Business Data Services in an Internet Protocol Environment, 38566-38579 [2019-16897]

Download as PDF 38566 Federal Register / Vol. 84, No. 152 / Wednesday, August 7, 2019 / Rules and Regulations Dated: July 31, 2019. Eric Letvin, Deputy Assistant Administrator for Mitigation, Federal Insurance and Mitigation Administration—FEMA Resilience, Department of Homeland Security, Federal Emergency Management Agency. [FR Doc. 2019–16806 Filed 8–6–19; 8:45 am] BILLING CODE 9110–12–P FEDERAL COMMUNICATIONS COMMISSION 47 CFR Parts 61 and 69 [WC Docket Nos. 16–143, 05–25; GN Docket No. 13–5; RM 10593; FCC 19–66] Business Data Services in an Internet Protocol Environment Federal Communications Commission. ACTION: Final rule. AGENCY: The Commission eliminates ex ante pricing regulation for lower speed time division multiplexing (TDM) transport services offered by price cap regulated carriers nationwide, finding there is widespread competition in the marketplace, and abundant support in the record for removing the Commission’s pricing regulations. DATES: This final rule is effective September 6, 2019. ADDRESSES: Federal Communications Commission, 445 12th Street SW, Washington, DC 20554. FOR FURTHER INFORMATION CONTACT: David Zesiger, Wireline Competition Bureau, Pricing Policy Division at (202) 418–1540 or via email at David.Zesiger@ fcc.gov. SUPPLEMENTARY INFORMATION: This is a summary of the Commission’s Report and Order on Remand, released on July 12, 2019. A full-text copy of this document may be obtained at the following internet address: https:// www.fcc.gov/document/removingunnecessary-regulation-transportservices-and-facilities-0. SUMMARY: jspears on DSK3GMQ082PROD with RULES I. Background A. BDS TDM Transport Services 1. The term business data services refers to the ‘‘dedicated point-to-point transmission of data at guaranteed speeds and service levels.’’ BDS offerings are fundamentally important to modern communities and economies. Over the last several decades, the Commission has repeatedly recognized the increasing competition for BDS services in areas of the country served by price cap LECs. Competition has grown even more markedly in recent VerDate Sep<11>2014 17:55 Aug 06, 2019 Jkt 247001 years as cable operators increasingly compete for all aspects of BDS, including TDM transport. In response, the Commission has worked consistently to streamline regulation of such services to reflect this evolution. 2. In so doing, the Commission has characterized TDM transport services, which ‘‘involve carrying traffic from one point of traffic concentration to another,’’ as ‘‘low hanging fruit’’ for competitors because they can more easily justify competitive investment and deployment. In 1999, recognizing that burdensome pricing regulation is unnecessary and counter-productive where competitive pressure exists, the Commission granted pricing flexibility to price cap carriers for their BDS offerings, including their TDM transport services. The Commission provided two levels of pricing flexibility to price cap LECs offering BDS, including TDMbased transport services, keyed to the presence of competitive providers collocated at a price cap LEC’s wire centers. The Commission suspended further grants of pricing flexibility in 2012, pending the resolution of the BDS proceedings. 3. In 2017, after more than ten years of study and a massive data collection (the 2015 Collection), the Commission adopted an order comprehensively addressing the pricing regulation of BDS in price cap LEC areas. In the BDS Order, the Commission found, among other things, that competition for BDS TDM transport services was sufficiently pervasive to justify elimination of ‘‘all ex ante pricing regulation of price cap incumbent LEC provision of TDM transport and other transport (i.e., nonend user channel termination)’’ services. In support of this conclusion, the Commission looked to the record evidence showing that ‘‘competitive providers have deployed competing transport networks in more than 95% of census blocks with [BDS] demand,’’ which included ‘‘about 99% of business establishments.’’ It also found that ‘‘in all price cap territories, 92.1 percent of buildings served were within a half mile of competitive fiber transport facilities’’ and that, ‘‘for all census blocks with business data services demand, 89.6 percent have at least one served building within a half mile of competitive LEC fiber.’’ This half mile is significant because, as the Commission concluded, most BDS providers are willing and able to profitably invest in and deploy facilities within a half mile of existing competitive facilities. In addition, the Commission found that buildings with BDS demand that were served only by an incumbent LEC were PO 00000 Frm 00022 Fmt 4700 Sfmt 4700 on average only 364 feet from the closest competitive LEC fiber facility. 4. After the Eighth Circuit Court’s partial remand of the BDS Order, finding that the Commission had not provided sufficient notice on the issue of eliminating ex ante pricing regulation for TDM transport, the Commission released the Second Further Notice, proposing to eliminate ex ante pricing regulation of price cap LECs’ BDS TDM transport and other transport (i.e., nonend user channel termination) services. The Commission received eight comments, six reply comments, and several filings memorializing various ex parte communications. Also, in the interest of ensuring a more complete analysis of competitive conditions affecting TDM transport services, the Commission conducted additional analysis of TDM transport services using data from the 2015 Collection. That analysis is focused on measuring the proximity of incumbent LEC wire centers to competitive fiber and shows that the vast majority of locations with BDS demand in price cap areas are served by wire centers that are no more than a half mile from competitive fiber. The Wireline Competition Bureau (Bureau) made that additional analysis available for public review and sought and received an additional seven comments and six reply comments about those data tables (the April Data Tables). As a result of these two additional rounds of comments, we now have an even more robust record. B. Forbearance Under Section 10 of the Act 5. Section 10 of the Communications Act of 1934 as amended by the Telecommunications Act of 1996 (the Act) requires the Commission to forbear from applying any requirement of the Act or of our regulations to a telecommunications carrier or telecommunications service if and only if the Commission determines that: (1) Enforcement of the requirement ‘‘is not necessary to ensure that the charges, practices, classifications, or regulations by, for, or in connection with that telecommunications carrier or telecommunications service are just and reasonable and are not unjustly or unreasonably discriminatory;’’ (2) enforcement of that requirement ‘‘is not necessary for the protection of consumers;’’ and (3) ‘‘forbearance from applying that requirement is consistent with the public interest.’’ Forbearance is warranted only if all three criteria are satisfied. E:\FR\FM\07AUR1.SGM 07AUR1 Federal Register / Vol. 84, No. 152 / Wednesday, August 7, 2019 / Rules and Regulations II. Eliminating Ex Ante Pricing Regulation of BDS TDM Transport Services Offered by Price Cap LECs (Report and Order on Remand) 6. After careful review of the record, we reaffirm the Commission’s previous decision to eliminate ex ante pricing regulation of TDM transport services in areas served by price cap LECs. The current record, even more so than the record that was before the Commission in 2017, demonstrates that widespread and ever-increasing competition in the supply of BDS transport makes ex ante pricing regulation of TDM transport in price cap areas both unnecessary and unduly burdensome. We therefore grant nationwide relief from ex ante pricing regulation of BDS TDM transport services in price cap areas, forbear from applying Section 203 tariffing requirements to these services, and adopt permissive detariffing for price cap LECs’ BDS TDM transport services for a transition period, followed by mandatory detariffing of these services. jspears on DSK3GMQ082PROD with RULES A. Competition for BDS TDM Transport 7. In finding that there is widespread and increasing competition for BDS TDM transport services in price cap areas, we rely in part on the evidence and analysis that was before the Commission in 2017 and also on evidence and analysis added to the record through two additional rounds of public comment following the Eighth Circuit Court’s remand. Indeed, the additional submissions to the record have substantiated the reasonableness of the Commission’s previous findings, and nothing in those submissions would cause us to modify the conclusions the Commission previously made concerning the state of competition for TDM transport services. As the Commission did in 2017, we find particularly persuasive the data that shows that as of 2013: (1) ‘‘competitive providers ha[d] deployed competing transport networks in more than 95% of census blocks with [BDS] demand’’ which included ‘‘about 99% of business establishments;’’ (2) ‘‘in all price cap territories, 92.1 percent of buildings served were within a half mile of competitive fiber transport facilities’’ and that, ‘‘for all census blocks with business data services demand, 89.6 percent have at least one served building within a half mile of competitive LEC fiber;’’ and (3) buildings with BDS demand that were served only by an incumbent LEC were on average only 364 feet from the closest competitive LEC fiber facility. 8. We continue to find that competitive suppliers with nearby fiber VerDate Sep<11>2014 17:55 Aug 06, 2019 Jkt 247001 put competitive pressure on transport prices. As the Commission previously found, the record demonstrates that providers actively compete for customers located within about a half mile from their networks. That is because wireline providers of BDS are commonly willing to extend their existing networks a half mile or further to meet demand. Thus, the fact that 92.1% of buildings served with business data services in price cap areas were within a half mile of competitive fiber transport facilities and that, 89.6% of census blocks with BDS demand in price cap areas had at least one served building within a half mile of competitive LEC fiber, demonstrates the widespread competitive pressure on TDM transport in price cap areas. 9. INCOMPAS disagrees and argues that the relevant measure of competition in the supply of TDM transport is the proximity of competitive fiber to incumbent LEC wire centers rather than the proximity of fiber to buildings with BDS demand. We find this argument to be misplaced. As the record demonstrates, while competitive LECs sometimes use transport links that are collocated at incumbent LEC wire centers, they often connect customers directly to their fiber facilities, effectively bypassing the incumbent LEC network. For example, cable operators compete with price cap incumbent LECs for transport services, but do not rely on interconnection with incumbent LEC wire centers to provide service. Commenters also observe competitors’ increasing reliance on third party carrier hotels and data centers, which provide competitive LECs alternatives to incumbent LEC wire centers. Therefore, using the proximity of price cap LEC wire centers to competitive LEC fiber to measure the competitiveness of TDM transport would, by itself, understate the level of competition for TDM transport by failing to account for competition that bypasses incumbent LEC networks. 10. Moreover, we agree with commenters that argue that our decision to measure the proximity of buildings with BDS demand to competitive fiber is ‘‘both more granular and more comprehensive’’ than the competitive LECs’ alternative proposal to measure the proximity of incumbent LEC wire centers to competitive fiber. Our metric assesses competition at approximately 1.2 million locations with BDS demand whereas there are fewer than 16,000 price cap incumbent LEC wire centers. 11. In the interest in having as complete a record as possible, however, earlier this year, using data from the 2015 Collection, Commission staff PO 00000 Frm 00023 Fmt 4700 Sfmt 4700 38567 included in the record the April Data Tables that show that the vast majority of locations with BDS demand are served by wire centers that were within a half mile of competitive fiber. More specifically, staff analysis demonstrates that, in 2013, 75.7% of price cap LEC wire center locations were within a half mile of competitive fiber. INCOMPAS’s own analysis confirms this finding. Commission staff determined that only 5.6% of locations with BDS demand are likely served by incumbent LEC wire centers without competitive LEC fiber within a half mile. Staff further calculated that only 2.7% of all locations with BDS demand were either likely served by wire centers without nearby competitive fiber or were themselves not within a half mile of such fiber. 12. As CenturyLink explains, the ‘‘tables confirm that competitors can connect to the vast majority of ILEC central offices, and particularly those with meaningful demand for business services, to supplement their own competitive networks.’’ At the same time, the April Data Tables ‘‘dramatically understate competition for these services, as cable companies and other competitors frequently bypass ILEC networks entirely, eliminating the need for them to connect to ILEC wire centers to reach end-user customers.’’ Moreover, the April Data Tables reflect only the competitive fiber that existed in 2013; as the record demonstrates, however, competitive fiber providers have continued to build new fiber routes in part to compete with incumbent LECs’ BDS offerings. 13. Commenters challenge the validity of the Commission’s April Data Tables on various grounds. For example, INCOMPAS argues that without information about the distance between wire centers and the nearest splice point or interconnection point on the competitive provider’s network, the April Data Tables understate the barriers to competitive entry. INCOMPAS cites Commission precedent regarding using the distance to splice points to measure competition, and notes the lack of splice point data in the record. 14. However, given the fact that fiber operators commonly install interconnection points at regular intervals on the fiber they deploy, measuring the distance to fiber is a reasonable proxy for measuring the distance to a splice point. As CenturyLink explains, installing an interconnection point on fiber is neither ‘‘particularly burdensome [nor] otherwise unachievable . . . . If there is sufficient demand, carriers will E:\FR\FM\07AUR1.SGM 07AUR1 jspears on DSK3GMQ082PROD with RULES 38568 Federal Register / Vol. 84, No. 152 / Wednesday, August 7, 2019 / Rules and Regulations naturally install interconnection points nearby when they deploy fiber, and even if they do not, it is still possible to add new splice points.’’ It further observes that ‘‘[e]stablishing a splice point generally does not significantly increase the cost of adding a new customer location to CenturyLink’s network . . . . As a result, the need for a new splice point typically does not negatively affect the business case for deploying a fiber lateral to serve a new customer . . . .’’ These statements are unrebutted in the record. We believe the data on fiber locations represents the best data available to the Commission and find they provide a reasonable means by which to estimate competitive pressure generated by the proximity of competitive fiber. 15. We also find the suggestion that it is improper to include cable fiber in the April Data Tables, since cable providers do not collocate in incumbent LEC wire centers to sell transport, to be premised on an unnecessarily narrow and outdated view of competition that requires interconnection with the incumbent LEC. It misses the competitive pressure that nearby cable fiber exerts on the incumbent LEC regardless of whether it interconnects with the incumbent LEC. Competitive LEC fiber, including cable fiber, remains relevant to a competitive analysis regardless of whether competitors connect with incumbent facilities or bypass them. 16. We reaffirm the Commission’s finding that the presence or reasonable proximity of a single competitor’s facilities represents competition given the high sunk cost nature of BDS. At the same time, as some commenters have pointed out, there are major urban areas with as many as 28 competitive transport providers, and second tier metropolitan areas with more than a dozen separate competitive transport providers. While these data are discrete in nature, they are unquestionably relevant to our assessment of TDM transport competition. That some of these competitive providers may not currently ‘‘offer a substitute for interoffice DS1 and DS3 facilities in the MSA’’ is of limited relevance given our view that TDM transport services are competitive due in part to the potential for providers to deploy transport when competitive LEC fiber exists within a half mile of BDS demand. Moreover, the willingness of so many competitors to supply service in these markets is a general indicator of competitiveness and the increasing use of non-incumbent LEC networks for transport. 17. The 2015 Collection and other data submitted into the record before VerDate Sep<11>2014 17:55 Aug 06, 2019 Jkt 247001 the adoption of the 2017 BDS Order necessarily do not account for competitive facilities deployed over the last several years. More recent record submissions show that competition for BDS transport services has continued to grow. The current record shows, for example, that cable operators have ‘‘evolved from new entrants to established providers of BDS . . . .’’ In the BDS Order, the Commission identified cable service as a substitute for BDS in areas with Metro Ethernetenabled offerings and for lower speed TDM services but did not find ‘‘broad substitution’’ of cable best efforts services for BDS or ‘‘substantial performance similarities’’ between the two types of services. Cable now competes for the full range of BDS, and, since it almost always bypasses the incumbent LEC network when it provides service, displaces incumbent LEC transport offerings when it takes a customer. In recent years, cable operators have invested billions of dollars in their hybrid fiber coax (HFC) networks which are now available in most areas where there is BDS demand and which can be repurposed to provide various levels of BDS with only incremental investment. Comcast, for example, reports having invested billions of dollars ‘‘to increase network capacity,’’ resulting in ‘‘the largest facilities-based last mile alternative to the phone company.’’ Charter Spectrum reportedly spent over $1 billion in 2018 in new fiber infrastructure to increase the density of its national fiber network. Cox is reported to be planning to invest an additional $10 billion into its network over the next five years. 18. According to a recent industry analyst report, ‘‘[c]able companies are leveraging [their] ubiquitous HFC and rapidly expanding fiber networks to gain share in the [BDS] market.’’ It states that ‘‘[a]ll major [cable operators] are focused on expanding their network footprints and speed offerings, and Comcast, Cox and other cable companies are working to increase the capacities of their Ethernet over HFC offerings.’’ The report also projects that cable providers are ‘‘expected to see share gains across markets, with continued expansion and upgrades of fiber and HFC footprint and focus on growing business and wholesale traction.’’ 19. As a result of this aggressive investment, cable’s BDS revenues and share of BDS revenues have steadily increased. Cable operators’ BDS revenues more than doubled from approximately $8 billion in 2013 to more than $18 billion in 2018 and could reach $20 billion by the end of 2019. PO 00000 Frm 00024 Fmt 4700 Sfmt 4700 Atlantic-ACM projects that from 2017 to 2023, cable operators’ share of all BDS revenues will grow from 19.7% to an estimated 30.7%. In 2017 alone, cable BDS revenue growth was 10.6%. 20. Traditional competitive LEC’s BDS offerings have also increased over the past two years. As one analyst report declares, ‘‘CLECs are aggressively expanding their footprints via network builds or M&A while ILECs are attempting to remain competitive by making major investments to prepare their networks for 5G.’’ Fiber-based competitive LECs such as Zayo and Uniti Fiber have deployed significant additional facilities and continue to grow their share of BDS revenues. Zayo reported a 38% increase in fiber route miles from December 2015 (95,000 miles) to November 2018 (131,100 miles). Moreover, as commenters have also observed the increased use of carrier-neutral facilities such as thirdparty carrier hotels and data centers that bypass incumbent LEC facilities, further suggesting competitive pressure from competitive LECs. 21. As the Commission did in the BDS Order, we consider packet-based transport services to be broadly substitutable for TDM-based transport services. Substitution between these two types of services is generally in one direction, and we find that ‘‘circuit- and packet-switched business data services that offer similar speed, functionality, and quality of service characteristics fall within the same product markets’’ for the purposes of the market analysis relevant here. Indeed, TDM transport services can be carried over fiber, so fiber providers can offer customers TDM services. 22. There is an ongoing steady decline in demand for TDM transport and increase in demand for packet-based alternatives. One analyst forecasts that legacy TDM transport will decline from $3.2 billion to $1.2 billion from 2017 to 2023. This forecast is supported by data submitted to the record by BDS providers. For example, according to CenturyLink, between 2015 and 2018, its incumbent LEC revenues for TDM transport dropped 9% annually and demand for DS1 and DS3 services ‘‘has been declining for years as customers migrate to Ethernet and other packetbased services that are easily scalable to meet their growing bandwidth needs.’’ Similarly, AT&T reports that its ‘‘revenues for DS1 and D[S]3 transport have continued to decline substantially since 2015 due to the availability of competitive alternatives and the fact that many competitors (e.g., cable companies) do not purchase much transport from ILECs at all.’’ E:\FR\FM\07AUR1.SGM 07AUR1 jspears on DSK3GMQ082PROD with RULES Federal Register / Vol. 84, No. 152 / Wednesday, August 7, 2019 / Rules and Regulations 23. In light of the record of continued aggressive deployment by competitors of BDS-capable network facilities since the BDS Order, we find unpersuasive arguments that our analysis fails to sufficiently consider the barriers to supplying TDM transport and whether those barriers identified are significant enough to prevent robust competition. As the Commission previously explained, while entry barriers to BDS supply may seem high, competitors nonetheless frequently choose to make significant investment to enter these markets. And, given that transport services typically connect points of traffic aggregation and therefore offer relatively greater revenue opportunity than end user channel terminations, barriers to entry to supply transport are lower than for other types of BDS. Additionally, because fiber connections are a sunk cost, and it is efficient to deploy many more strands than are initially used, once competitors deploy facilities, they have every incentive to price competitively (as do the incumbents against whom they compete). 24. Some commenters’ arguments about barriers to entry are based on an unjustifiably narrow view of BDS transport competition which is premised on competition that is interconnected with, and therefore dependent on, incumbent LEC infrastructure. This argument ignores substantial and growing evidence that competitors often bypass the incumbent LEC network entirely. Indeed, as the Commission has previously recognized, ‘‘cable operators self-provision all aspects of their BDS, including transport functionality,’’ and therefore do not rely on incumbent LEC central offices to offer competitive TDM transport services and competitive LECs are increasingly bypassing incumbent LEC infrastructure. As AT&T explains, ‘‘CLECs do not need to collocate in ILEC central offices, or to replicate ILEC transport paths, in order to provide a competitive alternative that disciplines ILEC rates.’’ 25. Finally, we find unpersuasive the assertion by some commenters that incumbent LECs retain market power over DS1 and DS3 channel terminations, which they contend extends to TDM transport, thus rendering some TDM transport markets noncompetitive. As an initial matter, the Commission’s competitive market test in the BDS Order, which was upheld on appeal by the Eighth Circuit, determined that 91.1% of locations with DS1 and DS3 end user channel termination demand were competitive. In support of their position, these commenters argue that VerDate Sep<11>2014 17:55 Aug 06, 2019 Jkt 247001 the market analysis conducted by Dr. Marc Rysman on behalf of the Commission showed that incumbent LECs exercised some market power over DS1 and DS3 services. The conclusions they cite from the Rysman study, however, were specific to DS1 and DS3 channel terminations. Moreover, as the Commission explained in the BDS Order, the data used in Dr. Rysman’s analysis were examined by peer reviewers and were found to be ‘‘too noisy to draw any firm conclusions,’’ and therefore the Commission chose not to rely on these to draw conclusions about markets for DS1 and DS3 services. Additionally, Dr. Rysman’s analysis was based on pricing data for full circuit service which combined data for channel termination, transport, and other services. Dr. Rysman did not attempt to draw conclusions specific to TDM transport. In fact, Dr. Rysman removed from his study all data specific to standalone transport services ‘‘because the cost structure behind providing transport is likely to be substantially different from providing service to end-user premises and therefore would make comparisons of prices less meaningful.’’ B. Removing Ex Ante Pricing Regulation 26. Given our finding that the supply of TDM transport services is sufficiently competitive across the country that the continued application of ex ante pricing regulation would do more harm than good, and consistent with the recommendation made by numerous commenters, we reaffirm the Commission’s decision in the BDS Order to remove ex ante pricing regulation of BDS TDM transport and other transport (i.e., non-end user channel termination) services in price cap areas nationwide. The record does not support allegations made by some commenters that ‘‘stark differences’’ in competitive conditions in different areas preclude the nationwide removal of ex ante pricing regulation. It does demonstrate, as the Commission recognized in the BDS Order, that an extremely small percentage of buildings with BDS demand in price cap areas may face the prospect of no regulatory constraint on incumbent LEC prices for TDM transport and no immediate prospect of a competitive alternative. We believe, however, that the costs of imposing ex ante pricing regulation far exceed the benefits of continued regulation of price cap LECs’ TDM transport services. Imposing inflexible and burdensome ex ante pricing regulation on TDM transport services would harm the dynamic competitive nature of these markets, could lead to a PO 00000 Frm 00025 Fmt 4700 Sfmt 4700 38569 decrease in new entrants, and would likely delay the transition from TDM- to IP-based offerings. To the limited extent there remain locations where there is not an immediate competitive threat, the Commission has previously explained that we anticipate reasonably competitive outcomes in the short- to medium-term (i.e., over several years) will discipline prices. As a result, we find that such locations do not preclude our adoption of a nationwide solution. Moreover, as the Commission previously recognized, ‘‘our goal is not absolute mathematical precision but an administratively feasible approach that avoids imposing undue regulatory burdens on this highly competitive segment of the market.’’ Refraining from pricing regulation for TDM transport services in price cap areas nationally achieves the proper balance between precision and administrability, particularly given the fact that parties continue to be able to file complaints with the Commission pursuant to section 208 of the Act. 27. As a result, we do not support proposals that we adopt a competitive market test for TDM transport services. The fact that the Commission adopted a competitive market test for TDM channel terminations in price cap areas does not compel the adoption of a competitive market test for TDM transport services. The Commission has always distinguished its analysis and regulation of these markets and presuming that a test for one set of services means that a competitive market test for the other is necessary or even possible, wrongly conflates the two. Indeed, commenters that support a competitive market test for TDM transport concede that a ‘‘competitive market test for transport should be distinct from that used for channel termination given the differences between the two types of services.’’ Moreover, they claim that the record ‘‘does not[ ] contain data on the extent of competition by different transport service providers’’ and urge the Commission to ‘‘further develop the record.’’ 28. We see no benefit to prolonging this long-running proceeding to conduct a further data collection for TDM transport services. Given the very significant burdens and delays involved in the Commission’s 2015 Collection, the benefits of collecting additional data on TDM transport competition to develop a separate TDM transport competitive market test would need to be substantial to justify the burdens of such a collection. Commission staff analysis of the 2015 Collection shows that only 2.7% of locations with BDS E:\FR\FM\07AUR1.SGM 07AUR1 jspears on DSK3GMQ082PROD with RULES 38570 Federal Register / Vol. 84, No. 152 / Wednesday, August 7, 2019 / Rules and Regulations demand in price cap areas in 2013 were neither served by a wire center that was within a half mile of competitive fiber nor were themselves within a half mile of competitive fiber. With competition this extensive, the burdens of a major data collection and of developing and administering a competitive market test for TDM transport services clearly outweigh the benefits. 29. This is particularly true because some commenters arguing for a competitive market test urge us to adopt a route-based test for TDM transport services based on transport routes connecting incumbent LEC wire centers. They argue that the relevant geographic market for TDM transport services is ‘‘the route between two ILEC end offices and not the area within a given distance from a customer’s location.’’ The providers that suggest adoption of such a test do not explain—even in broad terms—how it would be structured, on what evidence it could be based, or how it could be feasibly administered. Neither do they acknowledge that the incumbent LEC-centric nature of such a test would not account for competitors that bypass incumbent LEC infrastructure. Nor do they take into account the fact that price cap LECs ‘‘generally do not price their transport services on a route-by-route basis.’’ Given the evidence of extensive and still growing competition for transport services in the vast majority of the areas served by price cap carriers where there is BDS demand, we cannot justify imposing burdensome new ex ante pricing regulation on BDS offerings based on the results of a test that will not actually be able to identify where there are failures in the transport market, but could inhibit investment in this dynamic marketplace. 30. We also reject arguments made by some commenters that nationwide deregulation of TDM transport will have secondary consequences for the pricing of channel terminations in those price cap counties that the BDS Order deemed insufficiently competitive to warrant removal of ex ante pricing regulation. These parties argue that eliminating pricing regulations for TDM transport would allow price cap LECs to evade the price caps that remain on channel terminations in areas deemed noncompetitive by allowing them to impose offsetting rate increases on TDM transport services in those counties. We find this reasoning flawed. The argument assumes that, if a provider tried to charge supracompetitive rates on transport services to compensate for price-capped channel terminations, competitors would not respond to such increased transport prices with VerDate Sep<11>2014 17:55 Aug 06, 2019 Jkt 247001 additional investment in transport facilities. However, given the evidence of widespread competitive entry for BDS transport, there is reason to believe that the likely result of a price cap LEC charging supracompetitive rates on transport services would be the entry of a competitor with the capacity to bypass facilities being added in response. The competitive LECs’ view of the BDS marketplace ignores the evidence of competitive pressure in the record. Moreover, in the more than two years since the adoption of the BDS Order, ex ante pricing regulation of TDM transport has been largely removed in price cap areas, even in counties where the Commission retained price cap regulation over price cap LECs’ DS1 and DS3 channel terminations. Yet, competitive LECs cite no instance where deregulating transport rates has undercut price cap regulation of channel terminations. In light of this experience, the competitive LECs’ concern seems speculative. 31. Refraining from pricing regulation for TDM transport services nationwide achieves the proper balance between precision and administrability. It also avoids unnecessary disruption of existing BDS transport sales arrangements. And, as one commenter explains, the ‘‘risks of overregulation of these services would outweigh any marginal benefit from’’ reinstating ex ante pricing regulation ‘‘in this highly competitive sector, by artificially tamping down TDM transport rates, thereby deterring competitive entry and slowing the IP migration.’’ Instead, we believe that providing regulatory relief in this market segment will foster conditions that will continue to encourage competitive entry and provide incentive for further investment in fiber transport facilities. 32. Finally, as we previously observed in the BDS Order, price cap LECs’ TDM transport services continue to be subject to sections 201, 202 and 208 of the Communications Act. These statutory provisions prohibit carriers from imposing rates, terms, and conditions that are unjust, unreasonable, or unreasonably discriminatory. C. Forbearance From Tariffing 33. To effectuate the approach we take to TDM transport, and consistent with the approach the Commission took in the BDS Order, pursuant to section 10 of the Communications Act, we forbear from applying section 203 of the Act and our tariffing requirements to price cap incumbent LECs in their provision of BDS TDM transport services. This forbearance relieves price cap LECs of PO 00000 Frm 00026 Fmt 4700 Sfmt 4700 the requirement to file interstate tariffs for these services nationwide. 34. The Commission has a long history of granting price cap LECs forbearance from tariffing requirements for various of their BDS offerings. More than a decade ago, the Commission provided grants of forbearance to price cap LECs for their packet-switched and optical transmission BDS. Two years ago, in the BDS Order, the Commission granted price cap LECs forbearance from the Act’s tariffing obligations with respect to the provision of packet-based and higher speed TDM BDS, lower speed TDM transport, and DS1 and DS3 end user channel termination services in counties deemed competitive by the Commission’s competitive market test. Based on the record before us, we find that the statutory test for granting forbearance from tariffing obligations for price cap LECs’ TDM transport services has been met. 35. First, we find that the widespread existence of competitive alternatives to incumbent LECs’ BDS TDM transport offerings means that the application of section 203 of the Act is not necessary to ensure that the charges and practices for price cap LECs’ transport services are just and reasonable and not unreasonably discriminatory. Congress enacted section 203 of the Act in an era when tariffs ‘‘were required to protect consumers from unjust, unreasonable, and discriminatory rates in a virtually monopolistic market.’’ Over time, the Commission progressively modified its regulation of price cap LECs’ BDS to reflect increasing levels of competition in the supply of BDS, and therefore, the reduced need for the protections tariffs that provide. The record demonstrates that current market forces will better ensure that prices for TDM transport offered by price cap LECs are just and reasonable and not unreasonably discriminatory than (necessarily) blunt regulatory measures. 36. Second, for many of the same reasons, we find that enforcement of our tariffing requirements for price cap LECs’ BDS TDM transport services is ‘‘not necessary for the protection of consumers,’’ and forbearance will benefit consumers. Widespread and increasing competition to BDS services will drive down prices and provide competitive alternatives to those services, which in turn benefits consumers. Moreover, forbearance from tariffing will allow price cap carriers to respond more quickly to competition and be more innovative in the services they offer, also benefitting consumers. Additionally, price cap LEC BDS TDM transport offerings will remain subject to sections 201, 202, and 208 of the Act E:\FR\FM\07AUR1.SGM 07AUR1 Federal Register / Vol. 84, No. 152 / Wednesday, August 7, 2019 / Rules and Regulations and to our enforcement of those provisions through the section 208 complaint process. 37. Third, we find that granting forbearance for price cap LECs’ BDS TDM transport services from section 203 of the Act is consistent with the public interest and will promote competitive market conditions. As the Commission found in the BDS Order, forbearance from tariffing obligations for TDM transport will promote further BDS competition and deployment in price cap LEC areas. Moreover, tariffing can adversely impact competitive markets by reducing a carrier’s incentives to offer price discounts, delaying and increasing the costs of innovation, and inhibiting a carrier from tailoring services to best meet customers’ needs. Further, tariffing itself is not without its costs. Forbearing from section 203 and our tariffing rules will reduce unnecessary administrative costs, which can be significant, and allow carriers to redirect their resources to deploying service capabilities and providing service. We continue to adhere to our view that disparate forbearance treatment of carriers providing the same or similar services is not in the public interest, as it creates distortions in the marketplace that may harm consumers. Accordingly, the continued application of section 203 is unnecessary under sections 10(a)(3) and 10(b). Because we find that each of the elements of the section 10 forbearance analysis is satisfied, we must grant forbearance from section 203 tariffing requirements. jspears on DSK3GMQ082PROD with RULES D. Transition to Mandatory Detariffing 38. To ensure an orderly transition to a fully detariffed regulatory regime for price cap LECs’ TDM transport offerings, we adopt mechanisms that align with those the Commission adopted in the BDS Order. As in the BDS Order, we also require competitive LECs, which are subject to permissive detariffing, to detariff their remaining transport BDS offerings by the end of this transition. In so doing, we recognize that many price cap LECs have already detariffed their TDM transport in response to the BDS Order and these services have remained detariffed given the Eighth Circuit’s temporary stay of its partial remand. For those price cap LECs that have not already detariffed their TDM transport, we adopt a new transition period that will begin on the effective date of this Order (which will be 30 days after publication of this Order in the Federal Register) and will end on August 1, 2020, the date of the transition period mandated by the BDS Order for mandatory detariffing. VerDate Sep<11>2014 17:55 Aug 06, 2019 Jkt 247001 39. During this transition, tariffing for TDM transport services by carriers will be permissive—we will accept new tariffs and revisions to existing tariffs for the affected services. Price cap LECs will no longer be required to comply with price cap regulation for their TDM transport services, and once these rules are effective, carriers that wish to continue filing tariffs under the permissive detariffing regime are free to modify such tariffs consistent with this Order. Carriers, including nonincumbent LECs, may remove the relevant portions of their tariffs for the affected services at any time during the transition. Once the transition ends, no price cap carrier may file or maintain any interstate tariffs for affected business data services. 40. Price cap incumbent LECs and competitive LECs may not file or maintain any interstate tariffs for affected business data services once the transition ends. This will prevent carriers from obtaining ‘‘deemed lawful’’ status for tariff filings that are not accompanied by cost support and invoking the filed-rate doctrine in contractual disputes with customers. Business data service providers will also be prevented from picking and choosing when they are able to invoke the protections of tariffs. 41. We do not intend our actions to disturb existing contractual or other long-term arrangements—a contract tariff remains a contract even if it is no longer tariffed. As we stated in the BDS Order, contract tariffs, term and volume discount plans, and individual circuit plans do not become void upon detariffing. All carriers are to act in good faith to develop solutions to ensure rates remain just and reasonable. 42. The rule amendments we adopt today relating to TDM transport are substantively the same as those the Commission adopted in the BDS Order, and as such, impose the same obligations on carriers as the existing rules. We make only minor clarifying changes to the rules. For example, we amend the rules to specify that competitive LECs must detariff their business data services by August 1, 2020. III. Procedural Matters 43. Paperwork Reduction Act Analysis—This document does not contain proposed information collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), Public Law 104–13. In addition, therefore, it does not contain any new or modified information collection burden for small business concerns with fewer than 25 employees, pursuant to the Small PO 00000 Frm 00027 Fmt 4700 Sfmt 4700 38571 Business Paperwork Relief Act of 2002, Public Law 107–198, see 44 U.S.C. 3506(c)(4). 44. Congressional Review Act—The Commission will send a copy of this Report and Order to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A). 45. Final Regulatory Flexibility Analysis—As required by the Regulatory by the Regulatory Flexibility Act of 1980, as amended (RFA) an Initial Regulatory Flexibility Analysis (IRFA) was incorporated into the Second Further Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking (Second Further Notice) for the Time Division Multiplexing (TDM) transport business data services (BDS). The Commission sought written public comment on the proposals in the Second Further Notice, including comment on the IRFA. The Commission received no comments on the IRFA. Because the Commission amends its rules in this Report and Order, the Commission has included this Final Regulatory Flexibility Analysis (FRFA). This present FRFA conforms to the RFA. A. Need for, and Objectives of, the Proposed Rules 46. In the Second Further Notice, the Commission proposed changes to, and sought comment on, the appropriate regulatory treatment of TDM transport BDS offerings offered by price cap local exchange carriers (LECs). The Commission proposed to remove ex ante pricing regulation from TDM transport business data services offered by price cap LECs. In this Order, we promote competition in the market for BDS TDM transport services by adopting a regulatory framework for those services that better reflects the dynamic competitive nature of price cap LECs’ TDM transport markets. B. Summary of Significant Issues Raised by Public Comments in Response to the IRFA 47. We analyze the market for TDM transport in areas served by price cap incumbent local exchange carriers and conclude that the record in this proceeding demonstrates widespread, significant and growing competition in this segment of the BDS market. We therefore grant nationwide relief from ex ante pricing regulation of these carriers’ TDM transport services, forbear from applying Section 203 tariffing requirements to these services, and adopt permissive detariffing for price cap LECs’ TDM transport services for a E:\FR\FM\07AUR1.SGM 07AUR1 38572 Federal Register / Vol. 84, No. 152 / Wednesday, August 7, 2019 / Rules and Regulations transition period, followed by mandatory detariffing of these services. 48. The Commission did not receive comments specifically addressing the rules and policies proposed in the IRFA. C. Response to Comments by the Chief Counsel for Advocacy of the Small Business Administration 49. The Chief Counsel did not file any comments in response to this proceeding. jspears on DSK3GMQ082PROD with RULES D. Description and Estimate of the Number of Small Entities to Which the Proposed Rules Will Apply 50. 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 and by the rule revisions on which the FNPRMs seek comment, if adopted. The RFA generally defines the term ‘‘small entity’’ as having the same meaning as the terms ‘‘small business,’’ ‘‘small organization,’’ and ‘‘small governmental jurisdiction.’’ In addition, the term ‘‘small business’’ has the same meaning as the term ‘‘small-business concern’’ under the Small Business Act. A ‘‘small-business concern’’ is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA. 1. Total Small Entities 51. Small Businesses, Small Organizations, Small Governmental Jurisdictions. Our actions, over time, may affect small entities that are not easily categorized at present. We therefore describe here, at the outset, three broad groups of small entities that could be directly affected herein. First, while there are industry specific size standards for small businesses that are used in the regulatory flexibility analysis, according to data from the SBA’s Office of Advocacy, in general a small business is an independent business having fewer than 500 employees. These types of small businesses represent 99.9% of all businesses in the United States which translates to 28.8 million businesses. 52. Next, the type of small entity described as a ‘‘small organization’’ is generally ‘‘any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.’’ Nationwide, as of August 2016, there were approximately 356,494 small organizations based on registration and tax data filed by nonprofits with the Internal Revenue Service (IRS). 53. Finally, the small entity described as a ‘‘small governmental jurisdiction’’ VerDate Sep<11>2014 17:55 Aug 06, 2019 Jkt 247001 is defined generally as ‘‘governments of cities, towns, townships, villages, school districts, or special districts, with a population of less than fifty thousand.’’ U.S. Census Bureau data from the 2012 Census of Governments indicates that there were 90,056 local governmental jurisdictions consisting of general purpose governments and special purpose governments in the United States. Of this number there were 37,132 general purpose governments (county, municipal and town or township) with populations of less than 50,000 and 12,184 special purpose governments (independent school districts and special districts) with populations of less than 50,000. The 2012 U.S. Census Bureau data for most types of governments in the local government category shows that the majority of these governments have populations of less than 50,000. Based on these data we estimate that at least 49,316 local government jurisdictions fall in the category of ‘‘small governmental jurisdictions.’’ 2. Broadband Internet Access Service Providers 54. Internet Service Providers (Broadband). Broadband internet service providers include wired (e.g., cable, DSL) and VoIP service providers using their own operated wired telecommunications infrastructure fall in the category of Wired Telecommunication Carriers. Wired Telecommunications Carriers are comprised of 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 size standard for this category classifies a business as small if it has 1,500 or fewer employees. U.S. Census data for 2012 show that there were 3,117 firms that operated that year. Of this total, 3,083 operated with fewer than 1,000 employees. Consequently, under this size standard the majority of firms in this industry can be considered small. 3. Wireline Providers 55. Wired Telecommunications Carriers. The U.S. Census Bureau defines this industry as ‘‘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 communications networks. PO 00000 Frm 00028 Fmt 4700 Sfmt 4700 Transmission facilities may be based on a single technology or a combination of technologies. Establishments in this industry use the wired telecommunications network facilities that they operate to provide a variety of services, such as wired telephony services, including VoIP services, wired (cable) audio and video programming distribution, and wired broadband internet services. By exception, establishments providing satellite television distribution services using facilities and infrastructure that they operate are included in this industry.’’ The SBA has developed a small business size standard for Wired Telecommunications Carriers, which consists of all such companies having 1,500 or fewer employees. Census data for 2012 show that there were 3,117 firms that operated that year. Of this total, 3,083 operated with fewer than 1,000 employees. Thus, under this size standard, the majority of firms in this industry can be considered small. 56. 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 as defined above. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 3,117 firms operated in that year. Of this total, 3,083 operated with fewer than 1,000 employees. Consequently, the Commission estimates that most providers of incumbent local exchange service are small businesses that may be affected by the rules and policies adopted. A total of 1,307 firms reported that they were incumbent local exchange service providers. Of this total, an estimated 1,006 have 1,500 or fewer employees. 57. Competitive Local Exchange Carriers (Competitive LECs), Competitive Access Providers (CAPs), Shared-Tenant Service Providers, and Other Local Service Providers. Neither the Commission nor the SBA has developed a small business size standard specifically for these service providers. The appropriate NAICS Code category is Wired Telecommunications Carriers, as defined above. Under that size standard, such a business is small if it has 1,500 or fewer employees. U.S. Census data for 2012 indicate that 3,117 firms operated during that year. Of that number, 3,083 operated with fewer than 1,000 employees. Based on this data, the Commission concludes that the majority of Competitive LECS, CAPs, SharedTenant Service Providers, and Other E:\FR\FM\07AUR1.SGM 07AUR1 jspears on DSK3GMQ082PROD with RULES Federal Register / Vol. 84, No. 152 / Wednesday, August 7, 2019 / Rules and Regulations Local Service Providers, are small entities. 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. 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. Also, 72 carriers have reported that they are Other Local Service Providers. Of this total, 70 have 1,500 or fewer employees. Consequently, based on internally researched FCC data, the Commission estimates that most providers of competitive local exchange service, competitive access providers, SharedTenant Service Providers, and Other Local Service Providers are small entities. 58. We have included small incumbent LECs in this present RFA analysis. As mentioned above, a ‘‘small business’’ under the RFA is one that, inter alia, meets the pertinent small business size standard (e.g., a telephone communications business having 1,500 or fewer employees), and ‘‘is not dominant in its field of operation.’’ The SBA’s Office of Advocacy contends that, for RFA purposes, small incumbent LECs are not dominant in their field of operation because any such dominance is not ‘‘national’’ in scope. We have therefore included small incumbent LECs in this RFA analysis, although we emphasize that this RFA action has no effect on Commission analyses and determinations in other, non-RFA contexts. 59. Interexchange Carriers (IXCs). Neither the Commission nor the SBA has developed a definition for Interexchange Carriers. The closest NAICS Code category is Wired Telecommunications Carriers as defined above. The applicable size standard under SBA rules is that such a business is small if it has 1,500 or fewer employees. U.S. Census data for 2012 indicates that 3,117 firms operated during that year. Of that number, 3,083 operated with fewer than 1,000 employees. According to internally developed Commission data, 359 companies reported that their primary telecommunications service activity was the provision of interexchange services. Of this total, an estimated 317 have 1,500 or fewer employees. Consequently, the Commission estimates that the majority of IXCs are small entities that may be affected by our proposed rules. 60. Local Resellers. The SBA has developed a small business size VerDate Sep<11>2014 17:55 Aug 06, 2019 Jkt 247001 standard for the category of Telecommunications Resellers. The Telecommunications Resellers industry comprises establishments engaged in purchasing access and network capacity from owners and operators of telecommunications networks and reselling wired and wireless telecommunications services (except satellite) to businesses and households. Establishments in this industry resell telecommunications; they do not operate transmission facilities and infrastructure. Mobile virtual network operators (MVNOs) are included in this industry. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census data for 2012 show that 1,341 firms provided resale services during that year. Of that number, all operated with fewer than 1,000 employees. Thus, under this category and the associated small business size standard, the majority of these prepaid calling card providers can be considered small entities. 61. Toll Resellers. The Commission has not developed a definition for Toll Resellers. The closest NAICS Code Category is Telecommunications Resellers. The Telecommunications Resellers industry comprises establishments engaged in purchasing access and network capacity from owners and operators of telecommunications networks and reselling wired and wireless telecommunications services (except satellite) to businesses and households. Establishments in this industry resell telecommunications; they do not operate transmission facilities and infrastructure. Mobile virtual network operators (MVNOs) are included in this industry. 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. Census data for 2012 show that 1,341 firms provided resale services during that year. Of that number, 1,341 operated with fewer than 1,000 employees. Thus, under this category and the associated small business size standard, the majority of these resellers can be considered small entities. According to Commission data, 881 carriers have reported that they are engaged in the provision of toll resale services. Of this total, an estimated 857 have 1,500 or fewer employees. Consequently, the Commission estimates that the majority of toll resellers are small entities. 62. Other Toll Carriers. Neither the Commission nor the SBA has developed a definition for small businesses specifically applicable to Other Toll PO 00000 Frm 00029 Fmt 4700 Sfmt 4700 38573 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 NAICS Code category is for Wired Telecommunications Carriers as defined above. Under the applicable SBA size standard, such a business is small if it has 1,500 or fewer employees. Census data for 2012 show that there were 3,117 firms that operated that year. Of this total, 3,083 operated with fewer than 1,000 employees. Thus, under this category and the associated small business size standard, the majority of Other Toll Carriers can be considered small. According to internally developed 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. Consequently, the Commission estimates that most Other Toll Carriers are small entities that may be affected by rules adopted pursuant to the Second Further Notice. 63. 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. 4. Wireless Providers—Fixed and Mobile 64. Wireless Telecommunications Carriers (except Satellite). This industry comprises establishments engaged in operating and maintaining switching and transmission facilities to provide communications via the airwaves. Establishments in this industry have spectrum licenses and provide services using that spectrum, such as cellular services, paging services, wireless internet access, and wireless video services. The appropriate size standard under SBA rules is that such a business is small if it has 1,500 or fewer employees. For this industry, U.S. Census data for 2012 show that there were 967 firms that operated for the entire year. Of this total, 955 firms had employment of 999 or fewer employees E:\FR\FM\07AUR1.SGM 07AUR1 38574 Federal Register / Vol. 84, No. 152 / Wednesday, August 7, 2019 / Rules and Regulations jspears on DSK3GMQ082PROD with RULES and 12 had employment of 1,000 employees or more. Thus under this category and the associated size standard, the Commission estimates that the majority of wireless telecommunications carriers (except satellite) are small entities. 65. The Commission’s own data— available in its Universal Licensing System—indicate that, as of October 25, 2016, there are 280 Cellular licensees that will be affected by our actions today. The Commission does not know how many of these licensees are small, as the Commission does not collect that information for these types of entities. Similarly, according to internally developed Commission data, 413 carriers reported that they were engaged in the provision of wireless telephony, including cellular service, Personal Communications Service, and Specialized Mobile Radio Telephony services. Of this total, an estimated 261 have 1,500 or fewer employees, and 152 have more than 1,500 employees. Thus, using available data, we estimate that the majority of wireless firms can be considered small. 66. 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. 67. Wireless Telephony. Wireless telephony includes cellular, personal communications services, and specialized mobile radio telephony carriers. As explained, 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. 5. Cable Service Providers 68. Because section 706 requires us to monitor the deployment of broadband using any technology, we anticipate that some broadband service providers may not provide telephone service. VerDate Sep<11>2014 17:55 Aug 06, 2019 Jkt 247001 Accordingly, we describe below other types of firms that may provide broadband services, including cable companies, MDS providers, and utilities, among others. 69. Cable and Other Subscription Programming. This industry comprises establishments primarily engaged in operating studios and facilities for the broadcasting of programs on a subscription or fee basis. The broadcast programming is typically narrowcast in nature (e.g., limited format, such as news, sports, education, or youthoriented). These establishments produce programming in their own facilities or acquire programming from external sources. The programming material is usually delivered to a third party, such as cable systems or direct-to-home satellite systems, for transmission to viewers. The SBA has established a size standard for this industry stating that a business in this industry is small if it has 1,500 or fewer employees. The 2012 Economic Census indicates that 367 firms were operational for that entire year. Of this total, 357 operated with less than 1,000 employees. Accordingly, we conclude that a substantial majority of firms in this industry are small under the applicable SBA size standard. 70. Cable Companies and Systems (Rate Regulation). The Commission has developed its own small business size standards for the purpose of cable rate regulation. Under the Commission’s rules, a ‘‘small cable company’’ is one serving 400,000 or fewer subscribers nationwide. Industry data indicate that there are currently 4,600 active cable systems in the United States. Of this total, all but eleven cable operators nationwide are small under the 400,000subscriber size standard. In addition, under the Commission’s rate regulation rules, a ‘‘small system’’ is a cable system serving 15,000 or fewer subscribers. Current Commission records show 4,600 cable systems nationwide. Of this total, 3,900 cable systems have fewer than 15,000 subscribers, and 700 systems have 15,000 or more subscribers, based on the same records. Thus, under this standard as well, we estimate that most cable systems are small entities. 71. Cable System Operators (Telecom Act Standard). The Communications Act also contains a size standard for small cable system operators, which is ‘‘a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1% 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.’’ There are approximately 52,403,705 cable video subscribers in the United States PO 00000 Frm 00030 Fmt 4700 Sfmt 4700 today. Accordingly, an operator serving fewer than 524,037 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, we find that all but nine incumbent cable operators are small entities under this size standard. The Commission neither requests nor collects information on whether cable system operators are affiliated with entities whose gross annual revenues exceed $250 million. Although it seems certain that some of these cable system operators are affiliated with entities whose gross annual revenues exceed $250 million, we are unable at this time to estimate with greater precision the number of cable system operators that would qualify as small cable operators under the definition in the Communications Act. 72. All Other Telecommunications. ‘‘All Other Telecommunications’’ is defined as follows: This U.S. industry is comprised of establishments that are primarily engaged in providing specialized telecommunications services, such as satellite tracking, communications telemetry, and radar station operation. This industry also includes establishments primarily engaged in providing satellite terminal stations and associated facilities connected with one or more terrestrial systems and capable of transmitting telecommunications to, and receiving telecommunications from, satellite systems. Establishments providing internet services or voice over internet protocol (VoIP) services via clientsupplied telecommunications connections are also included in this industry. The SBA has developed a small business size standard for ‘‘All Other Telecommunications,’’ which consists of all such firms with gross annual receipts of $32.5 million or less. For this category, census data for 2012 show that there were 1,442 firms that operated for the entire year. Of these firms, a total of 1,400 had gross annual receipts of less than $25 million. Consequently, we estimate that the majority of All Other Telecommunications firms are small entities that might be affected by our action. E. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements for Small Entities 73. The rule changes in the Order include reducing the unnecessary regulatory burdens and inflexibility of ex ante pricing regulation and tariffing requirements for price cap LECs’ TDM E:\FR\FM\07AUR1.SGM 07AUR1 Federal Register / Vol. 84, No. 152 / Wednesday, August 7, 2019 / Rules and Regulations transport services since the Commission has found there is sufficient competition to justify reduced regulation. These rule changes provide additional incentives for competitive entry, network investment and the migration to IPbased network technologies and services. 74. The transition period for detariffing price cap LECs’ TDM transport services will begin on the effective date of this Order (thirty (30) days after Federal Register publication). Given our desire to align the transition periods we adopt here with those the Commission already adopted in the BDS Order, the transition periods for detariffing TDM transport services will end on the same date that the transition period mandated by the BDS Order for price cap LECs’ other BDS services is scheduled to end—August 1, 2020. 75. Specifically, the Order eliminates ex ante pricing regulation and tariffing requirements for price cap LECs’ TDM transport BDS. This will eliminate reporting, recordkeeping, and other compliance requirements for any price cap LEC. jspears on DSK3GMQ082PROD with RULES F. Steps Taken To Minimize the Significant Economic Impact on Small Entities, and Significant Alternatives Considered 76. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance and reporting requirements under the rules for such small entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of the rule, or any part thereof, for such small entities. 77. The rule changes in this Order reduce the economic impact of the Commission’s rules on price cap LECs by freeing price cap LECs from ex ante pricing regulation for their TDM transport offerings, including the requirement to tariff their TDM transport services. These rule changes will significantly minimize the economic impact of our rules on price cap LECs. G. Report to Congress 78. The Commission will send a copy of the Report and Order, including this FRFA, in a report to be sent to Congress pursuant to the Congressional Review Act. In addition, the Commission will VerDate Sep<11>2014 17:55 Aug 06, 2019 Jkt 247001 send a copy of the Report and Order, including this FRFA, to the Chief Counsel for Advocacy of the SBA. A copy of the Order and FRFA (or summaries thereof) will also be published in the Federal Register. Final Regulatory Flexibility Analysis. 79. As required by the Regulatory Flexibility Act of 1980, as amended (RFA) an Initial Regulatory Flexibility Analysis (IRFA) was incorporated into the Second Further Notice of Proposed Rulemaking and Further Notice of Proposed Rulemaking (Second Further Notice) for the Time Division Multiplexing (TDM) transport business data services (BDS). The Commission sought written public comment on the proposals in the Second Further Notice, including comment on the IRFA. The Commission received no comments on the IRFA. Because the Commission amends its rules in this Report and Order, the Commission has included this Final Regulatory Flexibility Analysis (FRFA). This present FRFA conforms to the RFA. A. Need for, and Objectives of, the Proposed Rules 80. In the Second Further Notice, the Commission proposed changes to, and sought comment on, the appropriate regulatory treatment of TDM transport BDS offerings offered by price cap local exchange carriers (LECs). The Commission proposed to remove ex ante pricing regulation from TDM transport business data services offered by price cap LECs. In this Order, we promote competition in the market for BDS TDM transport services by adopting a regulatory framework for those services that better reflects the dynamic competitive nature of price cap LECs’ TDM transport markets. B. Summary of Significant Issues Raised by Public Comments in Response to the IRFA 81. We analyze the market for TDM transport in areas served by price cap incumbent local exchange carriers and conclude that the record in this proceeding demonstrates widespread, significant and growing competition in this segment of the BDS market. We therefore grant nationwide relief from ex ante pricing regulation of these carriers’ TDM transport services, forbear from applying Section 203 tariffing requirements to these services, and adopt permissive detariffing for price cap LECs’ TDM transport services for a transition period, followed by mandatory detariffing of these services. 82. The Commission did not receive comments specifically addressing the rules and policies proposed in the IRFA. PO 00000 Frm 00031 Fmt 4700 Sfmt 4700 38575 C. Response to Comments by the Chief Counsel for Advocacy of the Small Business Administration 83. The Chief Counsel did not file any comments in response to this proceeding. D. Description and Estimate of the Number of Small Entities to Which the Proposed Rules Will Apply 84. 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 and by the rule revisions on which the FNPRMs seek comment, if adopted. The RFA generally defines the term ‘‘small entity’’ as having the same meaning as the terms ‘‘small business,’’ ‘‘small organization,’’ and ‘‘small governmental jurisdiction.’’ In addition, the term ‘‘small business’’ has the same meaning as the term ‘‘small-business concern’’ under the Small Business Act. A ‘‘small-business concern’’ is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the SBA. 1. Total Small Entities 85. Small Businesses, Small Organizations, Small Governmental Jurisdictions. Our actions, over time, may affect small entities that are not easily categorized at present. We therefore describe here, at the outset, three broad groups of small entities that could be directly affected herein. First, while there are industry specific size standards for small businesses that are used in the regulatory flexibility analysis, according to data from the SBA’s Office of Advocacy, in general a small business is an independent business having fewer than 500 employees. These types of small businesses represent 99.9% of all businesses in the United States which translates to 28.8 million businesses. 86. Next, the type of small entity described as a ‘‘small organization’’ is generally ‘‘any not-for-profit enterprise which is independently owned and operated and is not dominant in its field.’’ Nationwide, as of August 2016, there were approximately 356,494 small organizations based on registration and tax data filed by nonprofits with the Internal Revenue Service (IRS). 87. Finally, the small entity described as a ‘‘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.’’ U.S. Census Bureau data E:\FR\FM\07AUR1.SGM 07AUR1 38576 Federal Register / Vol. 84, No. 152 / Wednesday, August 7, 2019 / Rules and Regulations from the 2012 Census of Governments indicates that there were 90,056 local governmental jurisdictions consisting of general purpose governments and special purpose governments in the United States. Of this number there were 37,132 general purpose governments (county, municipal and town or township) with populations of less than 50,000 and 12,184 special purpose governments (independent school districts and special districts) with populations of less than 50,000. The 2012 U.S. Census Bureau data for most types of governments in the local government category shows that the majority of these governments have populations of less than 50,000. Based on these data we estimate that at least 49,316 local government jurisdictions fall in the category of ‘‘small governmental jurisdictions.’’ jspears on DSK3GMQ082PROD with RULES 2. Broadband Internet Access Service Providers 88. Internet Service Providers (Broadband). Broadband internet service providers include wired (e.g., cable, DSL) and VoIP service providers using their own operated wired telecommunications infrastructure fall in the category of Wired Telecommunication Carriers. Wired Telecommunications Carriers are comprised of 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 size standard for this category classifies a business as small if it has 1,500 or fewer employees. U.S. Census data for 2012 show that there were 3,117 firms that operated that year. Of this total, 3,083 operated with fewer than 1,000 employees. Consequently, under this size standard the majority of firms in this industry can be considered small. 3. Wireline Providers 89. Wired Telecommunications Carriers. The U.S. Census Bureau defines this industry as ‘‘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 communications networks. Transmission facilities may be based on a single technology or a combination of technologies. Establishments in this industry use the wired telecommunications network facilities VerDate Sep<11>2014 17:55 Aug 06, 2019 Jkt 247001 that they operate to provide a variety of services, such as wired telephony services, including VoIP services, wired (cable) audio and video programming distribution, and wired broadband internet services. By exception, establishments providing satellite television distribution services using facilities and infrastructure that they operate are included in this industry.’’ The SBA has developed a small business size standard for Wired Telecommunications Carriers, which consists of all such companies having 1,500 or fewer employees. Census data for 2012 show that there were 3,117 firms that operated that year. Of this total, 3,083 operated with fewer than 1,000 employees. Thus, under this size standard, the majority of firms in this industry can be considered small. 90. 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 as defined above. Under that size standard, such a business is small if it has 1,500 or fewer employees. According to Commission data, 3,117 firms operated in that year. Of this total, 3,083 operated with fewer than 1,000 employees. Consequently, the Commission estimates that most providers of incumbent local exchange service are small businesses that may be affected by the rules and policies adopted. A total of 1,307 firms reported that they were incumbent local exchange service providers. Of this total, an estimated 1,006 have 1,500 or fewer employees. 91. 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 NAICS Code category is Wired Telecommunications Carriers, as defined above. Under that size standard, such a business is small if it has 1,500 or fewer employees. U.S. Census data for 2012 indicate that 3,117 firms operated during that year. Of that number, 3,083 operated with fewer than 1,000 employees. Based on this data, the Commission concludes that the majority of Competitive LECS, CAPs, SharedTenant Service Providers, and Other Local Service Providers, are small entities. According to Commission data, 1,442 carriers reported that they were engaged in the provision of either competitive local exchange services or PO 00000 Frm 00032 Fmt 4700 Sfmt 4700 competitive access provider services. Of these 1,442 carriers, an estimated 1,256 have 1,500 or fewer 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. Also, 72 carriers have reported that they are Other Local Service Providers. Of this total, 70 have 1,500 or fewer employees. Consequently, based on internally researched FCC data, the Commission estimates that most providers of competitive local exchange service, competitive access providers, SharedTenant Service Providers, and Other Local Service Providers are small entities. 92. We have included small incumbent LECs in this present RFA analysis. As mentioned above, a ‘‘small business’’ under the RFA is one that, inter alia, meets the pertinent small business size standard (e.g., a telephone communications business having 1,500 or fewer employees), and ‘‘is not dominant in its field of operation.’’ The SBA’s Office of Advocacy contends that, for RFA purposes, small incumbent LECs are not dominant in their field of operation because any such dominance is not ‘‘national’’ in scope. We have therefore included small incumbent LECs in this RFA analysis, although we emphasize that this RFA action has no effect on Commission analyses and determinations in other, non-RFA contexts. 93. Interexchange Carriers (IXCs). Neither the Commission nor the SBA has developed a definition for Interexchange Carriers. The closest NAICS Code category is Wired Telecommunications Carriers as defined above. The applicable size standard under SBA rules is that such a business is small if it has 1,500 or fewer employees. U.S. Census data for 2012 indicates that 3,117 firms operated during that year. Of that number, 3,083 operated with fewer than 1,000 employees. According to internally developed Commission data, 359 companies reported that their primary telecommunications service activity was the provision of interexchange services. Of this total, an estimated 317 have 1,500 or fewer employees. Consequently, the Commission estimates that the majority of IXCs are small entities that may be affected by our proposed rules. 94. Local Resellers. The SBA has developed a small business size standard for the category of Telecommunications Resellers. The Telecommunications Resellers industry comprises establishments engaged in purchasing access and network capacity E:\FR\FM\07AUR1.SGM 07AUR1 jspears on DSK3GMQ082PROD with RULES Federal Register / Vol. 84, No. 152 / Wednesday, August 7, 2019 / Rules and Regulations from owners and operators of telecommunications networks and reselling wired and wireless telecommunications services (except satellite) to businesses and households. Establishments in this industry resell telecommunications; they do not operate transmission facilities and infrastructure. Mobile virtual network operators (MVNOs) are included in this industry. Under that size standard, such a business is small if it has 1,500 or fewer employees. Census data for 2012 show that 1,341 firms provided resale services during that year. Of that number, all operated with fewer than 1,000 employees. Thus, under this category and the associated small business size standard, the majority of these prepaid calling card providers can be considered small entities. 95. Toll Resellers. The Commission has not developed a definition for Toll Resellers. The closest NAICS Code Category is Telecommunications Resellers. The Telecommunications Resellers industry comprises establishments engaged in purchasing access and network capacity from owners and operators of telecommunications networks and reselling wired and wireless telecommunications services (except satellite) to businesses and households. Establishments in this industry resell telecommunications; they do not operate transmission facilities and infrastructure. Mobile virtual network operators (MVNOs) are included in this industry. 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. Census data for 2012 show that 1,341 firms provided resale services during that year. Of that number, 1,341 operated with fewer than 1,000 employees. Thus, under this category and the associated small business size standard, the majority of these resellers can be considered small entities. According to Commission data, 881 carriers have reported that they are engaged in the provision of toll resale services. Of this total, an estimated 857 have 1,500 or fewer employees. Consequently, the Commission estimates that the majority of toll resellers are small entities. 96. Other Toll Carriers. Neither the Commission nor the SBA has developed a definition 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 VerDate Sep<11>2014 17:55 Aug 06, 2019 Jkt 247001 carriers, or toll resellers. The closest applicable NAICS Code category is for Wired Telecommunications Carriers as defined above. Under the applicable SBA size standard, such a business is small if it has 1,500 or fewer employees. Census data for 2012 show that there were 3,117 firms that operated that year. Of this total, 3,083 operated with fewer than 1,000 employees. Thus, under this category and the associated small business size standard, the majority of Other Toll Carriers can be considered small. According to internally developed 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. Consequently, the Commission estimates that most Other Toll Carriers are small entities that may be affected by rules adopted pursuant to the Second Further Notice. 97. 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. 4. Wireless Providers—Fixed and Mobile 98. Wireless Telecommunications Carriers (except Satellite). This industry comprises establishments engaged in operating and maintaining switching and transmission facilities to provide communications via the airwaves. Establishments in this industry have spectrum licenses and provide services using that spectrum, such as cellular services, paging services, wireless internet access, and wireless video services. The appropriate size standard under SBA rules is that such a business is small if it has 1,500 or fewer employees. For this industry, U.S. Census data for 2012 show that there were 967 firms that operated for the entire year. Of this total, 955 firms had employment of 999 or fewer employees and 12 had employment of 1,000 employees or more. Thus under this category and the associated size standard, the Commission estimates that the majority of wireless PO 00000 Frm 00033 Fmt 4700 Sfmt 4700 38577 telecommunications carriers (except satellite) are small entities. 99. The Commission’s own data— available in its Universal Licensing System—indicate that, as of October 25, 2016, there are 280 Cellular licensees that will be affected by our actions today. The Commission does not know how many of these licensees are small, as the Commission does not collect that information for these types of entities. Similarly, according to internally developed Commission data, 413 carriers reported that they were engaged in the provision of wireless telephony, including cellular service, Personal Communications Service, and Specialized Mobile Radio Telephony services. Of this total, an estimated 261 have 1,500 or fewer employees, and 152 have more than 1,500 employees. Thus, using available data, we estimate that the majority of wireless firms can be considered small. 100. 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. 101. Wireless Telephony. Wireless telephony includes cellular, personal communications services, and specialized mobile radio telephony carriers. As explained, 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. 5. Cable Service Providers 102. Because section 706 requires us to monitor the deployment of broadband using any technology, we anticipate that some broadband service providers may not provide telephone service. Accordingly, we describe below other types of firms that may provide broadband services, including cable companies, MDS providers, and utilities, among others. E:\FR\FM\07AUR1.SGM 07AUR1 jspears on DSK3GMQ082PROD with RULES 38578 Federal Register / Vol. 84, No. 152 / Wednesday, August 7, 2019 / Rules and Regulations 103. Cable and Other Subscription Programming. This industry comprises establishments primarily engaged in operating studios and facilities for the broadcasting of programs on a subscription or fee basis. The broadcast programming is typically narrowcast in nature (e.g., limited format, such as news, sports, education, or youthoriented). These establishments produce programming in their own facilities or acquire programming from external sources. The programming material is usually delivered to a third party, such as cable systems or direct-to-home satellite systems, for transmission to viewers. The SBA has established a size standard for this industry stating that a business in this industry is small if it has 1,500 or fewer employees. The 2012 Economic Census indicates that 367 firms were operational for that entire year. Of this total, 357 operated with less than 1,000 employees. Accordingly, we conclude that a substantial majority of firms in this industry are small under the applicable SBA size standard. 104. Cable Companies and Systems (Rate Regulation). The Commission has developed its own small business size standards for the purpose of cable rate regulation. Under the Commission’s rules, a ‘‘small cable company’’ is one serving 400,000 or fewer subscribers nationwide. Industry data indicate that there are currently 4,600 active cable systems in the United States. Of this total, all but eleven cable operators nationwide are small under the 400,000subscriber size standard. In addition, under the Commission’s rate regulation rules, a ‘‘small system’’ is a cable system serving 15,000 or fewer subscribers. Current Commission records show 4,600 cable systems nationwide. Of this total, 3,900 cable systems have fewer than 15,000 subscribers, and 700 systems have 15,000 or more subscribers, based on the same records. Thus, under this standard as well, we estimate that most cable systems are small entities. 105. Cable System Operators (Telecom Act Standard). The Communications Act also contains a size standard for small cable system operators, which is ‘‘a cable operator that, directly or through an affiliate, serves in the aggregate fewer than 1% 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.’’ There are approximately 52,403,705 cable video subscribers in the United States today. Accordingly, an operator serving fewer than 524,037 subscribers shall be deemed a small operator if its annual revenues, when combined with the total annual revenues of all its VerDate Sep<11>2014 17:55 Aug 06, 2019 Jkt 247001 affiliates, do not exceed $250 million in the aggregate. Based on available data, we find that all but nine incumbent cable operators are small entities under this size standard. The Commission neither requests nor collects information on whether cable system operators are affiliated with entities whose gross annual revenues exceed $250 million. Although it seems certain that some of these cable system operators are affiliated with entities whose gross annual revenues exceed $250 million, we are unable at this time to estimate with greater precision the number of cable system operators that would qualify as small cable operators under the definition in the Communications Act. 106. All Other Telecommunications. ‘‘All Other Telecommunications’’ is defined as follows: This U.S. industry is comprised of establishments that are primarily engaged in providing specialized telecommunications services, such as satellite tracking, communications telemetry, and radar station operation. This industry also includes establishments primarily engaged in providing satellite terminal stations and associated facilities connected with one or more terrestrial systems and capable of transmitting telecommunications to, and receiving telecommunications from, satellite systems. Establishments providing internet services or voice over internet protocol (VoIP) services via clientsupplied telecommunications connections are also included in this industry. The SBA has developed a small business size standard for ‘‘All Other Telecommunications,’’ which consists of all such firms with gross annual receipts of $32.5 million or less. For this category, census data for 2012 show that there were 1,442 firms that operated for the entire year. Of these firms, a total of 1,400 had gross annual receipts of less than $25 million. Consequently, we estimate that the majority of All Other Telecommunications firms are small entities that might be affected by our action. E. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements for Small Entities 107. The rule changes in the Order include reducing the unnecessary regulatory burdens and inflexibility of ex ante pricing regulation and tariffing requirements for price cap LECs’ TDM transport services since the Commission has found there is sufficient competition to justify reduced regulation. These rule changes provide additional incentives for competitive entry, network PO 00000 Frm 00034 Fmt 4700 Sfmt 4700 investment and the migration to IPbased network technologies and services. 108. The transition period for detariffing price cap LECs’ TDM transport services will begin on the effective date of this Order (thirty (30) days after Federal Register publication). Given our desire to align the transition periods we adopt here with those the Commission already adopted in the BDS Order, the transition periods for detariffing TDM transport services will end on the same date that the transition period mandated by the BDS Order for price cap LECs’ other BDS services is scheduled to end—August 1, 2020. 109. Specifically, the Order eliminates ex ante pricing regulation and tariffing requirements for price cap LECs’ TDM transport BDS. This will eliminate reporting, recordkeeping, and other compliance requirements for any price cap LEC. F. Steps Taken To Minimize the Significant Economic Impact on Small Entities, and Significant Alternatives Considered 110. The RFA requires an agency to describe any significant alternatives that it has considered in reaching its proposed approach, which may include the following four alternatives (among others): (1) The establishment of differing compliance or reporting requirements or timetables that take into account the resources available to small entities; (2) the clarification, consolidation, or simplification of compliance and reporting requirements under the rules for such small entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of the rule, or any part thereof, for such small entities. 111. The rule changes in this Order reduce the economic impact of the Commission’s rules on price cap LECs by freeing price cap LECs from ex ante pricing regulation for their TDM transport offerings, including the requirement to tariff their TDM transport services. These rule changes will significantly minimize the economic impact of our rules on price cap LECs. G. Report to Congress 112. The Commission will send a copy of the Report and Order, including this FRFA, in a report to be sent to Congress pursuant to the Congressional Review Act. In addition, the Commission will send a copy of the Report and Order, including this FRFA, to the Chief Counsel for Advocacy of the SBA. A copy of the Order and FRFA (or E:\FR\FM\07AUR1.SGM 07AUR1 Federal Register / Vol. 84, No. 152 / Wednesday, August 7, 2019 / Rules and Regulations 47 CFR Part 69 summaries thereof) will also be published in the Federal Register. IV. Ordering Clauses jspears on DSK3GMQ082PROD with RULES 113. Accordingly, it is ordered that, pursuant to sections 1, 2, 4(i)–(j), 10, 201(b), 202(a), 403, of the Communications Act of 1934, as amended, and section 706 of the Telecommunications Act of 1996, 47 U.S.C. 151, 152, 154(i)–(j), 160, 201(b), 202(a), 403, 1302, this Report and Order on Remand in WC Docket No. 16–143, GN Docket No. 13–5, WC Docket No. 05–25, and RM–10593 is adopted and shall be effective thirty (30) days after publication in the Federal Register. 114. It is further ordered that Parts 61 and 69 of the Commission’s rules, 47 CFR parts 61 and 69, are amended as set forth in Appendix A, and that such rule amendments shall be effective thirty (30) days after publication of this Report and Order on Remand in the Federal Register. 115. It is further ordered that, pursuant to sections 402 and 405 of the Communications Act, 47 U.S.C. 402, 405, the date of ‘‘public notice’’ with respect to this Report and Order on Remand of all actions taken herein shall be the date that a summary of this Report and Order on Remand is published in the Federal Register. The period for filing petitions for reconsideration or petitions for judicial review of all actions taken herein shall commence on that date. Section 1.4 of the Commission’s rules, 47 CFR 1.4, is hereby waived to the extent inconsistent with this paragraph. 116. It is further ordered that the Commission’s Consumer & Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Report and Order on Remand to Congress and the Government Accountability Office pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A). 117. It is further ordered, that the Commission’s Consumer & Governmental Affairs Bureau, Reference Information Center, shall send a copy of this Report and Order on Remand, including the Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration. List of Subjects 47 CFR Part 61 Communications, Common carriers, Reporting and recordkeeping requirements, Telephone. VerDate Sep<11>2014 17:55 Aug 06, 2019 Jkt 247001 Communications, Common carriers, Reporting and recordkeeping requirements, Telephone. Federal Communications Commission. Marlene Dortch, Secretary. 38579 (3) Elimination of tariffing requirements as specified in § 61.201 of this chapter. * * * * * [FR Doc. 2019–16897 Filed 8–6–19; 8:45 a.m.] BILLING CODE 6712–01–P Final Rules SURFACE TRANSPORTATION BOARD For the reasons set forth in the preamble, the Federal Communications Commission amends parts 61 and 69 of title 47 of the CFR, as follows: 49 CFR Part 1002 PART 61—TARIFFS 1. The authority citation for part 61 continues to read as follows: ■ Authority: 47 U.S.C. 151, 154(i), 154(j), 201–205, 403, unless otherwise noted. 2. Section 61.201 is amended by revising paragraph (a)(3) to read as follows: ■ § 61.201 Detariffing of price cap local exchange carriers. (a) * * * (3) Any transport services as defined in § 69.801(j) of this chapter; * * * * * 3. Section 61.203 is amended by revising paragraph (b) to read as follows: ■ § 61.203 Detariffing of competitive local exchange carriers. * * * * * (b) The detariffing must be completed by August 1, 2020. PART 69—ACCESS CHARGES 4. The authority citation for part 69 continues to read as follows: ■ Authority: 47 U.S.C. 154, 201, 202, 203, 205, 218, 220, 254, 403, unless otherwise noted. 5. Section 69.807 is amended by revising paragraph (a) to read as follows: ■ § 69.807 Regulatory relief. (a) Price cap local exchange carrier TDM transport, end user channel terminations in markets deemed competitive, and end user channel terminations in grandfathered markets for a price cap local exchange carrier that was granted Phase II pricing flexibility prior to June 2017, are granted the following regulatory relief: (1) Elimination of the rate structure requirements contained in subpart B of this part; (2) Elimination of price cap regulation; and PO 00000 Frm 00035 Fmt 4700 Sfmt 4700 [Docket No. EP 542 (Sub-No. 27)] Regulations Governing Fees for Services Performed in Connection With Licensing and Related Services— 2019 Update Surface Transportation Board. Final rule. AGENCY: ACTION: The Surface Transportation Board (Board) updates for 2019 the fees that the public must pay to file certain cases and pleadings with the Board. Pursuant to this update, 93 of the Board’s 135 fees will be increased and 42 fees will be maintained at their current levels. DATES: This final rule is effective September 6, 2019. FOR FURTHER INFORMATION CONTACT: David T. Groves at (202) 245–0327, or Andrea Pope-Matheson at (202) 245– 0363. Assistance for the hearing impaired is available through the Federal Relay Service at (800) 877–8339. SUPPLEMENTARY INFORMATION: The Board’s regulations at 49 CFR 1002.3 provide for an annual update of the Board’s entire user-fee schedule. Fees are generally revised based on the cost study formula set forth at 49 CFR 1002.3(d), which looks to changes in salary costs, publication costs, and Board overhead cost factors. Additional information is contained in the Board’s decision, available at www.stb.gov. SUMMARY: List of Subjects in 49 CFR Part 1002 Administrative practice and procedure, Common carriers, and Freedom of information. Decided: July 31, 2019. By the Board, Board Members Begeman, Fuchs, and Oberman. Aretha Laws-Byrum, Clearance Clerk. For the reasons set forth in the preamble, title 49, chapter X, part 1002, of the Code of Federal Regulations is amended as follows: PART 1002—FEES 1. The authority citation for part 1002 continues to read as follows: ■ E:\FR\FM\07AUR1.SGM 07AUR1

Agencies

[Federal Register Volume 84, Number 152 (Wednesday, August 7, 2019)]
[Rules and Regulations]
[Pages 38566-38579]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-16897]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 61 and 69

[WC Docket Nos. 16-143, 05-25; GN Docket No. 13-5; RM 10593; FCC 19-66]


Business Data Services in an Internet Protocol Environment

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission eliminates ex ante pricing regulation for lower 
speed time division multiplexing (TDM) transport services offered by 
price cap regulated carriers nationwide, finding there is widespread 
competition in the marketplace, and abundant support in the record for 
removing the Commission's pricing regulations.

DATES: This final rule is effective September 6, 2019.

ADDRESSES: Federal Communications Commission, 445 12th Street SW, 
Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: David Zesiger, Wireline Competition 
Bureau, Pricing Policy Division at (202) 418-1540 or via email at 
[email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order on Remand, released on July 12, 2019. A full-text copy of 
this document may be obtained at the following internet address: 
https://www.fcc.gov/document/removing-unnecessary-regulation-transport-services-and-facilities-0.

I. Background

A. BDS TDM Transport Services

    1. The term business data services refers to the ``dedicated point-
to-point transmission of data at guaranteed speeds and service 
levels.'' BDS offerings are fundamentally important to modern 
communities and economies. Over the last several decades, the 
Commission has repeatedly recognized the increasing competition for BDS 
services in areas of the country served by price cap LECs. Competition 
has grown even more markedly in recent years as cable operators 
increasingly compete for all aspects of BDS, including TDM transport. 
In response, the Commission has worked consistently to streamline 
regulation of such services to reflect this evolution.
    2. In so doing, the Commission has characterized TDM transport 
services, which ``involve carrying traffic from one point of traffic 
concentration to another,'' as ``low hanging fruit'' for competitors 
because they can more easily justify competitive investment and 
deployment. In 1999, recognizing that burdensome pricing regulation is 
unnecessary and counter-productive where competitive pressure exists, 
the Commission granted pricing flexibility to price cap carriers for 
their BDS offerings, including their TDM transport services. The 
Commission provided two levels of pricing flexibility to price cap LECs 
offering BDS, including TDM-based transport services, keyed to the 
presence of competitive providers collocated at a price cap LEC's wire 
centers. The Commission suspended further grants of pricing flexibility 
in 2012, pending the resolution of the BDS proceedings.
    3. In 2017, after more than ten years of study and a massive data 
collection (the 2015 Collection), the Commission adopted an order 
comprehensively addressing the pricing regulation of BDS in price cap 
LEC areas. In the BDS Order, the Commission found, among other things, 
that competition for BDS TDM transport services was sufficiently 
pervasive to justify elimination of ``all ex ante pricing regulation of 
price cap incumbent LEC provision of TDM transport and other transport 
(i.e., non-end user channel termination)'' services. In support of this 
conclusion, the Commission looked to the record evidence showing that 
``competitive providers have deployed competing transport networks in 
more than 95% of census blocks with [BDS] demand,'' which included 
``about 99% of business establishments.'' It also found that ``in all 
price cap territories, 92.1 percent of buildings served were within a 
half mile of competitive fiber transport facilities'' and that, ``for 
all census blocks with business data services demand, 89.6 percent have 
at least one served building within a half mile of competitive LEC 
fiber.'' This half mile is significant because, as the Commission 
concluded, most BDS providers are willing and able to profitably invest 
in and deploy facilities within a half mile of existing competitive 
facilities. In addition, the Commission found that buildings with BDS 
demand that were served only by an incumbent LEC were on average only 
364 feet from the closest competitive LEC fiber facility.
    4. After the Eighth Circuit Court's partial remand of the BDS 
Order, finding that the Commission had not provided sufficient notice 
on the issue of eliminating ex ante pricing regulation for TDM 
transport, the Commission released the Second Further Notice, proposing 
to eliminate ex ante pricing regulation of price cap LECs' BDS TDM 
transport and other transport (i.e., non-end user channel termination) 
services. The Commission received eight comments, six reply comments, 
and several filings memorializing various ex parte communications. 
Also, in the interest of ensuring a more complete analysis of 
competitive conditions affecting TDM transport services, the Commission 
conducted additional analysis of TDM transport services using data from 
the 2015 Collection. That analysis is focused on measuring the 
proximity of incumbent LEC wire centers to competitive fiber and shows 
that the vast majority of locations with BDS demand in price cap areas 
are served by wire centers that are no more than a half mile from 
competitive fiber. The Wireline Competition Bureau (Bureau) made that 
additional analysis available for public review and sought and received 
an additional seven comments and six reply comments about those data 
tables (the April Data Tables). As a result of these two additional 
rounds of comments, we now have an even more robust record.

B. Forbearance Under Section 10 of the Act

    5. Section 10 of the Communications Act of 1934 as amended by the 
Telecommunications Act of 1996 (the Act) requires the Commission to 
forbear from applying any requirement of the Act or of our regulations 
to a telecommunications carrier or telecommunications service if and 
only if the Commission determines that: (1) Enforcement of the 
requirement ``is not necessary to ensure that the charges, practices, 
classifications, or regulations by, for, or in connection with that 
telecommunications carrier or telecommunications service are just and 
reasonable and are not unjustly or unreasonably discriminatory;'' (2) 
enforcement of that requirement ``is not necessary for the protection 
of consumers;'' and (3) ``forbearance from applying that requirement is 
consistent with the public interest.'' Forbearance is warranted only if 
all three criteria are satisfied.

[[Page 38567]]

II. Eliminating Ex Ante Pricing Regulation of BDS TDM Transport 
Services Offered by Price Cap LECs (Report and Order on Remand)

    6. After careful review of the record, we reaffirm the Commission's 
previous decision to eliminate ex ante pricing regulation of TDM 
transport services in areas served by price cap LECs. The current 
record, even more so than the record that was before the Commission in 
2017, demonstrates that widespread and ever-increasing competition in 
the supply of BDS transport makes ex ante pricing regulation of TDM 
transport in price cap areas both unnecessary and unduly burdensome. We 
therefore grant nationwide relief from ex ante pricing regulation of 
BDS TDM transport services in price cap areas, forbear from applying 
Section 203 tariffing requirements to these services, and adopt 
permissive detariffing for price cap LECs' BDS TDM transport services 
for a transition period, followed by mandatory detariffing of these 
services.

A. Competition for BDS TDM Transport

    7. In finding that there is widespread and increasing competition 
for BDS TDM transport services in price cap areas, we rely in part on 
the evidence and analysis that was before the Commission in 2017 and 
also on evidence and analysis added to the record through two 
additional rounds of public comment following the Eighth Circuit 
Court's remand. Indeed, the additional submissions to the record have 
substantiated the reasonableness of the Commission's previous findings, 
and nothing in those submissions would cause us to modify the 
conclusions the Commission previously made concerning the state of 
competition for TDM transport services. As the Commission did in 2017, 
we find particularly persuasive the data that shows that as of 2013: 
(1) ``competitive providers ha[d] deployed competing transport networks 
in more than 95% of census blocks with [BDS] demand'' which included 
``about 99% of business establishments;'' (2) ``in all price cap 
territories, 92.1 percent of buildings served were within a half mile 
of competitive fiber transport facilities'' and that, ``for all census 
blocks with business data services demand, 89.6 percent have at least 
one served building within a half mile of competitive LEC fiber;'' and 
(3) buildings with BDS demand that were served only by an incumbent LEC 
were on average only 364 feet from the closest competitive LEC fiber 
facility.
    8. We continue to find that competitive suppliers with nearby fiber 
put competitive pressure on transport prices. As the Commission 
previously found, the record demonstrates that providers actively 
compete for customers located within about a half mile from their 
networks. That is because wireline providers of BDS are commonly 
willing to extend their existing networks a half mile or further to 
meet demand. Thus, the fact that 92.1% of buildings served with 
business data services in price cap areas were within a half mile of 
competitive fiber transport facilities and that, 89.6% of census blocks 
with BDS demand in price cap areas had at least one served building 
within a half mile of competitive LEC fiber, demonstrates the 
widespread competitive pressure on TDM transport in price cap areas.
    9. INCOMPAS disagrees and argues that the relevant measure of 
competition in the supply of TDM transport is the proximity of 
competitive fiber to incumbent LEC wire centers rather than the 
proximity of fiber to buildings with BDS demand. We find this argument 
to be misplaced. As the record demonstrates, while competitive LECs 
sometimes use transport links that are collocated at incumbent LEC wire 
centers, they often connect customers directly to their fiber 
facilities, effectively bypassing the incumbent LEC network. For 
example, cable operators compete with price cap incumbent LECs for 
transport services, but do not rely on interconnection with incumbent 
LEC wire centers to provide service. Commenters also observe 
competitors' increasing reliance on third party carrier hotels and data 
centers, which provide competitive LECs alternatives to incumbent LEC 
wire centers. Therefore, using the proximity of price cap LEC wire 
centers to competitive LEC fiber to measure the competitiveness of TDM 
transport would, by itself, understate the level of competition for TDM 
transport by failing to account for competition that bypasses incumbent 
LEC networks.
    10. Moreover, we agree with commenters that argue that our decision 
to measure the proximity of buildings with BDS demand to competitive 
fiber is ``both more granular and more comprehensive'' than the 
competitive LECs' alternative proposal to measure the proximity of 
incumbent LEC wire centers to competitive fiber. Our metric assesses 
competition at approximately 1.2 million locations with BDS demand 
whereas there are fewer than 16,000 price cap incumbent LEC wire 
centers.
    11. In the interest in having as complete a record as possible, 
however, earlier this year, using data from the 2015 Collection, 
Commission staff included in the record the April Data Tables that show 
that the vast majority of locations with BDS demand are served by wire 
centers that were within a half mile of competitive fiber. More 
specifically, staff analysis demonstrates that, in 2013, 75.7% of price 
cap LEC wire center locations were within a half mile of competitive 
fiber. INCOMPAS's own analysis confirms this finding. Commission staff 
determined that only 5.6% of locations with BDS demand are likely 
served by incumbent LEC wire centers without competitive LEC fiber 
within a half mile. Staff further calculated that only 2.7% of all 
locations with BDS demand were either likely served by wire centers 
without nearby competitive fiber or were themselves not within a half 
mile of such fiber.
    12. As CenturyLink explains, the ``tables confirm that competitors 
can connect to the vast majority of ILEC central offices, and 
particularly those with meaningful demand for business services, to 
supplement their own competitive networks.'' At the same time, the 
April Data Tables ``dramatically understate competition for these 
services, as cable companies and other competitors frequently bypass 
ILEC networks entirely, eliminating the need for them to connect to 
ILEC wire centers to reach end-user customers.'' Moreover, the April 
Data Tables reflect only the competitive fiber that existed in 2013; as 
the record demonstrates, however, competitive fiber providers have 
continued to build new fiber routes in part to compete with incumbent 
LECs' BDS offerings.
    13. Commenters challenge the validity of the Commission's April 
Data Tables on various grounds. For example, INCOMPAS argues that 
without information about the distance between wire centers and the 
nearest splice point or interconnection point on the competitive 
provider's network, the April Data Tables understate the barriers to 
competitive entry. INCOMPAS cites Commission precedent regarding using 
the distance to splice points to measure competition, and notes the 
lack of splice point data in the record.
    14. However, given the fact that fiber operators commonly install 
interconnection points at regular intervals on the fiber they deploy, 
measuring the distance to fiber is a reasonable proxy for measuring the 
distance to a splice point. As CenturyLink explains, installing an 
interconnection point on fiber is neither ``particularly burdensome 
[nor] otherwise unachievable . . . . If there is sufficient demand, 
carriers will

[[Page 38568]]

naturally install interconnection points nearby when they deploy fiber, 
and even if they do not, it is still possible to add new splice 
points.'' It further observes that ``[e]stablishing a splice point 
generally does not significantly increase the cost of adding a new 
customer location to CenturyLink's network . . . . As a result, the 
need for a new splice point typically does not negatively affect the 
business case for deploying a fiber lateral to serve a new customer . . 
. .'' These statements are unrebutted in the record. We believe the 
data on fiber locations represents the best data available to the 
Commission and find they provide a reasonable means by which to 
estimate competitive pressure generated by the proximity of competitive 
fiber.
    15. We also find the suggestion that it is improper to include 
cable fiber in the April Data Tables, since cable providers do not 
collocate in incumbent LEC wire centers to sell transport, to be 
premised on an unnecessarily narrow and outdated view of competition 
that requires interconnection with the incumbent LEC. It misses the 
competitive pressure that nearby cable fiber exerts on the incumbent 
LEC regardless of whether it interconnects with the incumbent LEC. 
Competitive LEC fiber, including cable fiber, remains relevant to a 
competitive analysis regardless of whether competitors connect with 
incumbent facilities or bypass them.
    16. We reaffirm the Commission's finding that the presence or 
reasonable proximity of a single competitor's facilities represents 
competition given the high sunk cost nature of BDS. At the same time, 
as some commenters have pointed out, there are major urban areas with 
as many as 28 competitive transport providers, and second tier 
metropolitan areas with more than a dozen separate competitive 
transport providers. While these data are discrete in nature, they are 
unquestionably relevant to our assessment of TDM transport competition. 
That some of these competitive providers may not currently ``offer a 
substitute for interoffice DS1 and DS3 facilities in the MSA'' is of 
limited relevance given our view that TDM transport services are 
competitive due in part to the potential for providers to deploy 
transport when competitive LEC fiber exists within a half mile of BDS 
demand. Moreover, the willingness of so many competitors to supply 
service in these markets is a general indicator of competitiveness and 
the increasing use of non-incumbent LEC networks for transport.
    17. The 2015 Collection and other data submitted into the record 
before the adoption of the 2017 BDS Order necessarily do not account 
for competitive facilities deployed over the last several years. More 
recent record submissions show that competition for BDS transport 
services has continued to grow. The current record shows, for example, 
that cable operators have ``evolved from new entrants to established 
providers of BDS . . . .'' In the BDS Order, the Commission identified 
cable service as a substitute for BDS in areas with Metro Ethernet-
enabled offerings and for lower speed TDM services but did not find 
``broad substitution'' of cable best efforts services for BDS or 
``substantial performance similarities'' between the two types of 
services. Cable now competes for the full range of BDS, and, since it 
almost always bypasses the incumbent LEC network when it provides 
service, displaces incumbent LEC transport offerings when it takes a 
customer. In recent years, cable operators have invested billions of 
dollars in their hybrid fiber coax (HFC) networks which are now 
available in most areas where there is BDS demand and which can be 
repurposed to provide various levels of BDS with only incremental 
investment. Comcast, for example, reports having invested billions of 
dollars ``to increase network capacity,'' resulting in ``the largest 
facilities-based last mile alternative to the phone company.'' Charter 
Spectrum reportedly spent over $1 billion in 2018 in new fiber 
infrastructure to increase the density of its national fiber network. 
Cox is reported to be planning to invest an additional $10 billion into 
its network over the next five years.
    18. According to a recent industry analyst report, ``[c]able 
companies are leveraging [their] ubiquitous HFC and rapidly expanding 
fiber networks to gain share in the [BDS] market.'' It states that 
``[a]ll major [cable operators] are focused on expanding their network 
footprints and speed offerings, and Comcast, Cox and other cable 
companies are working to increase the capacities of their Ethernet over 
HFC offerings.'' The report also projects that cable providers are 
``expected to see share gains across markets, with continued expansion 
and upgrades of fiber and HFC footprint and focus on growing business 
and wholesale traction.''
    19. As a result of this aggressive investment, cable's BDS revenues 
and share of BDS revenues have steadily increased. Cable operators' BDS 
revenues more than doubled from approximately $8 billion in 2013 to 
more than $18 billion in 2018 and could reach $20 billion by the end of 
2019. Atlantic-ACM projects that from 2017 to 2023, cable operators' 
share of all BDS revenues will grow from 19.7% to an estimated 30.7%. 
In 2017 alone, cable BDS revenue growth was 10.6%.
    20. Traditional competitive LEC's BDS offerings have also increased 
over the past two years. As one analyst report declares, ``CLECs are 
aggressively expanding their footprints via network builds or M&A while 
ILECs are attempting to remain competitive by making major investments 
to prepare their networks for 5G.'' Fiber-based competitive LECs such 
as Zayo and Uniti Fiber have deployed significant additional facilities 
and continue to grow their share of BDS revenues. Zayo reported a 38% 
increase in fiber route miles from December 2015 (95,000 miles) to 
November 2018 (131,100 miles). Moreover, as commenters have also 
observed the increased use of carrier-neutral facilities such as third-
party carrier hotels and data centers that bypass incumbent LEC 
facilities, further suggesting competitive pressure from competitive 
LECs.
    21. As the Commission did in the BDS Order, we consider packet-
based transport services to be broadly substitutable for TDM-based 
transport services. Substitution between these two types of services is 
generally in one direction, and we find that ``circuit- and packet-
switched business data services that offer similar speed, 
functionality, and quality of service characteristics fall within the 
same product markets'' for the purposes of the market analysis relevant 
here. Indeed, TDM transport services can be carried over fiber, so 
fiber providers can offer customers TDM services.
    22. There is an ongoing steady decline in demand for TDM transport 
and increase in demand for packet-based alternatives. One analyst 
forecasts that legacy TDM transport will decline from $3.2 billion to 
$1.2 billion from 2017 to 2023. This forecast is supported by data 
submitted to the record by BDS providers. For example, according to 
CenturyLink, between 2015 and 2018, its incumbent LEC revenues for TDM 
transport dropped 9% annually and demand for DS1 and DS3 services ``has 
been declining for years as customers migrate to Ethernet and other 
packet-based services that are easily scalable to meet their growing 
bandwidth needs.'' Similarly, AT&T reports that its ``revenues for DS1 
and D[S]3 transport have continued to decline substantially since 2015 
due to the availability of competitive alternatives and the fact that 
many competitors (e.g., cable companies) do not purchase much transport 
from ILECs at all.''

[[Page 38569]]

    23. In light of the record of continued aggressive deployment by 
competitors of BDS-capable network facilities since the BDS Order, we 
find unpersuasive arguments that our analysis fails to sufficiently 
consider the barriers to supplying TDM transport and whether those 
barriers identified are significant enough to prevent robust 
competition. As the Commission previously explained, while entry 
barriers to BDS supply may seem high, competitors nonetheless 
frequently choose to make significant investment to enter these 
markets. And, given that transport services typically connect points of 
traffic aggregation and therefore offer relatively greater revenue 
opportunity than end user channel terminations, barriers to entry to 
supply transport are lower than for other types of BDS. Additionally, 
because fiber connections are a sunk cost, and it is efficient to 
deploy many more strands than are initially used, once competitors 
deploy facilities, they have every incentive to price competitively (as 
do the incumbents against whom they compete).
    24. Some commenters' arguments about barriers to entry are based on 
an unjustifiably narrow view of BDS transport competition which is 
premised on competition that is interconnected with, and therefore 
dependent on, incumbent LEC infrastructure. This argument ignores 
substantial and growing evidence that competitors often bypass the 
incumbent LEC network entirely. Indeed, as the Commission has 
previously recognized, ``cable operators self-provision all aspects of 
their BDS, including transport functionality,'' and therefore do not 
rely on incumbent LEC central offices to offer competitive TDM 
transport services and competitive LECs are increasingly bypassing 
incumbent LEC infrastructure. As AT&T explains, ``CLECs do not need to 
collocate in ILEC central offices, or to replicate ILEC transport 
paths, in order to provide a competitive alternative that disciplines 
ILEC rates.''
    25. Finally, we find unpersuasive the assertion by some commenters 
that incumbent LECs retain market power over DS1 and DS3 channel 
terminations, which they contend extends to TDM transport, thus 
rendering some TDM transport markets noncompetitive. As an initial 
matter, the Commission's competitive market test in the BDS Order, 
which was upheld on appeal by the Eighth Circuit, determined that 91.1% 
of locations with DS1 and DS3 end user channel termination demand were 
competitive. In support of their position, these commenters argue that 
the market analysis conducted by Dr. Marc Rysman on behalf of the 
Commission showed that incumbent LECs exercised some market power over 
DS1 and DS3 services. The conclusions they cite from the Rysman study, 
however, were specific to DS1 and DS3 channel terminations. Moreover, 
as the Commission explained in the BDS Order, the data used in Dr. 
Rysman's analysis were examined by peer reviewers and were found to be 
``too noisy to draw any firm conclusions,'' and therefore the 
Commission chose not to rely on these to draw conclusions about markets 
for DS1 and DS3 services. Additionally, Dr. Rysman's analysis was based 
on pricing data for full circuit service which combined data for 
channel termination, transport, and other services. Dr. Rysman did not 
attempt to draw conclusions specific to TDM transport. In fact, Dr. 
Rysman removed from his study all data specific to standalone transport 
services ``because the cost structure behind providing transport is 
likely to be substantially different from providing service to end-user 
premises and therefore would make comparisons of prices less 
meaningful.''

B. Removing Ex Ante Pricing Regulation

    26. Given our finding that the supply of TDM transport services is 
sufficiently competitive across the country that the continued 
application of ex ante pricing regulation would do more harm than good, 
and consistent with the recommendation made by numerous commenters, we 
reaffirm the Commission's decision in the BDS Order to remove ex ante 
pricing regulation of BDS TDM transport and other transport (i.e., non-
end user channel termination) services in price cap areas nationwide. 
The record does not support allegations made by some commenters that 
``stark differences'' in competitive conditions in different areas 
preclude the nationwide removal of ex ante pricing regulation. It does 
demonstrate, as the Commission recognized in the BDS Order, that an 
extremely small percentage of buildings with BDS demand in price cap 
areas may face the prospect of no regulatory constraint on incumbent 
LEC prices for TDM transport and no immediate prospect of a competitive 
alternative. We believe, however, that the costs of imposing ex ante 
pricing regulation far exceed the benefits of continued regulation of 
price cap LECs' TDM transport services. Imposing inflexible and 
burdensome ex ante pricing regulation on TDM transport services would 
harm the dynamic competitive nature of these markets, could lead to a 
decrease in new entrants, and would likely delay the transition from 
TDM- to IP-based offerings. To the limited extent there remain 
locations where there is not an immediate competitive threat, the 
Commission has previously explained that we anticipate reasonably 
competitive outcomes in the short- to medium-term (i.e., over several 
years) will discipline prices. As a result, we find that such locations 
do not preclude our adoption of a nationwide solution. Moreover, as the 
Commission previously recognized, ``our goal is not absolute 
mathematical precision but an administratively feasible approach that 
avoids imposing undue regulatory burdens on this highly competitive 
segment of the market.'' Refraining from pricing regulation for TDM 
transport services in price cap areas nationally achieves the proper 
balance between precision and administrability, particularly given the 
fact that parties continue to be able to file complaints with the 
Commission pursuant to section 208 of the Act.
    27. As a result, we do not support proposals that we adopt a 
competitive market test for TDM transport services. The fact that the 
Commission adopted a competitive market test for TDM channel 
terminations in price cap areas does not compel the adoption of a 
competitive market test for TDM transport services. The Commission has 
always distinguished its analysis and regulation of these markets and 
presuming that a test for one set of services means that a competitive 
market test for the other is necessary or even possible, wrongly 
conflates the two. Indeed, commenters that support a competitive market 
test for TDM transport concede that a ``competitive market test for 
transport should be distinct from that used for channel termination 
given the differences between the two types of services.'' Moreover, 
they claim that the record ``does not[ ] contain data on the extent of 
competition by different transport service providers'' and urge the 
Commission to ``further develop the record.''
    28. We see no benefit to prolonging this long-running proceeding to 
conduct a further data collection for TDM transport services. Given the 
very significant burdens and delays involved in the Commission's 2015 
Collection, the benefits of collecting additional data on TDM transport 
competition to develop a separate TDM transport competitive market test 
would need to be substantial to justify the burdens of such a 
collection. Commission staff analysis of the 2015 Collection shows that 
only 2.7% of locations with BDS

[[Page 38570]]

demand in price cap areas in 2013 were neither served by a wire center 
that was within a half mile of competitive fiber nor were themselves 
within a half mile of competitive fiber. With competition this 
extensive, the burdens of a major data collection and of developing and 
administering a competitive market test for TDM transport services 
clearly outweigh the benefits.
    29. This is particularly true because some commenters arguing for a 
competitive market test urge us to adopt a route-based test for TDM 
transport services based on transport routes connecting incumbent LEC 
wire centers. They argue that the relevant geographic market for TDM 
transport services is ``the route between two ILEC end offices and not 
the area within a given distance from a customer's location.'' The 
providers that suggest adoption of such a test do not explain--even in 
broad terms--how it would be structured, on what evidence it could be 
based, or how it could be feasibly administered. Neither do they 
acknowledge that the incumbent LEC-centric nature of such a test would 
not account for competitors that bypass incumbent LEC infrastructure. 
Nor do they take into account the fact that price cap LECs ``generally 
do not price their transport services on a route-by-route basis.'' 
Given the evidence of extensive and still growing competition for 
transport services in the vast majority of the areas served by price 
cap carriers where there is BDS demand, we cannot justify imposing 
burdensome new ex ante pricing regulation on BDS offerings based on the 
results of a test that will not actually be able to identify where 
there are failures in the transport market, but could inhibit 
investment in this dynamic marketplace.
    30. We also reject arguments made by some commenters that 
nationwide deregulation of TDM transport will have secondary 
consequences for the pricing of channel terminations in those price cap 
counties that the BDS Order deemed insufficiently competitive to 
warrant removal of ex ante pricing regulation. These parties argue that 
eliminating pricing regulations for TDM transport would allow price cap 
LECs to evade the price caps that remain on channel terminations in 
areas deemed non-competitive by allowing them to impose offsetting rate 
increases on TDM transport services in those counties. We find this 
reasoning flawed. The argument assumes that, if a provider tried to 
charge supracompetitive rates on transport services to compensate for 
price-capped channel terminations, competitors would not respond to 
such increased transport prices with additional investment in transport 
facilities. However, given the evidence of widespread competitive entry 
for BDS transport, there is reason to believe that the likely result of 
a price cap LEC charging supracompetitive rates on transport services 
would be the entry of a competitor with the capacity to bypass 
facilities being added in response. The competitive LECs' view of the 
BDS marketplace ignores the evidence of competitive pressure in the 
record. Moreover, in the more than two years since the adoption of the 
BDS Order, ex ante pricing regulation of TDM transport has been largely 
removed in price cap areas, even in counties where the Commission 
retained price cap regulation over price cap LECs' DS1 and DS3 channel 
terminations. Yet, competitive LECs cite no instance where deregulating 
transport rates has undercut price cap regulation of channel 
terminations. In light of this experience, the competitive LECs' 
concern seems speculative.
    31. Refraining from pricing regulation for TDM transport services 
nationwide achieves the proper balance between precision and 
administrability. It also avoids unnecessary disruption of existing BDS 
transport sales arrangements. And, as one commenter explains, the 
``risks of overregulation of these services would outweigh any marginal 
benefit from'' reinstating ex ante pricing regulation ``in this highly 
competitive sector, by artificially tamping down TDM transport rates, 
thereby deterring competitive entry and slowing the IP migration.'' 
Instead, we believe that providing regulatory relief in this market 
segment will foster conditions that will continue to encourage 
competitive entry and provide incentive for further investment in fiber 
transport facilities.
    32. Finally, as we previously observed in the BDS Order, price cap 
LECs' TDM transport services continue to be subject to sections 201, 
202 and 208 of the Communications Act. These statutory provisions 
prohibit carriers from imposing rates, terms, and conditions that are 
unjust, unreasonable, or unreasonably discriminatory.

C. Forbearance From Tariffing

    33. To effectuate the approach we take to TDM transport, and 
consistent with the approach the Commission took in the BDS Order, 
pursuant to section 10 of the Communications Act, we forbear from 
applying section 203 of the Act and our tariffing requirements to price 
cap incumbent LECs in their provision of BDS TDM transport services. 
This forbearance relieves price cap LECs of the requirement to file 
interstate tariffs for these services nationwide.
    34. The Commission has a long history of granting price cap LECs 
forbearance from tariffing requirements for various of their BDS 
offerings. More than a decade ago, the Commission provided grants of 
forbearance to price cap LECs for their packet-switched and optical 
transmission BDS. Two years ago, in the BDS Order, the Commission 
granted price cap LECs forbearance from the Act's tariffing obligations 
with respect to the provision of packet-based and higher speed TDM BDS, 
lower speed TDM transport, and DS1 and DS3 end user channel termination 
services in counties deemed competitive by the Commission's competitive 
market test. Based on the record before us, we find that the statutory 
test for granting forbearance from tariffing obligations for price cap 
LECs' TDM transport services has been met.
    35. First, we find that the widespread existence of competitive 
alternatives to incumbent LECs' BDS TDM transport offerings means that 
the application of section 203 of the Act is not necessary to ensure 
that the charges and practices for price cap LECs' transport services 
are just and reasonable and not unreasonably discriminatory. Congress 
enacted section 203 of the Act in an era when tariffs ``were required 
to protect consumers from unjust, unreasonable, and discriminatory 
rates in a virtually monopolistic market.'' Over time, the Commission 
progressively modified its regulation of price cap LECs' BDS to reflect 
increasing levels of competition in the supply of BDS, and therefore, 
the reduced need for the protections tariffs that provide. The record 
demonstrates that current market forces will better ensure that prices 
for TDM transport offered by price cap LECs are just and reasonable and 
not unreasonably discriminatory than (necessarily) blunt regulatory 
measures.
    36. Second, for many of the same reasons, we find that enforcement 
of our tariffing requirements for price cap LECs' BDS TDM transport 
services is ``not necessary for the protection of consumers,'' and 
forbearance will benefit consumers. Widespread and increasing 
competition to BDS services will drive down prices and provide 
competitive alternatives to those services, which in turn benefits 
consumers. Moreover, forbearance from tariffing will allow price cap 
carriers to respond more quickly to competition and be more innovative 
in the services they offer, also benefitting consumers. Additionally, 
price cap LEC BDS TDM transport offerings will remain subject to 
sections 201, 202, and 208 of the Act

[[Page 38571]]

and to our enforcement of those provisions through the section 208 
complaint process.
    37. Third, we find that granting forbearance for price cap LECs' 
BDS TDM transport services from section 203 of the Act is consistent 
with the public interest and will promote competitive market 
conditions. As the Commission found in the BDS Order, forbearance from 
tariffing obligations for TDM transport will promote further BDS 
competition and deployment in price cap LEC areas. Moreover, tariffing 
can adversely impact competitive markets by reducing a carrier's 
incentives to offer price discounts, delaying and increasing the costs 
of innovation, and inhibiting a carrier from tailoring services to best 
meet customers' needs. Further, tariffing itself is not without its 
costs. Forbearing from section 203 and our tariffing rules will reduce 
unnecessary administrative costs, which can be significant, and allow 
carriers to redirect their resources to deploying service capabilities 
and providing service. We continue to adhere to our view that disparate 
forbearance treatment of carriers providing the same or similar 
services is not in the public interest, as it creates distortions in 
the marketplace that may harm consumers. Accordingly, the continued 
application of section 203 is unnecessary under sections 10(a)(3) and 
10(b). Because we find that each of the elements of the section 10 
forbearance analysis is satisfied, we must grant forbearance from 
section 203 tariffing requirements.

D. Transition to Mandatory Detariffing

    38. To ensure an orderly transition to a fully detariffed 
regulatory regime for price cap LECs' TDM transport offerings, we adopt 
mechanisms that align with those the Commission adopted in the BDS 
Order. As in the BDS Order, we also require competitive LECs, which are 
subject to permissive detariffing, to detariff their remaining 
transport BDS offerings by the end of this transition. In so doing, we 
recognize that many price cap LECs have already detariffed their TDM 
transport in response to the BDS Order and these services have remained 
detariffed given the Eighth Circuit's temporary stay of its partial 
remand. For those price cap LECs that have not already detariffed their 
TDM transport, we adopt a new transition period that will begin on the 
effective date of this Order (which will be 30 days after publication 
of this Order in the Federal Register) and will end on August 1, 2020, 
the date of the transition period mandated by the BDS Order for 
mandatory detariffing.
    39. During this transition, tariffing for TDM transport services by 
carriers will be permissive--we will accept new tariffs and revisions 
to existing tariffs for the affected services. Price cap LECs will no 
longer be required to comply with price cap regulation for their TDM 
transport services, and once these rules are effective, carriers that 
wish to continue filing tariffs under the permissive detariffing regime 
are free to modify such tariffs consistent with this Order. Carriers, 
including non-incumbent LECs, may remove the relevant portions of their 
tariffs for the affected services at any time during the transition. 
Once the transition ends, no price cap carrier may file or maintain any 
interstate tariffs for affected business data services.
    40. Price cap incumbent LECs and competitive LECs may not file or 
maintain any interstate tariffs for affected business data services 
once the transition ends. This will prevent carriers from obtaining 
``deemed lawful'' status for tariff filings that are not accompanied by 
cost support and invoking the filed-rate doctrine in contractual 
disputes with customers. Business data service providers will also be 
prevented from picking and choosing when they are able to invoke the 
protections of tariffs.
    41. We do not intend our actions to disturb existing contractual or 
other long-term arrangements--a contract tariff remains a contract even 
if it is no longer tariffed. As we stated in the BDS Order, contract 
tariffs, term and volume discount plans, and individual circuit plans 
do not become void upon detariffing. All carriers are to act in good 
faith to develop solutions to ensure rates remain just and reasonable.
    42. The rule amendments we adopt today relating to TDM transport 
are substantively the same as those the Commission adopted in the BDS 
Order, and as such, impose the same obligations on carriers as the 
existing rules. We make only minor clarifying changes to the rules. For 
example, we amend the rules to specify that competitive LECs must 
detariff their business data services by August 1, 2020.

III. Procedural Matters

    43. Paperwork Reduction Act Analysis--This document does not 
contain proposed information collection(s) subject to the Paperwork 
Reduction Act of 1995 (PRA), Public Law 104-13. In addition, therefore, 
it does not contain any new or modified information collection burden 
for small business concerns with fewer than 25 employees, pursuant to 
the Small Business Paperwork Relief Act of 2002, Public Law 107-198, 
see 44 U.S.C. 3506(c)(4).
    44. Congressional Review Act--The Commission will send a copy of 
this Report and Order to Congress and the Government Accountability 
Office pursuant to the Congressional Review Act, see 5 U.S.C. 
801(a)(1)(A).
    45. Final Regulatory Flexibility Analysis--As required by the 
Regulatory by the Regulatory Flexibility Act of 1980, as amended (RFA) 
an Initial Regulatory Flexibility Analysis (IRFA) was incorporated into 
the Second Further Notice of Proposed Rulemaking and Further Notice of 
Proposed Rulemaking (Second Further Notice) for the Time Division 
Multiplexing (TDM) transport business data services (BDS). The 
Commission sought written public comment on the proposals in the Second 
Further Notice, including comment on the IRFA. The Commission received 
no comments on the IRFA. Because the Commission amends its rules in 
this Report and Order, the Commission has included this Final 
Regulatory Flexibility Analysis (FRFA). This present FRFA conforms to 
the RFA.

A. Need for, and Objectives of, the Proposed Rules

    46. In the Second Further Notice, the Commission proposed changes 
to, and sought comment on, the appropriate regulatory treatment of TDM 
transport BDS offerings offered by price cap local exchange carriers 
(LECs). The Commission proposed to remove ex ante pricing regulation 
from TDM transport business data services offered by price cap LECs. In 
this Order, we promote competition in the market for BDS TDM transport 
services by adopting a regulatory framework for those services that 
better reflects the dynamic competitive nature of price cap LECs' TDM 
transport markets.

B. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA

    47. We analyze the market for TDM transport in areas served by 
price cap incumbent local exchange carriers and conclude that the 
record in this proceeding demonstrates widespread, significant and 
growing competition in this segment of the BDS market. We therefore 
grant nationwide relief from ex ante pricing regulation of these 
carriers' TDM transport services, forbear from applying Section 203 
tariffing requirements to these services, and adopt permissive 
detariffing for price cap LECs' TDM transport services for a

[[Page 38572]]

transition period, followed by mandatory detariffing of these services.
    48. The Commission did not receive comments specifically addressing 
the rules and policies proposed in the IRFA.

C. Response to Comments by the Chief Counsel for Advocacy of the Small 
Business Administration

    49. The Chief Counsel did not file any comments in response to this 
proceeding.

D. Description and Estimate of the Number of Small Entities to Which 
the Proposed Rules Will Apply

    50. 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 and by the rule revisions on which the 
FNPRMs seek comment, if adopted. The RFA generally defines the term 
``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small-business concern'' under the Small Business 
Act. A ``small-business concern'' is one which: (1) Is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria established by the SBA.
1. Total Small Entities
    51. Small Businesses, Small Organizations, Small Governmental 
Jurisdictions. Our actions, over time, may affect small entities that 
are not easily categorized at present. We therefore describe here, at 
the outset, three broad groups of small entities that could be directly 
affected herein. First, while there are industry specific size 
standards for small businesses that are used in the regulatory 
flexibility analysis, according to data from the SBA's Office of 
Advocacy, in general a small business is an independent business having 
fewer than 500 employees. These types of small businesses represent 
99.9% of all businesses in the United States which translates to 28.8 
million businesses.
    52. Next, the type of small entity described as a ``small 
organization'' is generally ``any not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.'' 
Nationwide, as of August 2016, there were approximately 356,494 small 
organizations based on registration and tax data filed by nonprofits 
with the Internal Revenue Service (IRS).
    53. Finally, the small entity described as a ``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.'' U.S. Census Bureau data from 
the 2012 Census of Governments indicates that there were 90,056 local 
governmental jurisdictions consisting of general purpose governments 
and special purpose governments in the United States. Of this number 
there were 37,132 general purpose governments (county, municipal and 
town or township) with populations of less than 50,000 and 12,184 
special purpose governments (independent school districts and special 
districts) with populations of less than 50,000. The 2012 U.S. Census 
Bureau data for most types of governments in the local government 
category shows that the majority of these governments have populations 
of less than 50,000. Based on these data we estimate that at least 
49,316 local government jurisdictions fall in the category of ``small 
governmental jurisdictions.''
2. Broadband Internet Access Service Providers
    54. Internet Service Providers (Broadband). Broadband internet 
service providers include wired (e.g., cable, DSL) and VoIP service 
providers using their own operated wired telecommunications 
infrastructure fall in the category of Wired Telecommunication 
Carriers. Wired Telecommunications Carriers are comprised of 
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 size 
standard for this category classifies a business as small if it has 
1,500 or fewer employees. U.S. Census data for 2012 show that there 
were 3,117 firms that operated that year. Of this total, 3,083 operated 
with fewer than 1,000 employees. Consequently, under this size standard 
the majority of firms in this industry can be considered small.
3. Wireline Providers
    55. Wired Telecommunications Carriers. The U.S. Census Bureau 
defines this industry as ``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 communications 
networks. Transmission facilities may be based on a single technology 
or a combination of technologies. Establishments in this industry use 
the wired telecommunications network facilities that they operate to 
provide a variety of services, such as wired telephony services, 
including VoIP services, wired (cable) audio and video programming 
distribution, and wired broadband internet services. By exception, 
establishments providing satellite television distribution services 
using facilities and infrastructure that they operate are included in 
this industry.'' The SBA has developed a small business size standard 
for Wired Telecommunications Carriers, which consists of all such 
companies having 1,500 or fewer employees. Census data for 2012 show 
that there were 3,117 firms that operated that year. Of this total, 
3,083 operated with fewer than 1,000 employees. Thus, under this size 
standard, the majority of firms in this industry can be considered 
small.
    56. 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 as defined above. Under that size standard, such a business is 
small if it has 1,500 or fewer employees. According to Commission data, 
3,117 firms operated in that year. Of this total, 3,083 operated with 
fewer than 1,000 employees. Consequently, the Commission estimates that 
most providers of incumbent local exchange service are small businesses 
that may be affected by the rules and policies adopted. A total of 
1,307 firms reported that they were incumbent local exchange service 
providers. Of this total, an estimated 1,006 have 1,500 or fewer 
employees.
    57. Competitive Local Exchange Carriers (Competitive LECs), 
Competitive Access Providers (CAPs), Shared-Tenant Service Providers, 
and Other Local Service Providers. Neither the Commission nor the SBA 
has developed a small business size standard specifically for these 
service providers. The appropriate NAICS Code category is Wired 
Telecommunications Carriers, as defined above. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
U.S. Census data for 2012 indicate that 3,117 firms operated during 
that year. Of that number, 3,083 operated with fewer than 1,000 
employees. Based on this data, the Commission concludes that the 
majority of Competitive LECS, CAPs, Shared-Tenant Service Providers, 
and Other

[[Page 38573]]

Local Service Providers, are small entities. 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. 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. Also, 72 carriers have reported that 
they are Other Local Service Providers. Of this total, 70 have 1,500 or 
fewer employees. Consequently, based on internally researched FCC data, 
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.
    58. We have included small incumbent LECs in this present RFA 
analysis. As mentioned above, a ``small business'' under the RFA is one 
that, inter alia, meets the pertinent small business size standard 
(e.g., a telephone communications business having 1,500 or fewer 
employees), and ``is not dominant in its field of operation.'' The 
SBA's Office of Advocacy contends that, for RFA purposes, small 
incumbent LECs are not dominant in their field of operation because any 
such dominance is not ``national'' in scope. We have therefore included 
small incumbent LECs in this RFA analysis, although we emphasize that 
this RFA action has no effect on Commission analyses and determinations 
in other, non-RFA contexts.
    59. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a definition for Interexchange Carriers. The closest 
NAICS Code category is Wired Telecommunications Carriers as defined 
above. The applicable size standard under SBA rules is that such a 
business is small if it has 1,500 or fewer employees. U.S. Census data 
for 2012 indicates that 3,117 firms operated during that year. Of that 
number, 3,083 operated with fewer than 1,000 employees. According to 
internally developed Commission data, 359 companies reported that their 
primary telecommunications service activity was the provision of 
interexchange services. Of this total, an estimated 317 have 1,500 or 
fewer employees. Consequently, the Commission estimates that the 
majority of IXCs are small entities that may be affected by our 
proposed rules.
    60. Local Resellers. The SBA has developed a small business size 
standard for the category of Telecommunications Resellers. The 
Telecommunications Resellers industry comprises establishments engaged 
in purchasing access and network capacity from owners and operators of 
telecommunications networks and reselling wired and wireless 
telecommunications services (except satellite) to businesses and 
households. Establishments in this industry resell telecommunications; 
they do not operate transmission facilities and infrastructure. Mobile 
virtual network operators (MVNOs) are included in this industry. Under 
that size standard, such a business is small if it has 1,500 or fewer 
employees. Census data for 2012 show that 1,341 firms provided resale 
services during that year. Of that number, all operated with fewer than 
1,000 employees. Thus, under this category and the associated small 
business size standard, the majority of these prepaid calling card 
providers can be considered small entities.
    61. Toll Resellers. The Commission has not developed a definition 
for Toll Resellers. The closest NAICS Code Category is 
Telecommunications Resellers. The Telecommunications Resellers industry 
comprises establishments engaged in purchasing access and network 
capacity from owners and operators of telecommunications networks and 
reselling wired and wireless telecommunications services (except 
satellite) to businesses and households. Establishments in this 
industry resell telecommunications; they do not operate transmission 
facilities and infrastructure. Mobile virtual network operators (MVNOs) 
are included in this industry. 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. Census data for 2012 show that 1,341 firms provided resale 
services during that year. Of that number, 1,341 operated with fewer 
than 1,000 employees. Thus, under this category and the associated 
small business size standard, the majority of these resellers can be 
considered small entities. According to Commission data, 881 carriers 
have reported that they are engaged in the provision of toll resale 
services. Of this total, an estimated 857 have 1,500 or fewer 
employees. Consequently, the Commission estimates that the majority of 
toll resellers are small entities.
    62. Other Toll Carriers. Neither the Commission nor the SBA has 
developed a definition 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 NAICS Code category is for 
Wired Telecommunications Carriers as defined above. Under the 
applicable SBA size standard, such a business is small if it has 1,500 
or fewer employees. Census data for 2012 show that there were 3,117 
firms that operated that year. Of this total, 3,083 operated with fewer 
than 1,000 employees. Thus, under this category and the associated 
small business size standard, the majority of Other Toll Carriers can 
be considered small. According to internally developed 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. Consequently, the 
Commission estimates that most Other Toll Carriers are small entities 
that may be affected by rules adopted pursuant to the Second Further 
Notice.
    63. 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.
4. Wireless Providers--Fixed and Mobile
    64. Wireless Telecommunications Carriers (except Satellite). This 
industry comprises establishments engaged in operating and maintaining 
switching and transmission facilities to provide communications via the 
airwaves. Establishments in this industry have spectrum licenses and 
provide services using that spectrum, such as cellular services, paging 
services, wireless internet access, and wireless video services. The 
appropriate size standard under SBA rules is that such a business is 
small if it has 1,500 or fewer employees. For this industry, U.S. 
Census data for 2012 show that there were 967 firms that operated for 
the entire year. Of this total, 955 firms had employment of 999 or 
fewer employees

[[Page 38574]]

and 12 had employment of 1,000 employees or more. Thus under this 
category and the associated size standard, the Commission estimates 
that the majority of wireless telecommunications carriers (except 
satellite) are small entities.
    65. The Commission's own data--available in its Universal Licensing 
System--indicate that, as of October 25, 2016, there are 280 Cellular 
licensees that will be affected by our actions today. The Commission 
does not know how many of these licensees are small, as the Commission 
does not collect that information for these types of entities. 
Similarly, according to internally developed Commission data, 413 
carriers reported that they were engaged in the provision of wireless 
telephony, including cellular service, Personal Communications Service, 
and Specialized Mobile Radio Telephony services. Of this total, an 
estimated 261 have 1,500 or fewer employees, and 152 have more than 
1,500 employees. Thus, using available data, we estimate that the 
majority of wireless firms can be considered small.
    66. 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.
    67. Wireless Telephony. Wireless telephony includes cellular, 
personal communications services, and specialized mobile radio 
telephony carriers. As explained, 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.
5. Cable Service Providers
    68. Because section 706 requires us to monitor the deployment of 
broadband using any technology, we anticipate that some broadband 
service providers may not provide telephone service. Accordingly, we 
describe below other types of firms that may provide broadband 
services, including cable companies, MDS providers, and utilities, 
among others.
    69. Cable and Other Subscription Programming. This industry 
comprises establishments primarily engaged in operating studios and 
facilities for the broadcasting of programs on a subscription or fee 
basis. The broadcast programming is typically narrowcast in nature 
(e.g., limited format, such as news, sports, education, or youth-
oriented). These establishments produce programming in their own 
facilities or acquire programming from external sources. The 
programming material is usually delivered to a third party, such as 
cable systems or direct-to-home satellite systems, for transmission to 
viewers. The SBA has established a size standard for this industry 
stating that a business in this industry is small if it has 1,500 or 
fewer employees. The 2012 Economic Census indicates that 367 firms were 
operational for that entire year. Of this total, 357 operated with less 
than 1,000 employees. Accordingly, we conclude that a substantial 
majority of firms in this industry are small under the applicable SBA 
size standard.
    70. Cable Companies and Systems (Rate Regulation). The Commission 
has developed its own small business size standards for the purpose of 
cable rate regulation. Under the Commission's rules, a ``small cable 
company'' is one serving 400,000 or fewer subscribers nationwide. 
Industry data indicate that there are currently 4,600 active cable 
systems in the United States. Of this total, all but eleven cable 
operators nationwide are small under the 400,000-subscriber size 
standard. In addition, under the Commission's rate regulation rules, a 
``small system'' is a cable system serving 15,000 or fewer subscribers. 
Current Commission records show 4,600 cable systems nationwide. Of this 
total, 3,900 cable systems have fewer than 15,000 subscribers, and 700 
systems have 15,000 or more subscribers, based on the same records. 
Thus, under this standard as well, we estimate that most cable systems 
are small entities.
    71. Cable System Operators (Telecom Act Standard). The 
Communications Act also contains a size standard for small cable system 
operators, which is ``a cable operator that, directly or through an 
affiliate, serves in the aggregate fewer than 1% 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.'' 
There are approximately 52,403,705 cable video subscribers in the 
United States today. Accordingly, an operator serving fewer than 
524,037 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, we find that all but nine incumbent cable operators are 
small entities under this size standard. The Commission neither 
requests nor collects information on whether cable system operators are 
affiliated with entities whose gross annual revenues exceed $250 
million. Although it seems certain that some of these cable system 
operators are affiliated with entities whose gross annual revenues 
exceed $250 million, we are unable at this time to estimate with 
greater precision the number of cable system operators that would 
qualify as small cable operators under the definition in the 
Communications Act.
    72. All Other Telecommunications. ``All Other Telecommunications'' 
is defined as follows: This U.S. industry is comprised of 
establishments that are primarily engaged in providing specialized 
telecommunications services, such as satellite tracking, communications 
telemetry, and radar station operation. This industry also includes 
establishments primarily engaged in providing satellite terminal 
stations and associated facilities connected with one or more 
terrestrial systems and capable of transmitting telecommunications to, 
and receiving telecommunications from, satellite systems. 
Establishments providing internet services or voice over internet 
protocol (VoIP) services via client-supplied telecommunications 
connections are also included in this industry. The SBA has developed a 
small business size standard for ``All Other Telecommunications,'' 
which consists of all such firms with gross annual receipts of $32.5 
million or less. For this category, census data for 2012 show that 
there were 1,442 firms that operated for the entire year. Of these 
firms, a total of 1,400 had gross annual receipts of less than $25 
million. Consequently, we estimate that the majority of All Other 
Telecommunications firms are small entities that might be affected by 
our action.

E. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities

    73. The rule changes in the Order include reducing the unnecessary 
regulatory burdens and inflexibility of ex ante pricing regulation and 
tariffing requirements for price cap LECs' TDM

[[Page 38575]]

transport services since the Commission has found there is sufficient 
competition to justify reduced regulation. These rule changes provide 
additional incentives for competitive entry, network investment and the 
migration to IP-based network technologies and services.
    74. The transition period for detariffing price cap LECs' TDM 
transport services will begin on the effective date of this Order 
(thirty (30) days after Federal Register publication). Given our desire 
to align the transition periods we adopt here with those the Commission 
already adopted in the BDS Order, the transition periods for 
detariffing TDM transport services will end on the same date that the 
transition period mandated by the BDS Order for price cap LECs' other 
BDS services is scheduled to end--August 1, 2020.
    75. Specifically, the Order eliminates ex ante pricing regulation 
and tariffing requirements for price cap LECs' TDM transport BDS. This 
will eliminate reporting, recordkeeping, and other compliance 
requirements for any price cap LEC.

F. Steps Taken To Minimize the Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    76. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance and reporting requirements under the rules for such small 
entities; (3) the use of performance rather than design standards; and 
(4) an exemption from coverage of the rule, or any part thereof, for 
such small entities.
    77. The rule changes in this Order reduce the economic impact of 
the Commission's rules on price cap LECs by freeing price cap LECs from 
ex ante pricing regulation for their TDM transport offerings, including 
the requirement to tariff their TDM transport services. These rule 
changes will significantly minimize the economic impact of our rules on 
price cap LECs.

G. Report to Congress

    78. The Commission will send a copy of the Report and Order, 
including this FRFA, in a report to be sent to Congress pursuant to the 
Congressional Review Act. In addition, the Commission will send a copy 
of the Report and Order, including this FRFA, to the Chief Counsel for 
Advocacy of the SBA. A copy of the Order and FRFA (or summaries 
thereof) will also be published in the Federal Register. Final 
Regulatory Flexibility Analysis.
    79. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA) an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated into the Second Further Notice of Proposed Rulemaking and 
Further Notice of Proposed Rulemaking (Second Further Notice) for the 
Time Division Multiplexing (TDM) transport business data services 
(BDS). The Commission sought written public comment on the proposals in 
the Second Further Notice, including comment on the IRFA. The 
Commission received no comments on the IRFA. Because the Commission 
amends its rules in this Report and Order, the Commission has included 
this Final Regulatory Flexibility Analysis (FRFA). This present FRFA 
conforms to the RFA.

A. Need for, and Objectives of, the Proposed Rules

    80. In the Second Further Notice, the Commission proposed changes 
to, and sought comment on, the appropriate regulatory treatment of TDM 
transport BDS offerings offered by price cap local exchange carriers 
(LECs). The Commission proposed to remove ex ante pricing regulation 
from TDM transport business data services offered by price cap LECs. In 
this Order, we promote competition in the market for BDS TDM transport 
services by adopting a regulatory framework for those services that 
better reflects the dynamic competitive nature of price cap LECs' TDM 
transport markets.

B. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA

    81. We analyze the market for TDM transport in areas served by 
price cap incumbent local exchange carriers and conclude that the 
record in this proceeding demonstrates widespread, significant and 
growing competition in this segment of the BDS market. We therefore 
grant nationwide relief from ex ante pricing regulation of these 
carriers' TDM transport services, forbear from applying Section 203 
tariffing requirements to these services, and adopt permissive 
detariffing for price cap LECs' TDM transport services for a transition 
period, followed by mandatory detariffing of these services.
    82. The Commission did not receive comments specifically addressing 
the rules and policies proposed in the IRFA.

C. Response to Comments by the Chief Counsel for Advocacy of the Small 
Business Administration

    83. The Chief Counsel did not file any comments in response to this 
proceeding.

D. Description and Estimate of the Number of Small Entities to Which 
the Proposed Rules Will Apply

    84. 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 and by the rule revisions on which the 
FNPRMs seek comment, if adopted. The RFA generally defines the term 
``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small-business concern'' under the Small Business 
Act. A ``small-business concern'' is one which: (1) Is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria established by the SBA.
1. Total Small Entities
    85. Small Businesses, Small Organizations, Small Governmental 
Jurisdictions. Our actions, over time, may affect small entities that 
are not easily categorized at present. We therefore describe here, at 
the outset, three broad groups of small entities that could be directly 
affected herein. First, while there are industry specific size 
standards for small businesses that are used in the regulatory 
flexibility analysis, according to data from the SBA's Office of 
Advocacy, in general a small business is an independent business having 
fewer than 500 employees. These types of small businesses represent 
99.9% of all businesses in the United States which translates to 28.8 
million businesses.
    86. Next, the type of small entity described as a ``small 
organization'' is generally ``any not-for-profit enterprise which is 
independently owned and operated and is not dominant in its field.'' 
Nationwide, as of August 2016, there were approximately 356,494 small 
organizations based on registration and tax data filed by nonprofits 
with the Internal Revenue Service (IRS).
    87. Finally, the small entity described as a ``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.'' U.S. Census Bureau data

[[Page 38576]]

from the 2012 Census of Governments indicates that there were 90,056 
local governmental jurisdictions consisting of general purpose 
governments and special purpose governments in the United States. Of 
this number there were 37,132 general purpose governments (county, 
municipal and town or township) with populations of less than 50,000 
and 12,184 special purpose governments (independent school districts 
and special districts) with populations of less than 50,000. The 2012 
U.S. Census Bureau data for most types of governments in the local 
government category shows that the majority of these governments have 
populations of less than 50,000. Based on these data we estimate that 
at least 49,316 local government jurisdictions fall in the category of 
``small governmental jurisdictions.''
2. Broadband Internet Access Service Providers
    88. Internet Service Providers (Broadband). Broadband internet 
service providers include wired (e.g., cable, DSL) and VoIP service 
providers using their own operated wired telecommunications 
infrastructure fall in the category of Wired Telecommunication 
Carriers. Wired Telecommunications Carriers are comprised of 
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 size 
standard for this category classifies a business as small if it has 
1,500 or fewer employees. U.S. Census data for 2012 show that there 
were 3,117 firms that operated that year. Of this total, 3,083 operated 
with fewer than 1,000 employees. Consequently, under this size standard 
the majority of firms in this industry can be considered small.
3. Wireline Providers
    89. Wired Telecommunications Carriers. The U.S. Census Bureau 
defines this industry as ``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 communications 
networks. Transmission facilities may be based on a single technology 
or a combination of technologies. Establishments in this industry use 
the wired telecommunications network facilities that they operate to 
provide a variety of services, such as wired telephony services, 
including VoIP services, wired (cable) audio and video programming 
distribution, and wired broadband internet services. By exception, 
establishments providing satellite television distribution services 
using facilities and infrastructure that they operate are included in 
this industry.'' The SBA has developed a small business size standard 
for Wired Telecommunications Carriers, which consists of all such 
companies having 1,500 or fewer employees. Census data for 2012 show 
that there were 3,117 firms that operated that year. Of this total, 
3,083 operated with fewer than 1,000 employees. Thus, under this size 
standard, the majority of firms in this industry can be considered 
small.
    90. 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 as defined above. Under that size standard, such a business is 
small if it has 1,500 or fewer employees. According to Commission data, 
3,117 firms operated in that year. Of this total, 3,083 operated with 
fewer than 1,000 employees. Consequently, the Commission estimates that 
most providers of incumbent local exchange service are small businesses 
that may be affected by the rules and policies adopted. A total of 
1,307 firms reported that they were incumbent local exchange service 
providers. Of this total, an estimated 1,006 have 1,500 or fewer 
employees.
    91. 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 NAICS Code category is Wired 
Telecommunications Carriers, as defined above. Under that size 
standard, such a business is small if it has 1,500 or fewer employees. 
U.S. Census data for 2012 indicate that 3,117 firms operated during 
that year. Of that number, 3,083 operated with fewer than 1,000 
employees. Based on this data, the Commission concludes that the 
majority of Competitive LECS, CAPs, Shared-Tenant Service Providers, 
and Other Local Service Providers, are small entities. 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. 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. Also, 72 carriers have reported that 
they are Other Local Service Providers. Of this total, 70 have 1,500 or 
fewer employees. Consequently, based on internally researched FCC data, 
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.
    92. We have included small incumbent LECs in this present RFA 
analysis. As mentioned above, a ``small business'' under the RFA is one 
that, inter alia, meets the pertinent small business size standard 
(e.g., a telephone communications business having 1,500 or fewer 
employees), and ``is not dominant in its field of operation.'' The 
SBA's Office of Advocacy contends that, for RFA purposes, small 
incumbent LECs are not dominant in their field of operation because any 
such dominance is not ``national'' in scope. We have therefore included 
small incumbent LECs in this RFA analysis, although we emphasize that 
this RFA action has no effect on Commission analyses and determinations 
in other, non-RFA contexts.
    93. Interexchange Carriers (IXCs). Neither the Commission nor the 
SBA has developed a definition for Interexchange Carriers. The closest 
NAICS Code category is Wired Telecommunications Carriers as defined 
above. The applicable size standard under SBA rules is that such a 
business is small if it has 1,500 or fewer employees. U.S. Census data 
for 2012 indicates that 3,117 firms operated during that year. Of that 
number, 3,083 operated with fewer than 1,000 employees. According to 
internally developed Commission data, 359 companies reported that their 
primary telecommunications service activity was the provision of 
interexchange services. Of this total, an estimated 317 have 1,500 or 
fewer employees. Consequently, the Commission estimates that the 
majority of IXCs are small entities that may be affected by our 
proposed rules.
    94. Local Resellers. The SBA has developed a small business size 
standard for the category of Telecommunications Resellers. The 
Telecommunications Resellers industry comprises establishments engaged 
in purchasing access and network capacity

[[Page 38577]]

from owners and operators of telecommunications networks and reselling 
wired and wireless telecommunications services (except satellite) to 
businesses and households. Establishments in this industry resell 
telecommunications; they do not operate transmission facilities and 
infrastructure. Mobile virtual network operators (MVNOs) are included 
in this industry. Under that size standard, such a business is small if 
it has 1,500 or fewer employees. Census data for 2012 show that 1,341 
firms provided resale services during that year. Of that number, all 
operated with fewer than 1,000 employees. Thus, under this category and 
the associated small business size standard, the majority of these 
prepaid calling card providers can be considered small entities.
    95. Toll Resellers. The Commission has not developed a definition 
for Toll Resellers. The closest NAICS Code Category is 
Telecommunications Resellers. The Telecommunications Resellers industry 
comprises establishments engaged in purchasing access and network 
capacity from owners and operators of telecommunications networks and 
reselling wired and wireless telecommunications services (except 
satellite) to businesses and households. Establishments in this 
industry resell telecommunications; they do not operate transmission 
facilities and infrastructure. Mobile virtual network operators (MVNOs) 
are included in this industry. 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. Census data for 2012 show that 1,341 firms provided resale 
services during that year. Of that number, 1,341 operated with fewer 
than 1,000 employees. Thus, under this category and the associated 
small business size standard, the majority of these resellers can be 
considered small entities. According to Commission data, 881 carriers 
have reported that they are engaged in the provision of toll resale 
services. Of this total, an estimated 857 have 1,500 or fewer 
employees. Consequently, the Commission estimates that the majority of 
toll resellers are small entities.
    96. Other Toll Carriers. Neither the Commission nor the SBA has 
developed a definition 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 NAICS Code category is for 
Wired Telecommunications Carriers as defined above. Under the 
applicable SBA size standard, such a business is small if it has 1,500 
or fewer employees. Census data for 2012 show that there were 3,117 
firms that operated that year. Of this total, 3,083 operated with fewer 
than 1,000 employees. Thus, under this category and the associated 
small business size standard, the majority of Other Toll Carriers can 
be considered small. According to internally developed 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. Consequently, the 
Commission estimates that most Other Toll Carriers are small entities 
that may be affected by rules adopted pursuant to the Second Further 
Notice.
    97. 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.
4. Wireless Providers--Fixed and Mobile
    98. Wireless Telecommunications Carriers (except Satellite). This 
industry comprises establishments engaged in operating and maintaining 
switching and transmission facilities to provide communications via the 
airwaves. Establishments in this industry have spectrum licenses and 
provide services using that spectrum, such as cellular services, paging 
services, wireless internet access, and wireless video services. The 
appropriate size standard under SBA rules is that such a business is 
small if it has 1,500 or fewer employees. For this industry, U.S. 
Census data for 2012 show that there were 967 firms that operated for 
the entire year. Of this total, 955 firms had employment of 999 or 
fewer employees and 12 had employment of 1,000 employees or more. Thus 
under this category and the associated size standard, the Commission 
estimates that the majority of wireless telecommunications carriers 
(except satellite) are small entities.
    99. The Commission's own data--available in its Universal Licensing 
System--indicate that, as of October 25, 2016, there are 280 Cellular 
licensees that will be affected by our actions today. The Commission 
does not know how many of these licensees are small, as the Commission 
does not collect that information for these types of entities. 
Similarly, according to internally developed Commission data, 413 
carriers reported that they were engaged in the provision of wireless 
telephony, including cellular service, Personal Communications Service, 
and Specialized Mobile Radio Telephony services. Of this total, an 
estimated 261 have 1,500 or fewer employees, and 152 have more than 
1,500 employees. Thus, using available data, we estimate that the 
majority of wireless firms can be considered small.
    100. 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.
    101. Wireless Telephony. Wireless telephony includes cellular, 
personal communications services, and specialized mobile radio 
telephony carriers. As explained, 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.
5. Cable Service Providers
    102. Because section 706 requires us to monitor the deployment of 
broadband using any technology, we anticipate that some broadband 
service providers may not provide telephone service. Accordingly, we 
describe below other types of firms that may provide broadband 
services, including cable companies, MDS providers, and utilities, 
among others.

[[Page 38578]]

    103. Cable and Other Subscription Programming. This industry 
comprises establishments primarily engaged in operating studios and 
facilities for the broadcasting of programs on a subscription or fee 
basis. The broadcast programming is typically narrowcast in nature 
(e.g., limited format, such as news, sports, education, or youth-
oriented). These establishments produce programming in their own 
facilities or acquire programming from external sources. The 
programming material is usually delivered to a third party, such as 
cable systems or direct-to-home satellite systems, for transmission to 
viewers. The SBA has established a size standard for this industry 
stating that a business in this industry is small if it has 1,500 or 
fewer employees. The 2012 Economic Census indicates that 367 firms were 
operational for that entire year. Of this total, 357 operated with less 
than 1,000 employees. Accordingly, we conclude that a substantial 
majority of firms in this industry are small under the applicable SBA 
size standard.
    104. Cable Companies and Systems (Rate Regulation). The Commission 
has developed its own small business size standards for the purpose of 
cable rate regulation. Under the Commission's rules, a ``small cable 
company'' is one serving 400,000 or fewer subscribers nationwide. 
Industry data indicate that there are currently 4,600 active cable 
systems in the United States. Of this total, all but eleven cable 
operators nationwide are small under the 400,000-subscriber size 
standard. In addition, under the Commission's rate regulation rules, a 
``small system'' is a cable system serving 15,000 or fewer subscribers. 
Current Commission records show 4,600 cable systems nationwide. Of this 
total, 3,900 cable systems have fewer than 15,000 subscribers, and 700 
systems have 15,000 or more subscribers, based on the same records. 
Thus, under this standard as well, we estimate that most cable systems 
are small entities.
    105. Cable System Operators (Telecom Act Standard). The 
Communications Act also contains a size standard for small cable system 
operators, which is ``a cable operator that, directly or through an 
affiliate, serves in the aggregate fewer than 1% 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.'' 
There are approximately 52,403,705 cable video subscribers in the 
United States today. Accordingly, an operator serving fewer than 
524,037 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, we find that all but nine incumbent cable operators are 
small entities under this size standard. The Commission neither 
requests nor collects information on whether cable system operators are 
affiliated with entities whose gross annual revenues exceed $250 
million. Although it seems certain that some of these cable system 
operators are affiliated with entities whose gross annual revenues 
exceed $250 million, we are unable at this time to estimate with 
greater precision the number of cable system operators that would 
qualify as small cable operators under the definition in the 
Communications Act.
    106. All Other Telecommunications. ``All Other Telecommunications'' 
is defined as follows: This U.S. industry is comprised of 
establishments that are primarily engaged in providing specialized 
telecommunications services, such as satellite tracking, communications 
telemetry, and radar station operation. This industry also includes 
establishments primarily engaged in providing satellite terminal 
stations and associated facilities connected with one or more 
terrestrial systems and capable of transmitting telecommunications to, 
and receiving telecommunications from, satellite systems. 
Establishments providing internet services or voice over internet 
protocol (VoIP) services via client-supplied telecommunications 
connections are also included in this industry. The SBA has developed a 
small business size standard for ``All Other Telecommunications,'' 
which consists of all such firms with gross annual receipts of $32.5 
million or less. For this category, census data for 2012 show that 
there were 1,442 firms that operated for the entire year. Of these 
firms, a total of 1,400 had gross annual receipts of less than $25 
million. Consequently, we estimate that the majority of All Other 
Telecommunications firms are small entities that might be affected by 
our action.

E. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities

    107. The rule changes in the Order include reducing the unnecessary 
regulatory burdens and inflexibility of ex ante pricing regulation and 
tariffing requirements for price cap LECs' TDM transport services since 
the Commission has found there is sufficient competition to justify 
reduced regulation. These rule changes provide additional incentives 
for competitive entry, network investment and the migration to IP-based 
network technologies and services.
    108. The transition period for detariffing price cap LECs' TDM 
transport services will begin on the effective date of this Order 
(thirty (30) days after Federal Register publication). Given our desire 
to align the transition periods we adopt here with those the Commission 
already adopted in the BDS Order, the transition periods for 
detariffing TDM transport services will end on the same date that the 
transition period mandated by the BDS Order for price cap LECs' other 
BDS services is scheduled to end--August 1, 2020.
    109. Specifically, the Order eliminates ex ante pricing regulation 
and tariffing requirements for price cap LECs' TDM transport BDS. This 
will eliminate reporting, recordkeeping, and other compliance 
requirements for any price cap LEC.

F. Steps Taken To Minimize the Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    110. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance and reporting requirements under the rules for such small 
entities; (3) the use of performance rather than design standards; and 
(4) an exemption from coverage of the rule, or any part thereof, for 
such small entities.
    111. The rule changes in this Order reduce the economic impact of 
the Commission's rules on price cap LECs by freeing price cap LECs from 
ex ante pricing regulation for their TDM transport offerings, including 
the requirement to tariff their TDM transport services. These rule 
changes will significantly minimize the economic impact of our rules on 
price cap LECs.

G. Report to Congress

    112. The Commission will send a copy of the Report and Order, 
including this FRFA, in a report to be sent to Congress pursuant to the 
Congressional Review Act. In addition, the Commission will send a copy 
of the Report and Order, including this FRFA, to the Chief Counsel for 
Advocacy of the SBA. A copy of the Order and FRFA (or

[[Page 38579]]

summaries thereof) will also be published in the Federal Register.

IV. Ordering Clauses

    113. Accordingly, it is ordered that, pursuant to sections 1, 2, 
4(i)-(j), 10, 201(b), 202(a), 403, of the Communications Act of 1934, 
as amended, and section 706 of the Telecommunications Act of 1996, 47 
U.S.C. 151, 152, 154(i)-(j), 160, 201(b), 202(a), 403, 1302, this 
Report and Order on Remand in WC Docket No. 16-143, GN Docket No. 13-5, 
WC Docket No. 05-25, and RM-10593 is adopted and shall be effective 
thirty (30) days after publication in the Federal Register.
    114. It is further ordered that Parts 61 and 69 of the Commission's 
rules, 47 CFR parts 61 and 69, are amended as set forth in Appendix A, 
and that such rule amendments shall be effective thirty (30) days after 
publication of this Report and Order on Remand in the Federal Register.
    115. It is further ordered that, pursuant to sections 402 and 405 
of the Communications Act, 47 U.S.C. 402, 405, the date of ``public 
notice'' with respect to this Report and Order on Remand of all actions 
taken herein shall be the date that a summary of this Report and Order 
on Remand is published in the Federal Register. The period for filing 
petitions for reconsideration or petitions for judicial review of all 
actions taken herein shall commence on that date. Section 1.4 of the 
Commission's rules, 47 CFR 1.4, is hereby waived to the extent 
inconsistent with this paragraph.
    116. It is further ordered that the Commission's Consumer & 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Report and Order on Remand to Congress and the Government 
Accountability Office pursuant to the Congressional Review Act, see 5 
U.S.C. 801(a)(1)(A).
    117. It is further ordered, that the Commission's Consumer & 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Report and Order on Remand, including the Final Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

List of Subjects

47 CFR Part 61

    Communications, Common carriers, Reporting and recordkeeping 
requirements, Telephone.

47 CFR Part 69

    Communications, Common carriers, Reporting and recordkeeping 
requirements, Telephone.

Federal Communications Commission.
Marlene Dortch,
Secretary.

Final Rules

    For the reasons set forth in the preamble, the Federal 
Communications Commission amends parts 61 and 69 of title 47 of the 
CFR, as follows:

PART 61--TARIFFS

0
1. The authority citation for part 61 continues to read as follows:

    Authority: 47 U.S.C. 151, 154(i), 154(j), 201-205, 403, unless 
otherwise noted.


0
2. Section 61.201 is amended by revising paragraph (a)(3) to read as 
follows:


Sec.  61.201  Detariffing of price cap local exchange carriers.

    (a) * * *
    (3) Any transport services as defined in Sec.  69.801(j) of this 
chapter;
* * * * *

0
3. Section 61.203 is amended by revising paragraph (b) to read as 
follows:


Sec.  61.203  Detariffing of competitive local exchange carriers.

* * * * *
    (b) The detariffing must be completed by August 1, 2020.

PART 69--ACCESS CHARGES

0
4. The authority citation for part 69 continues to read as follows:

    Authority: 47 U.S.C. 154, 201, 202, 203, 205, 218, 220, 254, 
403, unless otherwise noted.


0
5. Section 69.807 is amended by revising paragraph (a) to read as 
follows:


Sec.  69.807  Regulatory relief.

    (a) Price cap local exchange carrier TDM transport, end user 
channel terminations in markets deemed competitive, and end user 
channel terminations in grandfathered markets for a price cap local 
exchange carrier that was granted Phase II pricing flexibility prior to 
June 2017, are granted the following regulatory relief:
    (1) Elimination of the rate structure requirements contained in 
subpart B of this part;
    (2) Elimination of price cap regulation; and
    (3) Elimination of tariffing requirements as specified in Sec.  
61.201 of this chapter.
* * * * *
[FR Doc. 2019-16897 Filed 8-6-19; 8:45 a.m.]
BILLING CODE 6712-01-P


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