and
associated small business size standard, we estimate that the majority
of entities are small. We have included small incumbent local exchange
carriers in this RFA analysis. A ``small business'' under the RFA is
one that, inter alia, meets the pertinent small business size standard
(e.g., a telephone communications business having 1,500 or fewer
employees), and ``is not dominant in its field of operation.'' The
SBA's Office of Advocacy contends that, for RFA purposes, small
incumbent local exchange carriers are not dominant in their field of
operation because any such dominance is not ``national'' in scope. We
have therefore included small incumbent carriers in this RFA analysis,
although we emphasize that this RFA action has no effect on the
Commission's analyses and determinations in other, non-RFA contexts.
17. Second, neither the Commission nor the SBA has developed a
definition of small entities specifically applicable to providers of
interexchange services (IXCs). The closest applicable definition under
the SBA rules is for wired telecommunications carriers. This
[[Page 23880]]
provides that a wired telecommunications carrier is a small entity if
it employs no more than 1,500 employees. According to the Commission's
2010 Trends Report, rel. Sept. 2012, 359 companies reported that they
were engaged in the provision of interexchange services. Of these 300
IXCs, an estimated 317 have 1,500 or few employees and 42 have more
than 1,500 employees. Consequently, the Commission estimates that most
providers of interexchange services are small businesses.
18. Third, neither the Commission nor the SBA has developed a
definition of small entities specifically applicable to competitive
access services providers (CAPs). The closest applicable definition
under the SBA rules is for wired telecommunications carriers. This
provides that a wired telecommunications carrier is a small entity if
it employs no more than 1,500 employees. According to the 2010 Trends
Report, 1,442 CAPs and competitive local exchange carriers (competitive
LECs) reported that they were engaged in the provision of competitive
local exchange services. Of these 1,442 CAPs and competitive LECs, an
estimated 1,256 have 1,500 or fewer employees and 186 have more than
1,500 employees. Consequently, the Commission estimates that most
providers of competitive exchange services are small businesses.
19. Wireless Telecommunications Carriers (except Satellite). Since
2007, the Census Bureau has placed wireless firms within this new,
broad, economic census category. Prior to that time, such firms were
within the now-superseded categories of ``Paging'' and ``Cellular and
Other Wireless Telecommunications.'' Under the present and prior
categories, the SBA has deemed a wireless business to be small if it
has 1,500 or fewer employees. Because Census Bureau data are not yet
available for the new category, we will estimate small business
prevalence using the prior categories and associated data. For the
category of Paging, data for 2002 show that there were 807 firms that
operated for the entire year. Of this total, 804 firms had employment
of 999 or fewer employees, and three firms had employment of 1,000
employees or more. For the category of Cellular and Other Wireless
Telecommunications, data for 2002 show that there were 1,397 firms that
operated for the entire year. Of this total, 1,378 firms had employment
of 999 or fewer employees, and 19 firms had employment of 1,000
employees or more. Thus, we estimate that the majority of wireless
firms are small.
20. Wireless telephony includes cellular, personal communications
services, and specialized mobile radio telephony carriers. As noted,
the SBA has developed a small business size standard for Wireless
Telecommunications Carriers (except Satellite). Under the SBA small
business size standard, a business is small if it has 1,500 or fewer
employees. According to the 2010 Trends Report, 413 carriers reported
that they were engaged in wireless telephony. Of these, an estimated
261 have 1,500 or fewer employees and 152 have more than 1,500
employees. We have estimated that 261 of these are small under the SBA
small business size standard.
21. Common Carrier Paging. As noted, since 2007 the Census Bureau
has placed paging providers within the broad economic census category
of Wireless Telecommunications Carriers (except Satellite). Prior to
that time, such firms were within the now-superseded category of
``Paging.'' Under the present and prior categories, the SBA has deemed
a wireless business to be small if it has 1,500 or fewer employees.
Because Census Bureau data are not yet available for the new category,
we will estimate small business prevalence using the prior category and
associated data. The data for 2002 show that there were 807 firms that
operated for the entire year. Of this total, 804 firms had employment
of 999 or fewer employees, and three firms had employment of 1,000
employees or more. Thus, we estimate that the majority of paging firms
are small.
22. In addition, in the Paging Second Report and Order, 12 FCC Rcd
2732, rel. Feb. 24, 1997, the Commission adopted a size standard for
``small businesses'' for purposes of determining their eligibility for
special provisions such as bidding credits and installment payments. A
small business is an entity that, together with its affiliates and
controlling principals, has average gross revenues not exceeding $15
million for the preceding three years. The SBA has approved this
definition. An initial auction of Metropolitan Economic Area (``MEA'')
licenses was conducted in the year 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.
23. Currently, there are approximately 74,000 Common Carrier Paging
licenses. According to the most recent Trends in Telephone Service,
rel. Sept. 2012, 291 carriers reported that they were engaged in the
provision of ``paging and messaging'' services. Of these, an estimated
289 have 1,500 or fewer employees and two have more than 1,500
employees. We estimate that the majority of common carrier paging
providers would qualify as small entities under the SBA definition.
24. Internet Service Providers. The 2007 Economic Census places
these firms, whose services might include voice over Internet protocol
(VoIP), in either of two categories, depending on whether the service
is provided over the provider's own telecommunications facilities
(e.g., cable and DSL ISPs), or over client-supplied telecommunications
connections (e.g., dial-up ISPs). The former are within the category of
Wired Telecommunications Carriers, which has an SBA small business size
standard of 1,500 or fewer employees. The latter are within the
category of All Other Telecommunications, which has a size standard of
annual receipts of $25 million or less. The most current Census Bureau
data for all such firms, however, are the 2002 data for the previous
census category called Internet Service Providers. That category had a
small business size standard of $21 million or less in annual receipts,
which was revised in late 2005 to $23 million. The 2002 data show that
there were 2,529 such firms that operated for the entire year. Of
those, 2,437 firms had annual receipts of under $10 million, and an
additional 47 firms had receipts of between $10 million and
$24,999,999. Consequently, we estimate that the majority of ISP firms
are small entities.
25. Vendors of Internal Connections: Telephone Apparatus
Manufacturing. The Census Bureau defines this category as follows:
``This industry comprises establishments primarily engaged in
manufacturing wire telephone and data communications equipment. These
products may be standalone or board-level components of a larger
system. Examples of products made by these establishments are central
office switching equipment, cordless telephones (except cellular), PBX
equipment, telephones, telephone answering machines, LAN modems, multi-
user modems, and other data communications equipment, such as bridges,
routers, and gateways.'' The SBA has developed a small business
[[Page 23881]]
size standard for Telephone Apparatus Manufacturing, which is: all such
firms having 1,000 or fewer employees. According to Census Bureau data
for 2002, there were a total of 518 establishments in this category
that operated for the entire year. Of this total, 511 had employment of
under 1,000, and an additional seven had employment of 1,000 to 2,499.
Thus, under this size standard, the majority of firms can be considered
small.
26. Vendors of Internal Connections: Radio and Television
Broadcasting and Wireless Communications Equipment Manufacturing. The
Census Bureau defines this category as follows: ``This industry
comprises establishments primarily engaged in manufacturing radio and
television broadcast and wireless communications equipment. Examples of
products made by these establishments are: transmitting and receiving
antennas, cable television equipment, GPS equipment, pagers, cellular
phones, mobile communications equipment, and radio and television
studio and broadcasting equipment.'' The SBA has developed a small
business size standard for firms in this category, which is: all such
firms having 750 or fewer employees. According to Census Bureau data
for 2002, there were a total of 1,041 establishments in this category
that operated for the entire year. Of this total, 1,010 had employment
of under 500, and an additional 13 had employment of 500 to 999. Thus,
under this size standard, the majority of firms can be considered
small.
27. Vendors of Internal Connections: Other Communications Equipment
Manufacturing. The Census Bureau defines this category as follows:
``This industry comprises establishments primarily engaged in
manufacturing communications equipment (except telephone apparatus, and
radio and television broadcast, and wireless communications
equipment).'' The SBA has developed a small business size standard for
Other Communications Equipment Manufacturing, which is having 750 or
fewer employees. According to Census Bureau data for 2002, there were a
total of 503 establishments in this category that operated for the
entire year. Of this total, 493 had employment of under 500, and an
additional 7 had employment of 500 to 999. Thus, under this size
standard, the majority of firms can be considered small.
E. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements for Small Entities
28. In the Public Notice, the Bureau seeks public comment on
proposals for cost allocating bundled ineligible components. The
proposed rule could result in minimal additional reporting
requirements.
29. These requirements are already part of 47 CFR 54.504(e) which
require a clear delineation of eligible and ineligible services that
are included on an application requesting E-rate discounts. The result
of the Public Notice could be that small entities that had not been
cost allocating certain bundled ineligible components per the Order
would again be required to comply with 47 CFR 54.504(e) requirements
for cost allocating these components. Small entities that are service
providers and vendors in the E-rate program would also be required to
reexamine offerings in accordance to any changed requirements.
F. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
30. The RFA requires an agency to describe any significant,
specifically small business, alternatives that it has considered in
reaching its proposed approach, which may include the following four
alternatives (among others): ``(1) The establishment of differing
compliance or reporting requirements or timetables that take into
account the resources available to small entities; (2) the
clarification, consolidation, or simplification of compliance and
reporting requirements under the rule for such 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 such small
entities.''
31. The proposed rulemaking could impose minimal additional burden
on small entities. The only additional administrative burden the
proposed rulemaking could impose on small entities, however, would be
requiring them to cost allocate ineligible components that they may
have presumed were exempted from the cost allocation requirements per
the Order. Cost allocation requires determining the costs of eligible
and ineligible components and reporting the delineation of those costs
in a request for E-rate discounts on the FCC Form 471. E-rate
recipients had been required to cost allocate ineligible components
bundled with eligible services prior to the Order, and are already
generally required to cost allocate all ineligible components. Thus,
this rulemaking merely removes a short-term exemption that may have
been applicable to certain equipment that met the limited
qualifications outlined in the Order.
G. Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
32. None.
H. Initial Paperwork Reduction Act of 1995 Analysis
33. This document seeks comment on a potential new or revised
information collection requirement. If the Commission adopts any new or
revised information collection requirement, the Commission will publish
a separate notice in the Federal Register inviting the public to
comment on the requirement, as required by the Paperwork Reduction Act
of 1995, Public Law 104-13 (44 U.S.C. 3501-3520). In addition, pursuant
to the Small Business Paperwork Relief Act of 2002, Public Law 107-198,
see 44 U.S.C. 3506(c)(4), the Commission seeks specific comment on how
it might ``further reduce the information collection burden for small
business concerns with fewer than 25 employees.''
I. Ex Parte Presentations
34. Permit-But-Disclose. The proceeding this Public Notice
initiates shall be treated as a ``permit-but-disclose'' proceeding in
accordance with the Commission's ex parte rules, 47 CFR 1.1200 through
1.1216. Persons making ex parte presentations must file a copy of any
written presentation or a memorandum summarizing any oral presentation
within two business days after the presentation (unless a different
deadline applicable to the Sunshine period applies). Persons making
oral ex parte presentations are reminded that memoranda summarizing the
presentation must (1) list all persons attending or otherwise
participating in the meeting at which the ex parte presentation was
made, and (2) summarize all data presented and arguments made during
the presentation. If the presentation consisted in whole or in part of
the presentation of data or arguments already reflected in the
presenter's written comments, memoranda or other filings in the
proceeding, the presenter may provide citations to such data or
arguments in his or her prior comments, memoranda, or other filings
(specifying the relevant page and/or paragraph numbers where such data
or arguments can be found) in lieu of summarizing them in the
memorandum. Documents
[[Page 23882]]
shown or given to Commission staff during ex parte meetings are deemed
to be written ex parte presentations and must be filed consistent with
Sec. 1.1206(b) of the Commission's rules. In proceedings governed by
Sec. 1.49(f) of the Commission's rules or for which the Commission has
made available a method of electronic filing, written ex parte
presentations and memoranda summarizing oral ex parte presentations,
and all attachments thereto, must be filed through the electronic
comment filing system available for that proceeding, and must be filed
in their native format (e.g., .doc, .xml, .ppt, searchable .pdf).
Participants in this proceeding should familiarize themselves with the
Commission's ex parte rules.
Federal Communications Commission.
Kimberly Scardino,
Division Chief, Telecommunications Access Policy Division, Wireline
Competition Bureau.
[FR Doc. 2013-09421 Filed 4-22-13; 8:45 am]
BILLING CODE 6712-01-P