Connect America Fund, ETC Annual Reports and Certification, Rural Broadband Experiments, 40235-40250 [2016-14507]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 81, Number 119 (Tuesday, June 21, 2016)]
[Proposed Rules]
[Pages 40235-40250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14507]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket Nos. 10-90, 14-58, 14-259; FCC 16-64]


Connect America Fund, ETC Annual Reports and Certification, Rural 
Broadband Experiments

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) seeks comment on several specific procedures that will 
apply in the Phase II auction. Pursuant to the Commission's existing 
rules for

[[Page 40236]]

competitive bidding for universal service support, ``[d]etailed 
competitive bidding procedures shall be established by public notice 
prior to the commencement of competitive bidding. With this Further 
Notice, the Commission begins the process of seeking comment. The 
Commission seeks comment on three discrete sets of issues relating to 
the process for determining winning bidders: How to apply weights to 
the different levels of performance adopted in the Order above; 
measures to achieve the public interest objective of ensuring 
appropriate support for all of the states; and measures to achieve the 
public interest objective of expanding broadband on Tribal lands.

DATES: Comments are due on or before July 21, 2016 and reply comments 
are due on or before August 5, 2016. If you anticipate that you will be 
submitting comments, but find it difficult to do so within the period 
of time allowed by this document, you should advise the contact listed 
below as soon as possible.

ADDRESSES: You may submit comments, identified by WC Docket No. 10-90, 
WC Docket No. 14-58 and WC Docket No. 14-259, 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: Alexander Minard, Wireline Competition 
Bureau, (202) 418-7400 or TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Further Notice of Proposed Rulemaking (FNPRM) in WC Docket Nos. 10-90, 
14-58 and 14-259; FCC 16-64, adopted on May 25, 2016 and released on 
May 26, 2016. 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 St. SW., Washington, DC 20554 or at the 
following Internet address: https://transition.fcc.gov/Daily_Releases/Daily_Business/2016/db0526/FCC-16-64A1.pdf. The Report and Order that 
was adopted concurrently with the FNPRM is published elsewhere in this 
issue of the Federal Register.

I. Introduction

    1. Over the last several years, the Commission has engaged in a 
modernization of its universal service regime to support networks 
capable of providing voice and broadband, including developing a new 
forward-looking cost model to calculate the cost of providing service 
in rural and high-cost areas. In 2015, 10 price cap carriers accepted 
an offer of Phase II support calculated by a cost model in exchange for 
a state-level commitment to deploy and maintain voice and broadband 
service in the high-cost areas in their respective states.
    2. In the Further Notice, the Commission begins the process of 
seeking comment on several specific procedures that will apply in the 
Phase II auction, including how to apply weights to the different 
levels of performance adopted in the concurrently adopted Order, 
measures to achieve the public interest objective of ensuring 
appropriate support for all of the states, and measures to achieve the 
public interest objective of expanding broadband on Tribal lands. The 
forthcoming Auction Comment PN will seek comment on other auction 
procedures that must be resolved in order to conduct the auction, such 
as the number of rounds during which bids may be submitted, package 
bidding, and what information will be disclosed to participants during 
the bidding process.

II. Further Notice of Proposed Rulemaking

    3. Pursuant to the Commission's existing rules for competitive 
bidding for universal service support, ``[d]etailed competitive bidding 
procedures shall be established by public notice prior to the 
commencement of competitive bidding.'' With this Further Notice, the 
Commission begins the process of seeking comment on several specific 
procedures that will apply in the Phase II auction. The Commission 
seeks comment on three discrete sets of issues relating to the process 
for determining winning bidders: (1) How to apply weights to the 
different levels of performance adopted in the concurrently adopted 
Order; (2) measures to achieve the public interest objective of 
ensuring appropriate support for all of the states; and (3) measures to 
achieve the public interest objective of expanding broadband on Tribal 
lands. The forthcoming Auction Comment PN will seek comment on other 
auction procedures that must be resolved in order to conduct the 
auction, such as the number of rounds during which bids may be 
submitted, package bidding, and what information will be disclosed to 
participants during the bidding process. The Commission also seeks 
comment on issues relating to interim deployment milestones for non-
terrestrial providers or providers that have already deployed the 
infrastructure they intend to use to fulfill their Phase II 
obligations.

A. Comparing Bids of Differing Performance Levels

    4. In the concurrently adopted Order, the Commission adopts four 
technology-neutral performance tiers with varying speed and usage 
allowances, and for each tier permit bidders to designate either low or 
high latency. The Commission also concludes that all bids will be 
considered simultaneously, so that bidders that propose to meet one set 
of performance standards will be directly competing against bidders 
that commit to meet other performance standards. To implement this 
framework, the Commission has decided to use weights to take into 
account the differing attributes of different types of service 
performance.
    5. In light of the decisions reached in the concurrently adopted 
Order, the Commission now seeks to further develop the record on how 
bids should be weighted in order to achieve its overarching goal of 
providing households in the relevant high-cost areas with access to 
high quality broadband services, while making the most efficient use of 
finite universal service funds. The Commission recognizes that setting 
appropriate weights is of crucial importance to achieving this goal as 
well as having a successful Phase II auction. Thus, the Commission 
seeks comment on weights today in order to expedite its ability to 
adopt auction procedures regarding the comparison of bids.
    6. In the concurrently adopted Order, the Commission concludes that 
it sees the value to consumers in rural markets of having access to 
service during the 10-year term of support that exceeds its baseline 
requirements. The Commission wants to ensure that rural America is not 
left behind, and the consumers in those areas benefit from innovation 
and advances in technology. All things considered, the Commission 
values higher speeds over lower speeds, higher usage allowances over 
lower usage allowances, and lower latency over higher latency. The 
Commission also sees the benefits to achieving its other

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universal service objectives if a Phase II service provider will be 
able to provide broadband adequate to meet the needs of the entire 
community, including schools, libraries and rural health care 
providers.
    7. The concurrently adopted Order concludes that the Commission 
will use the Connect America Cost Model (CAM) to establish reserve 
prices, and that bids will be scored relative to the reserve price for 
the areas subject to the bid, with lower bids selected first, taking 
into account the weights on which the Commission is seeking comment. 
Specifically, the Commission will divide the annual amount of support 
per location requested per bid by the model-based support amount per 
location to determine an initial cost-effectiveness score for a 
particular bid, i.e., a numeral that represents the relationship of the 
bid to the reserve price set for the geographic area that is subject to 
the bid.
    8. The Commission proposes procedures to assign a weight to each 
service tier as well as the high and low latency designations that 
would alter the initial cost-effectiveness score of each bid. As 
described below, the Commission proposes to adopt procedures for 
weights that would take into account the relative benefits to consumers 
of the various service tiers. The Commission seeks comment on these 
proposals and any other alternatives. Are there other ways to compare 
bids, given the Commission's stated goals for this auction?
    9. The Commission thus proposes to establish weights for specific 
types of bids that represent the relative benefits of service that 
provides higher speeds, higher usage allowances, and/or lower latency 
over service that meets lower requirements for participation in the 
Phase II auction. Under such a scheme, a bid closer to the reserve 
price but for higher performance levels could be selected based on its 
``weighted score''--its score that will be compared to other bids once 
weights are applied to its ``cost-effective score''--even if another 
bidder seeks less actual support to provide the minimum level of 
service.
    10. The Commission seeks comment on what specific value of weights 
should be applied to each of the four tiers of service. The Commission 
seeks comment on whether weights should be set relative to the baseline 
service tier, or relative to the minimum requirements for this auction. 
The Commission also seeks comment on what specific value of weights 
should be applied to low and high latency designations for each of the 
four tiers. In particular, how should those tier weights be adjusted in 
light of low and high latency designations? Should a weight for latency 
be applied in the same fashion across all of the speed/usage tiers? 
Ultimately, the Commission seeks to establish weights that provide 
rural consumers with the highest quality service while making efficient 
use of universal service funds. In designing weights to achieve this 
goal, the Commission does not predetermine which bidder will win if 
competing head to head with another bidder for a given area. The 
Commission instead intends to provide a means for numerically comparing 
the bids received based on the value to rural consumers of having 
access to different service levels using the finite budget of this 
auction.
    11. The Commission seeks comment on whether, and, if so, how, the 
Commission should consider subscribership data for broadband services 
of varying performance levels and expected costs per subscribed 
location in establishing weights for the Phase II auction. For example, 
the Commission seeks comment on potentially using the Commission's Form 
477 data to inform its decision regarding weights in the Phase II 
auction. Should national market share data, based on the Commission's 
Form 477 data, inform the Commission's setting of weights?
    12. The Commission recognizes, however, that these national market 
shares are a function of both availability and consumer preferences for 
certain services, and that more recent data may show different trends. 
For that reason, national shares would not necessarily reflect 
subscribership of these services where they are actually the only 
broadband choice deployed. Of course, the eligible areas in the Phase 
II auction are, by definition, those areas lacking 10 Mbps/1 Mbps 
service. The Commission seeks comment on whether, and, if so, how, to 
account for both variation in deployment across geographic areas and 
consumer tastes in setting procedures for weights used to compare bids. 
For example, could analysis be performed using FCC Form 477 
subscription and deployment data or other data sources to predict the 
expected subscribership rate for a particular performance level 
offering of speed, usage, and latency in a given geographic area if 
that were the only offering available to every household? How could 
such analysis inform the weights adopted for the Phase II auction? The 
Commission is also guided by the statutory goal of ensuring consumers 
in rural and high-cost areas have access to services ``that are 
reasonably comparable to those services provided in urban areas.'' How 
should this objective inform the Commission's weights? Could the 
Commission analyze its Form 477 data on broadband deployment and 
subscription in urban areas in setting weights for different 
performance tiers? Are there other objective metrics or data sources 
the Commission can rely on to inform the specific numerical weights it 
will apply to bids?
    13. A number of parties have submitted various proposals for how to 
weigh bids with differing performance obligations. For example, WISPA 
proposed that ``[b]idders would begin the auction process with 100 
points'' and ``could gain additional points, or bidding credits'' by 
exceeding baseline performance criteria. Hughes suggested specific 
weights for different services levels, with no weight applied to a 10/1 
speed tier, and higher weights for faster speeds and usage that 
exceeded baseline requirements. It proposed a 25 percent weight for 
low-latency offerings. The Utilities Technology Council and National 
Rural Electric Cooperative Association proposed weights that would 
translate into a weight of 50 for the gigabit service tier, a weight of 
35 for the above-baseline service tier, no weight for the baseline 
service tier, and a negative 25 weight for the minimum service tier, as 
well as a negative 25 weight for high-latency offerings. The Commission 
seeks comment on these proposals in light of the specific performance 
obligation tiers and latency framework the Commission adopts in the 
concurrently adopted Order and its decision to use weights to adjust 
the cost-effectiveness score of individual bids. The Commission also 
seeks comment on any alternative weighting proposals.
    14. The Commission does not intend to adopt auction procedures that 
would apply an additional weight to the bid depending on the percentage 
of available funds bid in a census block, as suggested by one 
commenter. The Commission already has decided that bids will be 
compared in the first instance based on the ratio of the bid amount 
divided by the reserve price. The weighting system that the Commission 
seeks comment on today would effectively adjust that bid price for 
purposes of comparison.

B. Access to Appropriate Phase II Levels for All States

    15. In this Further Notice, the Commission next seeks comment on 
measures to achieve the public interest objective of ensuring 
appropriate support for all of the states. In the

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concurrently adopted Order, the Commission recognizes the concerns 
raised by those states where significant amounts of Phase II funding 
were declined (declined states). Specifically, the Commission 
recognizes that it is making available $2.15 billion in support in the 
Phase II auction, of which approximately $1.05 billion was originally 
offered to particular states as part of the Phase II state-wide 
election process. And the Commission recognizes that where incumbent 
carriers declined the offer of support does not diminish its universal 
service obligation to connect consumers in areas that would have been 
reached had the offer been accepted and to provide sufficient universal 
service funds to do so. The Commission seeks to design a Phase II 
auction that achieves an efficient and equitable distribution across 
the states for Phase II Connect America funding, recognizing the 
relative characteristics of individual states. The Commission seeks 
comment generally on how to address these concerns in line with its 
universal service objectives. The Commission seeks comment on the ideas 
set forth below and also invite commenters to identify any additional 
or alternative measures it could take to address these concerns.
    16. To begin with, the Commission recognizes and applauds state 
initiatives to advance broadband deployment and access to unserved and 
underserved consumers. The Commission seeks further comment on how best 
to coordinate with such initiatives to achieve its universal service 
goals.
    17. With respect to equitable distribution among states, the 
Commission first seeks comment on establishing weights that would 
provide a preference to such declined states or other auction design 
procedures for the comparison of bids to ensure equitable funding to 
such states. The Commission also seeks comment on adopting weights to 
provide a preference for those states that have made a meaningful 
commitment to advance broadband, such as the state initiatives 
mentioned above. If the Commission were to adopt such weights for 
either purpose, at what value should such weights be set? Are there 
other auction procedures that could be used that would be simple to 
administer and help achieve the Commission's objectives?
    18. Second, the Commission seeks comment on creating a `backstop' 
of funds that could be used, if necessary, to ensure an equitable 
distribution of funding to declined states. For example, the Commission 
could conduct the Phase II auction initially with $1.75 billion of the 
total $2.15 billion Phase II budget. If a state falls short of winning 
aggregate bids that total to a set percentage of the amount previously 
declined in the state by the incumbent price cap carrier, the remaining 
$400 million could be allocated to the remaining next-in-line bidders 
in just those states, on a lowest bid score basis. If the Commission 
were to adopt such an approach, what percentage of the declined amount 
should be used as the trigger amount? Should the Commission adopt an 80 
percent trigger? Or a higher or lower trigger? Alternatively, should 
next-in-line bidders in those specific states be selected on a lowest 
cost basis?
    19. Third, the Commission seeks comment on viewing the problem of 
ensuring adequate service to all rural Americans holistically, so any 
state allocated less funding in the Phase II auction will almost 
certainly need more support from the Remote Areas Fund. The Commission 
could, for example, reserve funding in the Remote Areas Fund in direct 
proportion to any shortfall between the funding declined in the 
statewide election process and the amount allocated in the Phase II 
auction. A holistic approach may balance the concerns for efficiency in 
the Phase II auction with the Commission's concern for ensuring that 
every state's rural residents are given the opportunity to access 
broadband at reasonably comparable speeds to urban areas. If the 
Commission adopted this approach, should it guarantees all the funding 
declined for a state is allocated there between the Phase II auction 
and the Remote Areas Fund, or only some proportion? If the latter, how 
should the Commission choose that amount?
    20. Fourth, the Commission seeks comment on setting a ceiling for 
the aggregate total of winning bids in any given state to prevent a 
substantial redistribution of Phase II funds among states. For example, 
the Commission could adopt auction procedures that would help ensure 
that winning bids in a given state do not exceed more than 125 percent 
of the amount declined by the incumbent price cap carriers in that 
state. If the Commission were to adopt such a ceiling, what would be 
the right level for such a ceiling?
    21. Finally, the Commission seeks comment on adopting alternative 
auction procedures designed to help ensure that declined states receive 
all or substantially all of the funds declined by the incumbent 
carrier. Such procedures would help ensure that, following the Phase II 
auction, declined states would be in the same or substantially the same 
position they would have been in had the incumbent carrier accepted 
support. For example, the Commission could establish procedures to 
prioritize selection of bids for declined states until a specified 
floor is met, assuming sufficient bidding in the declined state. If the 
Commission were to adopt such a floor, should the floor be set at 100 
percent of the declined amount? Or should it be set at 95 or 90 percent 
or some other percentage of declined support?
    22. The Commission seeks comment on advantages and disadvantages of 
each of these alternatives as well as any other alternatives commenters 
suggest. Commenters should explain how each of the approaches they 
advocate would affect the efficiency of the Phase II auction. Which 
mechanism or combination of mechanisms might best advance the 
Commission's objective of ensuring that all states have access to 
appropriate levels of Phase II funding overall? In considering 
mechanisms to ensure appropriate support to all of the states, should 
the Commission focus on the amount of funding that was declined by the 
incumbent carriers, the number of locations that would have been served 
had the incumbent carrier accepted the Phase II offer of support, or 
the overall amount of Phase II support provided to the state?

C. Access to Service on Tribal Lands

    23. The Commission also seeks to further develop the record on how 
to advance its policy objective of extending broadband to unserved 
Tribal lands through the Phase II auction. The Commission recognizes 
the historic challenges of serving Tribal lands and the low level of 
broadband service deployment on Tribal lands. Here, the Commission 
seeks comment on several possible auction procedures that could advance 
its goal of expanding access to broadband on Tribal lands.
    24. In prior universal service competitive bidding processes, the 
Commission adopted a Tribal bidding credit. In Mobility Fund Phase I 
and Tribal Mobility Fund Phase I, Tribal bidders could apply a 25 
percent credit to bids. In the rural broadband experiments, bids 
proposing to serve only Tribal lands could apply a 25 percent credit.
    25. The Commission seeks comment on adopting such a Tribal-specific 
weight in the Phase II auction and how such a weight should be designed 
to further its objective of advancing broadband deployment on Tribal 
lands. Should the Commission adopt a weight that would lower the 
effective score of Tribal entities that bid (thereby making their bids 
more like to succeed)? Or should the Commission adopts a weight

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that would apply to any bid seeking to serve Tribal lands? If a bid is 
seeking to serve a combination of Tribal lands and non-Tribal lands, 
should the Commission applies a Tribal weight? If so, how would that 
weight be applied across the bid so as not to benefit bids that seek to 
serve only a de minimis number of Tribal locations? To the extent that 
a weight is applied to a bid that contains both Tribal and non-Tribal 
census blocks, should the weight be apportioned by number of locations 
in the relevant areas or by the geography (square miles) of the 
relevant areas? Is there some other procedure for Tribal weights that 
would be simple to administer?
    26. One goal of a Tribal-specific weight could be to make it more 
likely a bidder proposing to serve Tribal lands would be selected by 
lowering its bid score. Another goal could be to make it more likely 
that the Commission has bidders willing to bid on Tribal lands. A 
score-lowering weight alone may not achieve the goal of incentivizing 
providers to bid on Tribal lands. As the Commission has noted in the 
2011 USF/ICC Transformation Order, 76 FR 73830, November 29, 2011, 
greater financial support may be necessary in order to ensure the 
availability of broadband on Tribal lands. The Commission therefore 
also seeks comment on any alternative auction procedures that could be 
adopted to further its goals of advancing deployment on Tribal lands.

D. Limited Adjustments to Interim Deployment Milestones

    27. Finally, as noted in the concurrently adopted Order, the 
interim deployment milestones adopted above may not be appropriate for 
non-terrestrial providers or other providers that have already deployed 
the infrastructure they intend to use to fulfill their Phase II 
obligations. Here, the Commission seeks comment on how to address this 
issue. Some parties have made proposals in the record to address this 
issue. For instance, a satellite provider may already have launched the 
satellite on which it will rely to provide the broadband service and 
need only to deploy customer premises equipment. In that circumstance, 
the interim deployment milestones would provide more time than needed 
to begin offering service to consumers. The Commission seeks comment on 
the proposal in the record and any alternative ways to address the 
issue. How should interim deployment milestones be modified, if at all, 
for providers that have already deployed significant amounts of 
infrastructure necessary to meet the service commitments? What specific 
milestones should the Commission adopt in the alternative so as to be 
able to monitor compliance with deployment obligations? As the 
Commission evaluates such alternatives, it remains mindful of its goals 
of promoting universal service efficiently while maintaining the 
financial integrity of the fund.

III. Procedural Matters

A. Paperwork Reduction Act Analysis

    28. The FNPRM contains proposed new information collection 
requirements. The Commission as part of its continuing effort to reduce 
paperwork burdens, invites the general public and the OMB to comment on 
the information collection requirements contained in this document, as 
required by the Paperwork Reduction Act of 1995, Public Law 104-13. In 
addition, pursuant to the Small Business Paperwork Relief Act of 2002, 
Public Law 107-198, see 44 U.S.C. 3506(c)(4), we seek specific comment 
on how we might further reduce the information collection burden for 
small business concerns with fewer than 25 employees.

B. Initial Regulatory Flexibility Analysis

    29. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) of the possible significant economic impact 
on a substantial number of small entities from the policies and rules 
proposed in this Further Notice of Proposed Rulemaking (Further 
Notice). The Commission requests written public comment on this IRFA. 
Comments must be identified as responses to the IRFA and must be filed 
by the deadlines for comments on the Further Notice provided on the 
concurrently adopted Report and Order (Order). The Commission will send 
a copy of the Further Notice, including this IRFA, to the Chief Counsel 
for Advocacy of the Small Business Administration (SBA). In addition, 
the Further Notice and IRFA (or summaries thereof) will be published in 
the Federal Register.
1. Need for, and Objectives of, the Proposed Rules
    30. In the concurrently adopted Order, the Commission adopts public 
interest obligations for recipients of support awarded through the 
Phase II competitive bidding process that will be known in advance of 
the auction and that will continue for the duration of the term of 
support, recognizing that competitive bidding is likely to be more 
efficient if potential bidders know what their performance standards 
will be before bids are made. In particular, the Commission establishes 
four technology-neutral tiers of bids available for bidding with 
varying speed and usage allowances, all at reasonably comparable rates, 
and for each tier will differentiate between bids that would commit to 
either lower or higher latency. The concurrently adopted Order provides 
general guidance on auction design, with certain details to be 
determined by the Commission at a future date in the Auction Procedures 
Public Notice, after further opportunity for comment.
    31. Separately, with the Further Notice, the Commission begins the 
process of seeking comment on several specific procedures that will 
apply to the Phase II auction. The Commission seeks comment on three 
discrete sets of issues relating to the process for determining winning 
bidders: (1) How to apply weights to the different levels of 
performance adopted in the concurrently adopted Order; (2) measures to 
achieve the public interest objective of ensuring appropriate support 
for all of the states; and (3) measures to achieve the public interest 
objective of expanding broadband on Tribal lands. The Commission also 
seeks comment on issues relating to interim deployment milestones for 
non-terrestrial providers or providers that have already deployed the 
infrastructure they intend to use to fulfill their Phase II 
obligations.
a. Comparing Bids of Differing Performance Levels
    32. In the concurrently adopted Order, the Commission adopts four 
technology-neutral performance tiers with varying speed and usage 
allowances, and for each tier permit bidders to designate either low or 
high latency. The Commission also concludes that all bids will be 
considered simultaneously, so that bidders that propose to meet one set 
of performance standards will be directly competing against bidders 
that propose to meet other performance standards. To implement this 
framework, the Commission has decided to use weights to take into 
account the differing attributes of different types of service 
performance.
    33. The Further Notice seeks comment on how bids should be weighted 
in order to achieve its overarching goal of providing households in the 
relevant high-cost areas with access to high quality broadband 
services, while making the most efficient use of limited universal 
service funds. The Commission

[[Page 40240]]

recognizes that setting appropriate weights is of crucial importance to 
achieving this goal and implementing a successful Phase II auction. 
Thus, the Commission seeks comment on weights in the Further Notice in 
order to expedite its ability to adopt auction procedures regarding the 
comparison of bids. A number of parties have submitted various 
proposals for how to weigh bids with differing performance obligations. 
In the Further Notice, the Commission seeks comment on these proposals 
and how it should consider them in light of the performance obligation 
tiers and latency framework it adopts in the concurrently adopted 
Order. The Commission also seeks comment on any alternative weighting 
proposals.
    34. The Further Notice proposes to adopt procedures that would 
assign a weight to each service tier as well as the high and low 
latency designations that would alter the initial cost-effectiveness 
score of each bid. The Further Notice proposes to adopt procedures for 
weights that would take into account the relative benefits to consumers 
of higher speeds, higher usage allowances, and lower latency. The 
Commission seeks comment on these proposals and any other alternatives. 
The Further Notice also seeks comment on what specific value of weights 
should be applied to each tier of service, and whether any of the 
different service tiers should be valued equivalently. The Commission 
also seeks comment on whether weights should be set relative to the 
baseline service tier, relative to the minimum requirements for this 
auction, or other approaches. The Commission also seeks comment on 
potentially using the Commission's Form 477 data or other 
subscribership data including costs per subscriber location in setting 
weights.
b. Access to Appropriate Phase II Levels for All States
    35. The Further Notice also seeks comment on measures to achieve 
the public interest objective of ensuring appropriate support for all 
of the states. In the concurrently adopted Order, the Commission 
recognizes the concerns raised by those states where significant 
amounts of Phase II funding were declined (declined states). The 
Commission seeks comment in the Further Notice generally on how to 
address these concerns in line with its universal service objectives.
    36. The Commission first seeks comment in the Further Notice on 
establishing weights that would provide a preference to declined states 
or other auction design procedures for the comparison of bids to ensure 
equitable funding to such states. The Commission also seeks comment on 
adopting weights to provide a preference for those states that have 
made a meaningful commitment to advance broadband. The Commission seeks 
comment on creating a funding `backstop' that could be used, if 
necessary, to ensure an equitable distribution of funding to declined 
states. The Commission also seeks comment on putting in place 
additional or subsequent measures to make up any shortfall from the 
declined amounts that remain following the Phase II auction. The 
Commission seeks comment on adopting an auction procedure that sets a 
ceiling for the aggregate total of winning bids in any given state to 
prevent a substantial redistribution of Phase II funds among states. If 
the Commission were to adopt such a ceiling, what would be the 
appropriate level? Finally, the Commission seeks comment on adopting 
auction procedures intended to ensure that declined states receive all 
or substantially all of the funds declined by the incumbent carrier.
c. Access to Service on Tribal Lands
    37. In the Further Notice, the Commission acts to further develop 
the record on how to advance its policy objective of extending 
broadband to unserved Tribal lands. The Commission recognizes the 
historic challenges of serving Tribal lands and the low deployment of 
broadband service on Tribal lands. The Commission seeks comment on 
several auction procedures that could advance its goal of expanding 
access to broadband on Tribal lands.
    38. The Commission seeks comment on adopting a Tribal-specific 
weight in the Phase II auction and how such a weighting should be 
designed to further its objective of advancing broadband deployment on 
Tribal lands. The Commission seeks comment on whether to provide a 
weight to the bids of all or a subset of entities bidding on Tribal 
lands and it seeks comment whether all or part of the area bid on must 
be Tribal lands for the bidder to receive a Tribal-specific weight. The 
Commission also seeks comment in the Further Notice on any alternative 
auction procedures that could be adopted to further its goals of 
advancing broadband deployment on Tribal lands.
d. Limited Adjustments to Interim Deployment Milestones
    39. In the Further Notice, the Commission seeks comment on how to 
address interim deployment milestones for non-terrestrial providers or 
other providers that have already deployed the infrastructure they 
intend to use to fulfill their Phase II obligations. The Commission 
seeks comment on how interim deployment milestones should be modified, 
if at all, for providers that have already deployed significant amounts 
of infrastructure necessary to meet the service commitments and on what 
specific milestones should the Commission adopt in the alternative so 
as to be able to monitor compliance with deployment obligations.
2. Legal Basis
    40. The legal basis for any action that may be taken pursuant to 
the Notice is contained in sections 1, 2, 4(i), 5, 10, 201-206, 214, 
218-220, 251, 252, 254, 256, 303(r), 332, 403, and 405 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), 155, 201-
206, 214, 218-220, 251, 252, 254, 256, 303(r), 332, 403, 405, 1302, and 
sections 1.1, 1.3, 1.421, 1.427, and 1.429 of the Commission's rules, 
47 CFR 1.1, 1.3, 1.421, 1.427, and 1.429.
3. Description and Estimate of the Number of Small Entities to Which 
the Rules Would Apply
    41. 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 Small Business 
Administration (SBA).
a. Total Small Entities
    42. The Commission's proposed action, if implemented, may, over 
time, affect small entities that are not easily categorized at present. 
The Commission therefore describes here, at the outset, three 
comprehensive, statutory small entity size standards. First, 
nationwide, there are a total of approximately 28.2 million small 
businesses, according to the SBA, which represents 99.7% of all 
businesses in the United States. In addition, a ``small organization'' 
is generally ``any not-for-profit enterprise which is independently 
owned and operated and is not dominant in its

[[Page 40241]]

field.'' Nationwide, as of 2007, there were approximately 1,621,215 
small organizations. Finally, 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 2011 
indicate that there were 90,056 local governmental jurisdictions in the 
United States. The Commission estimates that, of this total, as many as 
89,327 entities may qualify as ``small governmental jurisdictions.'' 
Thus, the Commission estimates that most governmental jurisdictions are 
small.
b. Broadband Internet Access Service Providers
    43. Any rules adopted pursuant to the Further Notice will apply to 
broadband Internet access service providers. The 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. These are also labeled 
``broadband.'' The latter are within the category of All Other 
Telecommunications, which has a size standard of annual receipts of 
$32.5 million or less. These are labeled non-broadband. According to 
Census Bureau data for 2007, there were 3,188 firms in the first 
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 1,000 employees or more. For the second category, the 
data show that 2,383 firms operated for the entire year. Of those, 
2,346 had annual receipts below $32.5 million per year. Consequently, 
the Commission estimates that the majority of broadband Internet access 
service provider firms are small entities.
    44. The broadband Internet access service provider industry has 
changed since this definition was introduced in 2007. The data cited 
above may therefore include entities that no longer provide broadband 
Internet access service, and may exclude entities that now provide such 
service. To ensure that this IRFA describes the universe of small 
entities that the Commission's action might affect, the Commission 
discusses in turn several different types of entities that might be 
providing broadband Internet access service. The Commission notes that, 
although it has no specific information on the number of small entities 
that provide broadband Internet access service over unlicensed 
spectrum, it includes these entities in its Initial Regulatory 
Flexibility Analysis.
c. Wireline Providers
    45. Incumbent Local Exchange Carriers (Incumbent LECs). Neither the 
Commission nor the SBA has developed a small business size standard 
specifically for incumbent LEC services. The closest applicable 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, 1,307 carriers 
reported that they were incumbent LEC 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 LEC service are small businesses that may 
be affected by rules adopted pursuant to the Further Notice.
    46. 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 Further Notice.
    47. The Commission has 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. The Commission has 
therefore included small incumbent LECs in this RFA analysis, although 
it emphasizes that this RFA action has no effect on Commission analyses 
and determinations in other, non-RFA contexts.
    48. Interexchange Carriers. Neither the Commission nor the SBA has 
developed a small business size standard specifically for providers of 
interexchange services. The appropriate size standard under SBA rules 
is for the category Wired Telecommunications Carriers. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
According to Commission data, 359 carriers have reported that they are 
engaged in the provision of interexchange service. Of these, 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 
IXCs are small entities that may be affected by rules adopted pursuant 
to the Further Notice.
    49. Operator Service Providers (OSPs). Neither the Commission nor 
the SBA has developed a small business size standard specifically for 
operator service providers. The appropriate size standard under SBA 
rules is for the category Wired Telecommunications Carriers. Under that 
size standard, such a business is small if it has 1,500 or fewer 
employees. According to Commission data, 33 carriers have reported that 
they are engaged in the provision of operator services. Of these, an 
estimated 31 have 1,500 or fewer employees and two have more than 1,500 
employees. Consequently, the Commission estimates that the majority of 
OSPs are small entities that may be affected by rules adopted pursuant 
to the Further Notice.
    50. 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

[[Page 40242]]

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 Further Notice.
    51. 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 Further Notice.
    52. 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 Further Notice.
    53. 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 Further 
Notice.
    54. 800 and 800-Like Service Subscribers. Neither the Commission 
nor the SBA has developed a small business size standard specifically 
for 800 and 800-like service (toll free) subscribers. The appropriate 
size standard under SBA rules is for the category Telecommunications 
Resellers. Under that size standard, such a business is small if it has 
1,500 or fewer employees. The most reliable source of information 
regarding the number of these service subscribers appears to be data 
the Commission collects on the 800, 888, 877, and 866 numbers in use. 
According to the Commission's 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. The Commission does 
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, the Commission estimates 
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.
d. Wireless Providers--Fixed and Mobile
    55. The broadband Internet access service provider category covered 
by this Further Notice may cover multiple wireless firms and categories 
of regulated wireless services. Thus, to the extent the wireless 
services listed below are used by wireless firms for broadband Internet 
access service, the proposed actions may have an impact on those small 
businesses as set forth above and further below. In addition, for those 
services subject to auctions, the Commission notes that, as a general 
matter, the number of winning bidders that claim to qualify as small 
businesses at the close of an auction does not necessarily represent 
the number of small businesses currently in service. Also, the 
Commission does not generally track subsequent business size unless, in 
the context of assignments and transfers or reportable eligibility 
events, unjust enrichment issues are implicated.
    56. Wireless Telecommunications Carriers (except Satellite). Since 
2007, the Census Bureau has placed wireless firms within this new, 
broad, economic census category. 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 the category of Wireless 
Telecommunications Carriers (except Satellite), 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 1,000 employees or more. Since all firms with fewer 
than 1,500 employees are considered small, given the total employment 
in the sector, the Commission estimates that the vast majority of 
wireless firms are small.
    57. 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.
    58. 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, 64 FR 
59656, November 3, 1999, the Commission 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

[[Page 40243]]

future auctions of 218-219 MHz spectrum.
    59. 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.
    60. 1670-1675 MHz Services. This service can be used for fixed and 
mobile uses, except aeronautical mobile. An auction for one license in 
the 1670-1675 MHz band was conducted in 2003. One license was awarded. 
The winning bidder was not a small entity.
    61. Wireless Telephony. 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 Commission data, 
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. Therefore, a little less than one third of these 
entities can be considered small.
    62. Broadband Personal Communications Service. The broadband 
personal communications services (PCS) spectrum is divided into six 
frequency blocks designated A through F, and the Commission has held 
auctions for each block. The Commission initially defined a ``small 
business'' for C- and F-Block licenses as an entity that has average 
gross revenues of $40 million or less in the three previous calendar 
years. For F-Block licenses, an additional small business size standard 
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 small 
business size standards, 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 claimed small business status 
in the first two C-Block auctions. A total of 93 bidders that claimed 
small business status won approximately 40 percent of the 1,479 
licenses in the first auction for the D, E, and F Blocks. On April 15, 
1999, the Commission completed the reauction of 347 C-, D-, E-, and F-
Block licenses in Auction No. 22. Of the 57 winning bidders in that 
auction, 48 claimed small business status and won 277 licenses.
    63. On January 26, 2001, the Commission completed the auction of 
422 C and F Block Broadband PCS licenses in Auction No. 35. Of the 35 
winning bidders in that auction, 29 claimed small business status. 
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. On February 15, 2005, the Commission completed an 
auction of 242 C-, D-, E-, and F-Block licenses in Auction No. 58. Of 
the 24 winning bidders in that auction, 16 claimed small business 
status and won 156 licenses. On May 21, 2007, the Commission completed 
an auction of 33 licenses in the A, C, and F Blocks in Auction No. 71. 
Of the 12 winning bidders in that auction, five claimed small business 
status and won 18 licenses. On August 20, 2008, the Commission 
completed the auction of 20 C-, D-, E-, and F-Block Broadband PCS 
licenses in Auction No. 78. Of the eight winning bidders for Broadband 
PCS licenses in that auction, six claimed small business status and won 
14 licenses.
    64. Specialized Mobile Radio Licenses. The Commission awards 
``small entity'' bidding credits in auctions for Specialized Mobile 
Radio (SMR) geographic area licenses in the 800 MHz and 900 MHz bands 
to firms that had revenues of no more than $15 million in each of the 
three previous calendar years. The Commission awards ``very small 
entity'' bidding credits to firms 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 900 MHz Service. 
The Commission has held auctions for geographic area licenses in the 
800 MHz and 900 MHz bands. The 900 MHz SMR auction began on December 5, 
1995, and closed on April 15, 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 began on October 28, 1997, and was 
completed on December 8, 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 held on January 10, 
2002 and closed on January 17, 2002 and included 23 BEA licenses. One 
bidder claiming small business status won five licenses.
    65. The auction of the 1,053 800 MHz SMR geographic area licenses 
for the General Category channels began on August 16, 2000, and was 
completed on September 1, 2000. Eleven bidders won 108 geographic area 
licenses for the General Category channels in the 800 MHz SMR band and 
qualified as small businesses under the $15 million size standard. In 
an auction completed on December 5, 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 four auctions, 41 winning 
bidders for geographic licenses in the 800 MHz SMR band claimed status 
as small businesses.
    66. In addition, there are numerous incumbent site-by-site SMR 
licenses and licensees with extended implementation authorizations in 
the 800 and 900 MHz bands. The Commission does not know how many firms 
provide 800 MHz or 900 MHz geographic area SMR service pursuant to 
extended implementation authorizations, nor how many of these providers 
have annual revenues of no more than $15 million. One firm has over $15 
million in revenues. In addition, the Commission does not know how many 
of these firms have 1,500 or fewer employees, which is the SBA-
determined size standard. The Commission assumes, for purposes of this 
analysis, that all of the remaining extended implementation 
authorizations are held by small entities, as defined by the SBA.
    67. 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

[[Page 40244]]

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 
Service had a third category of small business status for Metropolitan/
Rural Service Area (MSA/RSA) licenses--``entrepreneur''--which is 
defined as an entity that, together with its affiliates and controlling 
principals, has average gross revenues that are not more than $3 
million for the preceding three years. The SBA approved these small 
size standards. An auction of 740 licenses (one license in each of the 
734 MSAs/RSAs and one license in each of the six Economic Area 
Groupings (EAGs)) commenced on August 27, 2002, and closed on September 
18, 2002. Of the 740 licenses available for auction, 484 licenses were 
won by 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. A second auction commenced on May 28, 2003, 
closed on June 13, 2003, and 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. On 
July 26, 2005, the Commission completed an auction of 5 licenses in the 
Lower 700 MHz band (Auction No. 60). There were three winning bidders 
for five licenses. All three winning bidders claimed small business 
status.
    68. In 2007, the Commission reexamined its rules governing the 700 
MHz band in the 700 MHz Second Report and Order, 72 FR 48814, August 
24, 2007. An auction of 700 MHz licenses commenced January 24, 2008 and 
closed on March 18, 2008, which included, 176 Economic Area licenses in 
the A Block, 734 Cellular Market Area licenses in the B Block, and 176 
EA licenses in the E Block. Twenty winning bidders, claiming 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) won 49 licenses. Thirty-three winning bidders claiming 
very small business status (those with attributable average annual 
gross revenues that do not exceed $15 million for the preceding three 
years) won 325 licenses.
    69. Upper 700 MHz Band Licenses. In the 700 MHz Second Report and 
Order, the Commission revised its rules regarding Upper 700 MHz 
licenses. On January 24, 2008, the Commission commenced Auction 73 in 
which several licenses in the Upper 700 MHz band were available for 
licensing: 12 Regional Economic Area Grouping licenses in the C Block, 
and one nationwide license in the D Block. The auction concluded on 
March 18, 2008, with 3 winning bidders claiming very small business 
status (those with attributable average annual gross revenues that do 
not exceed $15 million for the preceding three years) and winning five 
licenses.
    70. 700 MHz Guard Band Licensees. In 2000, in the 700 MHz Guard 
Band Order, 65 FR 17594, April 4, 2000, the Commission adopted size 
standards 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 in this 
service 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 gross revenues that are not more than $15 million for the 
preceding three years. SBA approval of these definitions is not 
required. An auction of 52 Major Economic Area 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.
    71. 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.
    72. 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, the Commission uses 
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. The Commission notes 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.
    73. As of March 2010, there were 424,162 PLMR licensees operating 
921,909 transmitters in the PLMR bands below 512 MHz. The Commission 
notes 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.
    74. 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, the Commission 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.
    75. Air-Ground Radiotelephone Service. The Commission has 
previously used 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 
100 licensees in the Air-Ground Radiotelephone Service, and under that 
definition, the Commission estimates that almost all of them qualify as 
small entities under the SBA definition. For purposes of assigning Air-
Ground Radiotelephone Service

[[Page 40245]]

licenses through competitive bidding, the Commission has defined 
``small business'' as an entity that, together with controlling 
interests and affiliates, has average annual gross revenues for the 
preceding three years not exceeding $40 million. A ``very small 
business'' is defined as an entity that, together with controlling 
interests and affiliates, has average annual gross revenues for the 
preceding three years not exceeding $15 million. These definitions were 
approved by the SBA. In May 2006, the Commission completed an auction 
of nationwide commercial Air-Ground Radiotelephone Service licenses in 
the 800 MHz band (Auction No. 65). On June 2, 2006, the auction closed 
with two winning bidders winning two Air-Ground Radiotelephone Services 
licenses. Neither of the winning bidders claimed small business status.
    76. 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 the 
Commission's evaluations in this analysis, the Commission estimates 
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 Further 
Notice.
    77. Advanced Wireless Services (AWS) (1710-1755 MHz and 2110-2155 
MHz bands (AWS-1); 1915-1920 MHz, 1995-2000 MHz, 2020-2025 MHz and 
2175-2180 MHz bands (AWS-2); 2155-2175 MHz band (AWS-3)). For the AWS-1 
bands, the Commission has defined a ``small business'' as an entity 
with average annual gross revenues for the preceding three years not 
exceeding $40 million, and a ``very small business'' as an entity with 
average annual gross revenues for the preceding three years not 
exceeding $15 million. For AWS-2 and AWS-3, although the Commission 
does not know for certain which entities are likely to apply for these 
frequencies, it notes that the AWS-1 bands are comparable to those used 
for cellular service and personal communications service. The 
Commission has not yet adopted size standards for the AWS-2 or AWS-3 
bands but proposes to treat both AWS-2 and AWS-3 similarly to broadband 
PCS service and AWS-1 service due to the comparable capital 
requirements and other factors, such as issues involved in relocating 
incumbents and developing markets, technologies, and services.
    78. 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, the 
Commission estimates that the majority of these licensees are Internet 
Access Service Providers (ISPs) and that most of those licensees are 
small businesses.
    79. Fixed Microwave Services. Microwave services include common 
carrier, private-operational fixed, and broadcast auxiliary radio 
services. They also include the Local Multipoint Distribution Service 
(LMDS), the Digital Electronic Message Service (DEMS), and the 24 GHz 
Service, where licensees can choose between common carrier and non-
common carrier status. At present, there are approximately 36,708 
common carrier fixed licensees and 59,291 private operational-fixed 
licensees and broadcast auxiliary radio licensees in the microwave 
services. There are approximately 135 LMDS licensees, three DEMS 
licensees, and three 24 GHz licensees. The Commission has not yet 
defined a small business with respect to microwave services. For 
purposes of the IRFA, the Commission will use the SBA's definition 
applicable to Wireless Telecommunications Carriers (except satellite)--
i.e., an entity with no more than 1,500 persons. Under the present and 
prior categories, the SBA has deemed a wireless business to be small if 
it has 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 
36,708 common carrier fixed licensees and up to 59,291 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. The Commission notes, however, that 
the common carrier microwave fixed licensee category includes some 
large entities.
    80. Offshore Radiotelephone Service. This service operates on 
several UHF television broadcast channels that are not used for 
television broadcasting in the coastal areas of states bordering the 
Gulf of Mexico. There are presently approximately 55 licensees in this 
service. 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,

[[Page 40246]]

the majority of firms can be considered small.
    81. 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 Further Notice.
    82. 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 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, the Commission estimates 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, the 
Commission finds that there are currently approximately 440 BRS 
licensees that are defined as small businesses under either the SBA or 
the Commission's rules.
    83. In 2009, the Commission conducted Auction 86, the sale of 78 
licenses in the BRS areas. The Commission offered three levels of 
bidding credits: (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) received 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) received 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) received a 35 percent discount on its 
winning bid. Auction 86 concluded in 2009 with the sale of 61 licenses. 
Of the ten winning bidders, two bidders that claimed small business 
status won 4 licenses; one bidder that claimed very small business 
status won three licenses; and two bidders that claimed entrepreneur 
status won six licenses.
    84. In addition, the SBA's Cable Television Distribution Services 
small business size standard is applicable to EBS. There are presently 
2,436 EBS licensees. All but 100 of these licenses are held by 
educational institutions. Educational institutions are included in this 
analysis as small entities. Thus, the Commission estimates that at 
least 2,336 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 has 
developed a small business size standard for this category, which is: 
all such firms having 1,500 or fewer employees. To gauge small business 
prevalence for these cable services the Commission must, however, use 
the most current census data that are based on the previous category of 
Cable and Other Program Distribution and its associated size standard; 
that size standard was: all such firms having $13.5 million or less in 
annual receipts. According to Census Bureau data for 2007, there were a 
total of 996 firms in this category that operated for the entire year. 
Of this total, 948 firms had annual receipts of under $10 million, and 
48 firms had receipts of $10 million or more but less than $25 million. 
Thus, the majority of these firms can be considered small.
    85. 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, 65 FR 35843, 
June 6, 2000. 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.
    86. Paging (Private and Common Carrier). In the Paging Third Report 
and Order, 64 FR 33762, June 24, 1999, the Commission 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 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

[[Page 40247]]

majority of paging providers are small entities that may be affected by 
its 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.
    87. 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, the Commission applies 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 Further Notice.
    88. 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, 62 
FR 15978, April 3, 1997, the Commission 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.
e. Satellite Service Providers
    89. Satellite Telecommunications Providers. Two economic census 
categories address the satellite industry. The first category has a 
small business size standard of $30 million or less in average annual 
receipts, under SBA rules. The second has a size standard of $30 
million or less in annual receipts.
    90. The category of Satellite Telecommunications ``comprises 
establishments primarily engaged in providing 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 570 firms that operated for the entire 
year. Of this total, 530 firms had annual receipts of under $30 
million, and 40 firms had receipts of over $30 million. Consequently, 
the Commission estimates that the majority of Satellite 
Telecommunications firms are small entities that might be affected by 
its action.
    91. The second category of Other Telecommunications comprises, 
inter alia, ``establishments 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.'' For this 
category, Census Bureau data for 2007 show that there were a total of 
1,274 firms that operated for the entire year. Of this total, 1,252 had 
annual receipts below $25 million per year. Consequently, the 
Commission estimates that the majority of All Other Telecommunications 
firms are small entities that might be affected by its action.
f. Cable Service Providers
    92. Because section 706 requires the Commission to monitor the 
deployment of broadband using any technology, the Commission 
anticipates that some broadband service providers may not provide 
telephone service. Accordingly, the Commission describes below other 
types of firms that may provide broadband services, including cable 
companies, MDS providers, and utilities, among others.
    93. Cable and Other Program Distributors. 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. To gauge small business prevalence for these cable services 
the Commission must, however, use current census data that are based on 
the previous category of Cable and Other Program Distribution and its 
associated size standard; that size standard was: all such firms having 
$13.5 million or less in annual receipts. According to Census Bureau 
data for 2007, there were a total of 2,048 firms in this category that 
operated for the entire year. Of this total, 1,393 firms had annual 
receipts of under $10 million, and 655 firms had receipts of $10 
million or more. Thus, the majority of these firms can be considered 
small.
    94. Cable Companies and Systems. The Commission has also developed 
its own small business size standards, for the purpose of cable rate 
regulation. Under the Commission's rules, a ``small cable company'' is 
one serving 400,000 or fewer subscribers, nationwide. Industry data 
that there are currently 4,600 active cable systems in the United 
States. Of this total, all but nine cable operators are small under the 
400,000 subscriber size standard. In addition, under the Commission's 
rules, a ``small

[[Page 40248]]

system'' is a cable system serving 15,000 or fewer subscribers. Current 
Commission records show 4,945 cable systems nationwide. Of this total, 
4,380 cable systems have less than 20,000 subscribers, and 565 systems 
have 20,000 or more subscribers, based on the same records. Thus, under 
this standard, the Commission estimates that most cable systems are 
small entities.
    95. Cable System Operators. The Communications Act of 1934, as 
amended, also contains a size standard for small cable system 
operators, which is ``a cable operator that, directly or through an 
affiliate, serves in the aggregate fewer than 1 percent of all 
subscribers in the United States and is not affiliated with any entity 
or entities whose gross annual revenues in the aggregate exceed 
$250,000,000.'' The Commission has determined that an operator serving 
fewer than 677,000 subscribers shall be deemed a small operator, if its 
annual revenues, when combined with the total annual revenues of all 
its affiliates, do not exceed $250 million in the aggregate. Based on 
available data, the Commission finds that all but ten incumbent cable 
operators are small entities under this size standard. The Commission 
notes 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 it is unable to 
estimate more accurately the number of cable system operators that 
would qualify as small under this size standard.
    96. 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 1,000 employees or 
more. Thus, under this second size standard, most cable systems are 
small and may be affected by rules adopted pursuant to the Further 
Notice. In addition, the Commission notes that it 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.
g. Electric Power Generators, Transmitters, and Distributors
    97. Electric Power Generators, Transmitters, and Distributors. The 
Census Bureau defines an industry group comprised of ``establishments, 
primarily engaged in generating, transmitting, and/or distributing 
electric power. Establishments in this industry group may perform one 
or more of the following activities: (1) Operate generation facilities 
that produce electric energy; (2) operate transmission systems that 
convey the electricity from the generation facility to the distribution 
system; and (3) operate distribution systems that convey electric power 
received from the generation facility or the transmission system to the 
final consumer.'' The SBA has developed a small business size standard 
for firms in this category: ``A firm is small if, including its 
affiliates, it is primarily engaged in the generation, transmission, 
and/or distribution of electric energy for sale and its total electric 
output for the preceding fiscal year did not exceed 4 million megawatt 
hours.'' Census Bureau data for 2007 show that there were 1,174 firms 
that operated for the entire year in this category. Of these firms, 50 
had 1,000 employees or more, and 1,124 had fewer than 1,000 employees. 
Based on this data, a majority of these firms can be considered small.
4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities
    98. In the Further Notice, the Commission begins the process of 
seeking comment on several specific procedures that will apply in the 
Phase II auction. The Commission seeks comment on three discrete sets 
of issues relating to the process for determining winning bidders: (1) 
How to apply weights to the different levels of performance adopted in 
the concurrently adopted Order; (2) measures to achieve the public 
interest objective of ensuring appropriate support for all of the 
states; and (3) measures to achieve the public interest objective of 
expanding broadband on Tribal lands. The Commission also seeks comment 
on issues relating to interim deployment milestones for non-terrestrial 
providers or providers that have already deployed the infrastructure 
they intend to use to fulfill their Phase II obligations.
    99. First, the Commission seeks comment on how to apply weights to 
the different levels of performance adopted in the concurrently adopted 
Order. As part of the weighting process, bidders should not need to 
provide additional information beyond their bid.
    100. Second, the Commission also seeks comment on measures to 
achieve the public interest objective of ensuring appropriate support 
for all of the states. To the extent that these procedures require 
bidders to identify whether they qualify, bidders will have to provide 
that information to the Commission.
    101. Third, the Commission seeks comment on several auction 
procedures that could advance its goal of expanding access to broadband 
on Tribal lands. Similarly, to the extent that these procedures require 
bidders to identify whether they qualify, bidders will have to provide 
that information to the Commission.
    102. Fourth, the Commission seeks comment on issues relating to 
interim deployment milestones for non-terrestrial providers or 
providers that have already deployed the infrastructure they intend to 
use to fulfill their Phase II obligations. Alternative interim 
milestones could require entities to report deployment information at 
different or accelerated intervals.
5. Steps Taken To Minimize the Significant Economic Impact on Small 
Entities and Significant Alternatives Considered
    103. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include (among others) the following four alternatives: (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. The Commission expects to consider all of these factors when 
it has received substantive comment from the public and potentially 
affected entities.

[[Page 40249]]

    104. Comparing Bids of Different Performance Levels. The Commission 
does not expect the submission of additional information from bidders 
in order to score weighted bids. In the Further Notice, the Commission 
specifically seeks comment on the weighting proposals of a number of 
industry groups, and it will take into account any concerns that these 
groups and subsequent commenters may have regarding any additional 
burden on carriers, particularly small entities. The Commission expects 
to consider whether any burden from these procedures would be 
outweighed by the benefit of furthering the Commission's goal to 
provide households in the relevant high-cost areas with access to high 
quality broadband services in the most efficient way possible.
    105. Access to Appropriate Phase II Levels for All States. The 
Commission does not expect that any weighting factors or other 
processes adopted to ensure appropriate support for all states will 
increase the administrative burden on bidders. To the extent that these 
procedures require bidders to identify whether they qualify, such as 
whether a bidder is submitting a bid in a declined state, bidders 
should readily have access to the necessary information.
    106. Access to Service on Tribal Lands. Similarly, the Commission 
does not expect that any weighting factors or other processes adopted 
to advance its goal of expanding access to broadband on Tribal lands 
will increase the administrative burden on bidders. To the extent that 
these procedures require bidders to identify whether they qualify, such 
as whether a bidder is submitting a bid to serve Tribal lands, bidders 
should readily have access to the necessary information.
    107. Limited Adjustments to Interim Deployment Milestones. Interim 
deployment milestones for non-terrestrial providers or providers that 
have already deployed the infrastructure they intend to use to fulfill 
their Phase II obligations could require entities to report deployment 
information at different or accelerated intervals than other Phase II 
recipients. However, such entities could complete deployment reporting 
sooner than other providers. All high-cost recipients are subject to 
narrowly tailored reporting obligations in order to enable the 
Commission to determine how high-cost support is being used to improve 
broadband availability, service quality, and capacity.
    108. More generally, the Commission expects to consider the 
economic impact on small entities, as identified in comments filed in 
response to the Further Notice and this IRFA, in reaching its final 
conclusions and taking action in this proceeding. The proposals and 
questions laid out in the Further Notice were designed to ensure the 
Commission has a complete understanding of the benefits and potential 
burdens associated with the different actions and methods.
6. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules
    109. None.

C. Ex Parte Presentations

    110. Permit-But-Disclose. The proceeding this Second FNPRM 
initiates shall be treated as a ``permit-but-disclose'' proceeding in 
accordance with the Commission's ex parte rules. 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 shown or given to 
Commission staff during ex parte meetings are deemed to be written ex 
parte presentations and must be filed consistent with rule 1.1206(b). 
In proceedings governed by rule 1.49(f) 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.
    111. 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).
    112. Comments and reply comments must include a short and concise 
summary of the substantive arguments raised in the pleading. Comments 
and reply comments must also comply with section 1.49 and all other 
applicable sections of the Commission's rules. The Commission directs 
all interested parties to include the name of the filing party and the 
date of the filing on each page of their comments and reply comments. 
All parties are encouraged to utilize a table of contents, regardless 
of the length of their submission. The Commission also strongly 
encourages parties to track the organization set forth in the FNPRM in 
order to facilitate its internal review process.
    113. Additional Information. For additional information on this 
proceeding, contact Alexander Minard of the Wireline Competition 
Bureau, Telecommunications Access Policy Division, 
Alexander.Minard@fcc.gov, (202) 418-7400.

IV. Ordering Clauses

    114. Accordingly, it is ordered, pursuant to the authority 
contained in sections 1, 2, 4(i), 5, 10, 201-206, 214, 218-220, 251, 
252, 254, 256, 303(r), 332, 403, 405, and 503 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), 155, 160, 201-206, 214, 218-220, 251, 
252, 254, 256, 303(r), 332, 403, 405, 503, 1302, and sections 1.1, 
1.427, and 1.429 of the Commission's rules, 47 CFR 1.1, 1.427, and 
1.429, that the concurrently adopted Report and Order and Further 
Notice of Proposed Rulemaking is adopted, effective thirty (30) days 
after publication of the text or summary thereof in the Federal 
Register, except for those rules and requirements involving Paperwork 
Reduction Act burdens, which shall become effective immediately upon 
announcement in the Federal Register of OMB approval. It is the 
Commission's intention in adopting these rules that if any of the rules 
that it retains, modifies, or adopts herein, or the application thereof 
to any person or circumstance, are held to be unlawful, the remaining 
portions of the rules not deemed unlawful, and the application of such 
rules to other persons or circumstances, shall remain in effect to the 
fullest extent permitted by law.

[[Page 40250]]

    115. It is further ordered that, pursuant to the authority 
contained in sections 1, 2, 4(i), 5, 10, 201-206, 214, 218-220, 251, 
252, 254, 256, 303(r), 332, 403, and 405 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), 155, 201-206, 214, 218-220, 251, 252, 
254, 256, 303(r), 332, 403, 405, 1302, and sections 1.1, 1.421, 1.427, 
and 1.429 of the Commission's rules, 47 CFR 1.1, 1.421, 1.427, and 
1.429, notice is hereby given of the proposals and tentative 
conclusions described in this Further Notice of Proposed Rulemaking.
    116. It is further ordered that Part 54 of the Commission's rules, 
47 CFR part 54, is amended as set forth in Appendix A, and such rule 
amendments shall be effective thirty (30) days after publication of the 
rules amendments in the Federal Register, except to the extent they 
contain information collections subject to PRA review. The rules that 
contain information collections subject to PRA review shall become 
effective immediately upon announcement in the Federal Register of OMB 
approval and an effective date.
    117. It is further ordered that the Commission SHALL SEND a copy of 
the concurrently adopted Report and Order and Further Notice of 
Proposed Rulemaking to Congress and the Government Accountability 
Office pursuant to the Congressional Review Act, see 5 U.S.C. 
801(a)(1)(A).
    118. It is further ordered, that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, SHALL SEND a 
copy of the concurrently adopted Report and Order and Further Notice of 
Proposed Rulemaking, including the Final Regulatory Flexibility 
Analysis, to the Chief Counsel for Advocacy of the Small Business 
Administration.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 2016-14507 Filed 6-20-16; 8:45 am]
 BILLING CODE 6712-01-P