Jurisdictional Separations and Referral to the Federal-State Joint Board, 58692-58698 [2024-15567]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 89, Number 139 (Friday, July 19, 2024)]
[Proposed Rules]
[Pages 58692-58698]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-15567]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 36

[CC Docket No. 80-286; FCC 24-71; FR ID 231217]


Jurisdictional Separations and Referral to the Federal-State 
Joint Board

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) proposes to extend, for an additional six years, the 
jurisdictional separations category relationships and cost allocation 
factors (together, separations rules) freeze for rate-of-return 
incumbent local exchange carriers (LECs). Further extending the freeze 
will enable the Commission to continue to work with the Federal-State 
Joint Board on Jurisdictional Separations (Joint Board) to determine 
next steps in amending the separations rules in light of sweeping 
technological and regulatory changes since these rules were initially 
adopted.

DATES: Comments are due on or before August 19, 2024; reply comments 
are due on or before September 3, 2024.

ADDRESSES: Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's 
rules, 47 CFR 1.415, 1.419, interested parties may file comments and 
reply comments on or before the dates indicated on the first page of 
this document. Comments may be filed using the Commission's Electronic 
Comment Filing System (ECFS). You may submit comments, identified by WC 
Docket No. 80-286, by either of the following methods:
     Electronic Filers: Comments may be filed electronically 
using the internet by accessing the ECFS: https://www.fcc.gov/ecfs/.
     Paper Filers: Parties who choose to file by paper must 
file an original and one copy of each filing.
     Filings can be sent by hand or messenger delivery, by 
commercial courier, or by the U.S. Postal Service. All filings must be 
addressed to the Secretary, Federal Communications Commission.
     Hand-delivered or messenger-delivered paper filings for 
the Commission's Secretary are accepted between 8:00 a.m. and 4:00 p.m. 
by the FCC's mailing contractor at 9050 Junction Drive, Annapolis 
Junction, MD 20701. All hand deliveries must be held together with 
rubber bands or fasteners. Any envelopes and boxes must be disposed of 
before entering the building.
     Commercial courier deliveries (any deliveries not by the 
U.S. Postal Service) must be sent to 9050 Junction Drive, Annapolis 
Junction, MD 20701. Filings sent by U.S. Postal Service First-Class 
Mail, Priority Mail, and Priority Mail Express must be sent to 45 L 
Street NE, Washington, DC 20554.
     People with Disabilities: To request materials in 
accessible formats for people with disabilities (braille, large print, 
electronic files, audio format), send an email to [email protected] or 
call the Consumer & Governmental Affairs Bureau at 202-418-0530.

FOR FURTHER INFORMATION CONTACT: Marv Sacks, Pricing Policy Division of 
the Wireline Communications Bureau, at (202) 418-2017 or via email at 
[email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Further Notice of Proposed Rulemaking (FNPRM) in CC Docket No. 80-286, 
FCC 24-71, adopted and released on July 1, 2024. The full text of this 
document is available at the following internet address: https://docs.fcc.gov/public/attachments/FCC-24-71A1.pdf. A notice of the 
renewal of the existing referrals to the Federal-State Joint Board on 
Separations relating to this document is published elsewhere in this 
issue of the Federal Register.
    Paperwork Reduction Act. This document does not contain proposed 
information collection requirements subject to the Paperwork Reduction 
Act of 1995, 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.
    Providing Accountability Through Transparency Act. The Providing 
Accountability Through Transparency Act requires each agency, in 
providing notice of a rulemaking, to post online a brief plain-language 
summary of the proposed rule. Accordingly, the Commission will publish 
the required summary of this Further Notice on https://www.fcc.gov/proposed-rulemakings.

Synopsis

I. Introduction

    1. Today, the separations rules remain applicable to only a limited 
and

[[Page 58693]]

declining number of incumbent LECs that continue to rely on costs to 
calculate rates or universal service support. Due to the breadth and 
complexity of these rules, as well as their narrow applicability, the 
Commission has repeatedly extended the freeze that was first adopted in 
2001. The Commission expects that the benefits of its proposal to 
further extend the separations rules' freeze likely outweigh the costs 
of allowing it to end and seeks comment on various aspects of its 
proposal.

II. Background

    2. Jurisdictional Separations Process. The jurisdictional 
separations rules were designed to ensure that rate-of-return incumbent 
LECs apportion the costs of their regulated services between the 
interstate or intrastate jurisdictions in a manner that reflects the 
relative use of their networks to provide interstate or intrastate 
telecommunications services. Jurisdictional separations is the third 
step in a four-step regulatory cost-based rate-making process. First, a 
rate-of-return carrier records its costs and revenues in various 
accounts using the Uniform System of Accounts prescribed by the 
Commission's part 32 rules. Second, the carrier divides the costs in 
these accounts between regulated and nonregulated activities in 
accordance with the Commission's part 64 rules, a step that helps 
ensure that the costs of nonregulated activities will not be recovered 
through regulated interstate rates. Third, the carrier separates the 
regulated costs and revenues between the interstate and intrastate 
jurisdictions using the Commission's part 36 jurisdictional separations 
rules. Finally, the carrier apportions the interstate regulated costs 
among the interexchange services and the rate elements that form the 
cost basis for its exchange access tariffs. Carriers subject to rate-
of-return regulation perform this apportionment in accordance with the 
Commission's part 69 rules.
    3. To comply with these rules, rate-of-return incumbent LECs must 
perform annual cost studies that include jurisdictional separations. 
After separating non-regulated from regulated costs and revenues, the 
cost study directly assigns or allocates the regulated costs and 
revenues to various part 36 categories. Amounts in categories that are 
used exclusively for interstate or intrastate communications are 
directly assigned to the appropriate jurisdiction. Amounts in 
categories that support both interstate and intrastate services are 
divided between the jurisdictions using allocation factors developed in 
accordance with part 36 that reflect relative use or a fixed 
percentage.
    4. Attempts at Separations Reform and Separations Freezes. In 1997, 
recognizing that ``changes in the law, technology, and market structure 
of the telecommunications industry'' necessitated a thorough 
reevaluation of the jurisdictional separations process, the Commission 
initiated a proceeding to comprehensively reform the separations rules. 
At the same time, pursuant to section 410(c) of the Communications Act 
of 1934, as amended (the Communications Act), the Commission referred 
the matter of jurisdictional separations reform to the Joint Board for 
a recommended decision.
    5. In 2000, the Joint Board--comprised of both State and Federal 
members--issued a recommendation that the Commission freeze the part 36 
category relationships and jurisdictional allocation factors pending 
resolution of comprehensive reform. In 2001, the Commission adopted an 
order concluding that a freeze would stabilize the separations process 
pending reform by minimizing any impact of cost shifts on separations 
results due to circumstances--such as the growth of internet usage, new 
technologies, and local competition--not contemplated by the rules. The 
Commission also determined that a freeze would simplify the separations 
process by eliminating the need for many separations studies until 
separations reform was implemented. Accordingly, the Commission froze 
all part 36 allocation factors and allowed rate-of-return carriers to 
voluntarily freeze their category relationships, enabling each carrier 
to determine whether such a freeze would be beneficial ``based on its 
own circumstances and investment plans.'' In 2009, the Commission made 
another referral, asking the Joint Board to consider comprehensive 
jurisdictional separations reform as well as ``an interim adjustment of 
the current jurisdictional separations freeze.'' In 2018, the 
Commission tasked the Joint Board with addressing two specific issues 
during the interim period pending comprehensive reform. These included 
exploring the possibility of amending separations rules to acknowledge 
that certain carriers are no longer bound by them, as well as updating 
existing recordkeeping requirements to align with the current 
applicability of separations rules. The Joint Board has not to date 
submitted a recommended decision on comprehensive separations reform or 
on any interim adjustments.
    6. The Commission specified that the 2001 freeze would last five 
years or until the Commission completed comprehensive separations 
reform, whichever came first. The Commission also concluded that, prior 
to the expiration of the five-year period, the Commission would, in 
consultation with the Joint Board, determine whether the freeze period 
should be extended, explaining that ``the determination of whether the 
freeze should be extended at the end of the five-year period shall be 
based upon whether, and to what extent, comprehensive reform of 
separations has been undertaken by that time.''
    7. Since 2001, the Commission has extended the separations freeze 
eight times, for periods ranging from one year to six years, the most 
recent extension of which expires on December 31, 2024. In repeatedly 
extending the freeze, the Commission has explained that the freeze 
would stabilize and simplify the separations process while the Joint 
Board and the Commission continued to work on separations reform.
    8. Declining Relevance of Jurisdictional Separations. The 
jurisdictional separations rules no longer apply to the majority of 
carriers currently providing telecommunications services. Currently, 
out of 1,079 rate-of-return carriers, only about 247 carriers that 
receive cost-based Universal Service Fund (USF) support make the full 
use of separations to set end-user common line, business data services 
(BDS), and Consumer Broadband-Only Loop service rates, as well as to 
determine the level of USF support. Approximately 374 Alternative-
Connect America Cost Model and Alaska Plan carriers use separations 
only for setting BDS rates. The separations rules were never applicable 
to wireless carriers, and in 2008, the Commission granted price cap 
incumbent LECs forbearance from the separations rules, leaving rate-of-
return incumbent LECs as the only remaining carriers required to comply 
with the separations rules. In addition, in 2018, the Commission 
offered rate-of-return carriers the option to receive fixed or model-
based high-cost universal service support with the ability to elect 
incentive regulation for their business data services (BDS). Carriers 
electing both model-based support and incentive regulation for BDS no 
longer need to engage in separation of their costs for any Federal 
regulatory purpose, whether for universal service funding or rate-
making. Currently, 232 A-CAM carriers have elected incentive regulation 
for BDS. Moreover, apart from a handful of carriers performing sample 
cost studies,

[[Page 58694]]

the separations rules do not apply to rate-of-return carriers that are 
``average schedule companies.'' At present, 226 companies participate 
in NECA's average schedule. These companies do not perform 
jurisdictional separations; they receive pool revenues, or settlements, 
from the National Exchange Carrier Association, Inc. for interstate 
telecommunications services based on a series of statistical formulas, 
approved by the Commission, that approximate the amounts received by a 
similar cost company. What is more, the Commission expects additional 
rate-of-return carriers will take advantage of the Commission's latest 
Enhanced A-CAM program for universal service support and will also 
select to be subject to incentive regulation for BDS--thus, the 
Commission expects the number of carriers that will be subject to the 
separations rules to decrease even further.
    9. For carriers that remain subject to the separations rules, the 
separations process has increasingly limited application because of 
regulatory reforms by the Commission that remove the need to engage in 
the separations process. For example, as part of comprehensive reform 
and modernization of the universal service and intercarrier 
compensation systems, the Commission adopted rate caps for the switched 
access services of rate-of-return carriers (including a transition to 
bill-and-keep for certain rate elements), thereby eliminating the need 
to apply separations rules for calculating switched access rates. 
Further, rate-of-return carriers receiving high-cost universal service 
support based on the Commission's A-CAM programs but not electing 
incentive regulation for business data services no longer need to use 
jurisdictional separations to quantify the amount of high-cost support 
for the interstate portion of their common line services or to set 
interstate rates for these services.

III. Further Notice of Proposed Rulemaking

    10. The Commission proposes to extend the separations freeze for 
another six years and invites comment on this proposal. Several 
factors--recent changes to the composition of the Joint Board, the 
complex nature of the work required to develop comprehensive 
recommendations for separations reform, and the fact that the current 
freeze expires at the end of this calendar year--have combined to leave 
limited and insufficient time within which to develop and advance 
recommended decisions. Moreover, allowing the freeze to expire without 
further extension would force rate-of-return carriers to engage in 
unnecessary, costly and burdensome cost studies based on outdated rules 
and assumptions that bear little relationship to the marketplace today. 
Accordingly, after weighing the likely benefits of extending the 
current freeze against the likely costs of allowing it to expire, the 
Commission proposes to extend the separations freeze until December 31, 
2030. The Commission seeks comment on this proposal as well as whether 
it should change any aspect of the separations freeze should the 
Commission extend the freeze as proposed.
    11. Process Considerations. The proposal to extend the freeze 
through December 31, 2030, would allow the Joint Board to consider next 
steps in addressing separations reform. This Joint Board has quite 
recently seated several new members who are just beginning their 
opportunity to delve into the complicated issues they need to grapple 
with in considering reform measures. For example, in 2018, the 
Commission referred a couple of discrete issues to the Joint Board, but 
the Joint Board has not been able to issue a recommended decision on 
them. In short the new Board will need time to develop a meaningful 
recommendation. The combination of these recent changes and the 
procedural process necessary for any recommendation render it unlikely 
that the Joint Board could issue a recommended decision on 
comprehensive reform and that the Commission could consider that 
recommendation, and then act upon it before the current freeze expires. 
Even if the Joint Board could develop a recommendation for 
consideration, the Commission would likely seek comment on that 
recommendation before issuing an order revising the rules. Section 
410(c) contemplates a Joint Board recommendation before the Commission 
moves forward on comprehensive separations reform. Therefore, as a 
practical matter, the Commission is limited at this point to either 
extending the separations freeze or allowing the long-fallow and 
outdated separations rules to take effect on January 1, 2025.
    12. Benefits Outweigh the Costs. The Commission seeks comment on 
the limited options it has under the current circumstances. The 
Commission has consistently found that letting the freeze expire would 
impose significant burdens on rate-of-return carriers, particularly 
smaller rural carriers, and create undue instability. In extending the 
most recent freeze in 2018, the Commission explained that lifting the 
freeze and reinstating the separations rules after an absence of more 
than two decades, would make it extremely difficult, if not impossible, 
for most carriers to perform all of the studies needed to remain in 
full compliance. This would require substantial training and investment 
by rural incumbent LECs, and could cause significant disruptions to 
regulated rates, cost recovery, and other operating conditions when 
applying the outdated separations rules to today's operations. Indeed, 
the Commission has found that requiring carriers to reinstate their 
separations systems ``would be unduly burdensome when there is a 
significant likelihood that there would be no lasting benefit to doing 
so.'' 82 FR 25535-01. The Commission has thus previously concluded that 
the benefits that will result from granting a further extension of the 
freeze far exceed any possible harms. These prior conclusions are also 
compelling and remain relevant today. The Commission proposes to find 
that an additional extension of the freeze far outweighs any potential 
harms, and the Commission seeks comment on this proposal.
    13. In extending the separations freeze, the Commission also 
proposes to direct rate-of-return incumbent LECs to continue to use the 
same frozen category relationships and jurisdictional allocation 
factors. When the Commission allowed a one-time unfreeze of category 
relationships in 2018, only three carriers capitalized on this 
opportunity. The Commission seeks comment on whether it should 
reintroduce the option to unfreeze category relationships at this time. 
The Commission also seeks comment on the comparative costs and benefits 
of maintaining the separations freeze without offering an option to 
unfreeze category relationships.
    14. Length of the Freeze Extension. The Commission proposes an 
extension period of up to six years. Under this proposal, the freeze 
would be extended until December 31, 2030 or until comprehensive reform 
of the part 36 rules is achieved, whichever occurs earlier. The 
Commission seeks comment on this proposal. In 2018, given the 
difficulty of achieving reform up to that point, the Commission 
initially proposed a 15 year freeze because short-term extensions 
adopted in the past would ``not provide the Joint Board, the 
Commission, and interested stakeholders sufficient time'' to revise its 
rules. After considering comments submitted in response to that 
proposal, including from the State members of the Joint Board, the 
Commission found that

[[Page 58695]]

an extension of up to six years was more appropriate.
    15. When the Commission extended the freeze for six years in 2018, 
it concluded that this time period best ``balances the competing 
considerations'' of enabling the Joint Board to focus on solving the 
complex issues versus the Commission's experience in granting a series 
of short-term separations extensions in the past when attempts at 
separations reform stalled. Does this assessment continue to weigh in 
favor of the Commission granting another six-year freeze extension? 
Have any circumstances changed that would lead to a different 
assessment, or do parties have other views on the length of an 
extension? Should the freeze be extended for a longer period of time 
than six years? Repeated short-term freeze extensions necessarily 
consume Commission, State, and industry resources. Alternatively, 
should the Commission permanently extend the separations freeze, as 
some commenters have suggested in the past?
    16. The Commission asks commenters to discuss the advantages and 
disadvantages of a temporally defined extension period versus an 
unlimited extension until comprehensive reform is achieved, and seeks 
comment on the specific reasons in support of recommended timeframes. 
In this regard, the Commission recognizes that the Federal and State 
members of the Joint Board have not issued a recommended decision on 
comprehensive separations reform in the more than two decades since the 
Commission originally proposed such reform. Commenters supporting 
shorter extension periods than the proposed six years should also take 
into account the time necessary for the Commission and the industry to 
adopt and implement revised separations rules and procedures.
    17. The Commission also invites comment on what effect, if any, 
particular extension periods would have on rates and ratepayers. Would 
a relatively long or permanent extension be inconsistent with section 
201(b) of the Act's prohibition on unjust and unreasonable charges? For 
example, in the past, some commenters have supported extending the 
freeze for 15 years, while others expressed concern that such a long 
freeze would result in unjust and unreasonable rates because of the 
frozen allocation of the underlying costs to the interstate and 
intrastate jurisdictions.

IV. Procedural Matters

    18. Ex Parte Requirements. This proceeding shall be treated as a 
``permit-but-disclose'' proceeding in accordance with the Commission's 
ex parte rules. Persons making ex parte presentations must file a copy 
of any written presentation or a memorandum summarizing any oral 
presentation within two business days after the presentation (unless a 
different deadline applicable to the Sunshine period applies). Persons 
making oral ex parte presentations are reminded that memoranda 
summarizing the presentation must (1) list all persons attending or 
otherwise participating in the meeting at which the ex parte 
presentation was made, and (2) summarize all data presented and 
arguments made during the presentation. If the presentation consisted 
in whole or in part of the presentation of data or arguments already 
reflected in the presenter's written comments, memoranda or other 
filings in the proceeding, the presenter may provide citations to such 
data or arguments in his or her prior comments, memoranda, or other 
filings (specifying the relevant page and/or paragraph numbers where 
such data or arguments can be found) in lieu of summarizing them in the 
memorandum. Documents shown or given to Commission staff during ex 
parte meetings are deemed to be written ex parte presentations and must 
be filed consistent with rule 1.1206(b). In proceedings governed by 
rule 1.49(f) or for which the Commission has made available a method of 
electronic filing, written ex parte presentations and memoranda 
summarizing oral ex parte presentations, and all attachments thereto, 
must be filed through the electronic comment filing system available 
for that proceeding, and must be filed in their native format (e.g., 
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding 
should familiarize themselves with the Commission's ex parte rules.
    19. Regulatory Flexibility Act. The Regulatory Flexibility Act of 
1980, as amended (RFA), requires that an agency prepare a regulatory 
flexibility analysis for notice and comment rulemakings, unless the 
agency certifies that ``the rule will not, if promulgated, have a 
significant economic impact on a substantial number of small 
entities.'' Accordingly, the Commission has prepared an Initial 
Regulatory Flexibility Analysis (IRFA) in appendix B of the Further 
Notice and set forth below concerning the possible/potential impact of 
the rule and policy changes contained in this Further Notice. Written 
public comments are requested on the IRFA. Comments must be identified 
as responses to the IRFA and must be filed by the deadlines for comment 
on this Further Notice. Comments must have a separate and distinct 
heading designating them as responses to the IRFA.
    20. Paperwork Reduction Act. This document does not contain 
proposed information collection requirements subject to the Paperwork 
Reduction Act of 1995, 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.
    21. Providing Accountability Through Transparency Act. The 
Providing Accountability Through Transparency Act requires each agency, 
in providing notice of a rulemaking, to post online a brief plain-
language summary of the proposed rule. Accordingly, the Commission will 
publish the required summary of this Further Notice on https://www.fcc.gov/proposed-rulemakings.

V. Initial Regulatory Flexibility Analysis

    22. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) of the possible significant economic impact 
on a substantial number of small entities by the policies and rules 
imposed in the Further Notice of Proposed Rulemaking (Further Notice). 
Written public comments are requested on this IRFA. Comments must be 
identified as responses to the IRFA and must be filed by the deadlines 
for comments specified in the Further Notice. The Commission will send 
a copy of the Further Notice, including this IRFA, to the Chief Counsel 
for Advocacy of the Small Business Administration (SBA).

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

    23. The Commission's part 36 rules regarding jurisdictional 
separations category relationships and cost allocation factors 
(separations rules) originated more than 35 years ago when the 
Commission and its State counterparts used costs to set rates, and the 
rules were designed to help prevent local exchange carriers (LECs) from 
recovering the same costs from both the interstate and intrastate 
jurisdictions. In 1997, the Commission initiated a proceeding to 
comprehensively reform those rules in light of the statutory, 
technological, and marketplace changes that had affected the

[[Page 58696]]

telecommunications industry. In 2001, the Commission, pursuant to a 
recommendation by the Federal-State Joint Board on Jurisdictional 
Separations (Joint Board), froze the part 36 separations rules for a 
five-year period beginning July 1, 2001, or until the Commission 
completed comprehensive separations reform, whichever came first. The 
Commission has extended the freeze eight times, with the most recent 
extension set to expire on December 31, 2024.
    24. In repeatedly extending the freeze, the Commission has 
explained that the freeze would stabilize and simplify the separations 
process while the Joint Board and the Commission continued to work on 
separations reform. This Joint Board has quite recently seated several 
new members who are just beginning their opportunity to delve into the 
complicated issues they need to grapple with in considering reform 
measures. In short, the new Joint Board will need time to develop a 
meaningful recommendation. The combination of these recent changes and 
the procedural process necessary for any recommendation render it 
unlikely that the Joint Board could issue a recommended decision on 
comprehensive reform and that the Commission could consider that 
recommendation, and then act upon it before the current freeze expires. 
Section 410(c) of the Communications Act of 1934, as amended, 
contemplates a Joint Board recommendation before the Commission moves 
forward on comprehensive separations reform. Therefore, as a practical 
matter, the Commission is limited at this point to either extending the 
separations freeze or allowing the outdated separations rules to take 
effect on January 1, 2025.
    25. The Commission expects that permitting the freeze to expire 
would impose significant burdens on rate-of-return carriers, many of 
which include small carriers, that would far exceed the benefits, if 
any, of requiring those carriers to comply with rules that they have 
not implemented since 2001. As a result, the Further Notice proposes to 
extend for up to six years the freeze of part 36 category relationships 
and jurisdictional cost allocation factors to enable the Joint Board to 
address the complex nature of the work involved in developing 
comprehensive recommendations for separations reform. Under this 
proposal, this extension would continue until the earlier of December 
31, 2030, or the completion of comprehensive reform of the part 36 
jurisdictional separations rules. The Commission invites comments on 
this proposal.

B. Legal Basis

    26. The proposed action is authorized pursuant to sections 1, 4(i) 
and (j), 205, 220, 221(c), 254, 303(r), 403, and 410 of the 
Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i) and (j), 
205, 220, 221(c), 254, 303(r), 403, 410, and section 706 of the 
Telecommunications Act of 1996, as amended, 47 U.S.C. 1302.

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

    27. The RFA directs agencies to provide a description of, and, 
where feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. The RFA generally defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A ``small business concern'' is one which: (1) is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria established by the SBA.
    28. Small Businesses, Small Organizations, Small Governmental 
Jurisdictions. The Commission's actions, over time, may affect small 
entities that are not easily categorized at present. The Commission 
therefore describes, 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 Small 
Business Administration'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 33.2 million businesses.
    29. 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.'' 
The Internal Revenue Service (IRS) uses a revenue benchmark of $50,000 
or less to delineate its annual electronic filing requirements for 
small exempt organizations. Nationwide, for tax year 2022, there were 
approximately 530,109 small exempt organizations in the U.S. reporting 
revenues of $50,000 or less according to the registration and tax data 
for exempt organizations available from the IRS.
    30. Finally, the small entity described as a ``small governmental 
jurisdiction'' is defined generally as ``governments of cities, 
counties, towns, townships, villages, school districts, or special 
districts, with a population of less than fifty thousand.'' U.S. Census 
Bureau data from the 2022 Census of Governments indicate there were 
90,837 local governmental jurisdictions consisting of general purpose 
governments and special purpose governments in the United States. Of 
this number, there were 36,845 general purpose governments (county, 
municipal, and town or township) with populations of less than 50,000 
and 11,879 special purpose governments (independent school districts) 
with enrollment populations of less than 50,000. Accordingly, based on 
the 2022 U.S. Census of Governments data, we estimate that at least 
48,724 entities fall into the category of ``small governmental 
jurisdictions.''
    31. 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. 
Wired Telecommunications Carriers are also referred to as wireline 
carriers or fixed local service providers.
    32. The SBA small business size standard for Wired 
Telecommunications Carriers classifies firms having 1,500 or fewer 
employees as small. U.S. Census Bureau data for 2017 show that there 
were 3,054 firms that operated in this industry for the entire year. Of 
this number, 2,964 firms operated with fewer than 250 employees. 
Additionally, based on Commission data in the 2022 Universal Service 
Monitoring Report, as of December 31, 2021, there were 4,590 providers 
that reported they were engaged in the provision of fixed local 
services. Of these providers, the Commission estimates that 4,146 
providers have

[[Page 58697]]

1,500 or fewer employees. Consequently, using the SBA's small business 
size standard, most of these providers can be considered small 
entities.
    33. Incumbent Local Exchange Carriers (Incumbent LECs). Neither the 
Commission nor the SBA has developed a small business size standard 
specifically for incumbent local exchange carriers. Wired 
Telecommunications Carriers is the closest industry with an SBA small 
business size standard. The SBA small business size standard for Wired 
Telecommunications Carriers classifies firms having 1,500 or fewer 
employees as small. U.S. Census Bureau data for 2017 show that there 
were 3,054 firms in this industry that operated for the entire year. Of 
this number, 2,964 firms operated with fewer than 250 employees. 
Additionally, based on Commission data in the 2022 Universal Service 
Monitoring Report, as of December 31, 2021, there were 1,212 providers 
that reported they were incumbent local exchange service providers. Of 
these providers, the Commission estimates that 916 providers have 1,500 
or fewer employees. Consequently, using the SBA's small business size 
standard, the Commission estimates that the majority of incumbent local 
exchange carriers can be considered small entities.
    34. The Commission has included small incumbent LECs in this RFA 
analysis. As noted above, a ``small business'' under the RFA is one 
that, inter alia, meets the pertinent small business size standard 
(e.g., a telephone communications business having 1,500 or fewer 
employees), and ``is not dominant in its field of operation.'' The 
SBA's Office of Advocacy contends that, for RFA purposes, small 
incumbent LECs are not dominant in their field of operation because any 
such dominance is not ``national'' in scope. Because the Commission's 
proposal to freeze the part 36 rules will affect incumbent LECs, some 
entities employing 1,500 or fewer employees may be affected by the rule 
changes proposed in the Further Notice. The Commission has therefore 
included small incumbent LECs in this RFA analysis, although this RFA 
action has no effect on the Commission's analyses and determinations in 
other, non-RFA contexts.

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

    35. The proposed rules, if adopted, would not impose any new or 
additional requirements on small or other entities. The Further Notice 
proposes to extend an existing freeze, and the Commission does not 
anticipate small entities will incur additional compliance costs, or be 
required to hire professionals to comply with the rule proposals, if 
adopted.

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

    36. The RFA requires an agency to describe any significant, 
specifically small business, alternatives that it has considered in 
reaching its proposed approach, which may include the following four 
alternatives (among others): (1) the establishment of differing 
compliance or reporting requirements or timetables that take into 
account the resources available to small entities; (2) the 
clarification, consolidation, or simplification of compliance and 
reporting requirements under the rule for such small entities; (3) the 
use of performance, rather than design, standards; and (4) an exemption 
from coverage of the rule, or part thereof, for such small entities.
    37. The Commission's proposed rules to extend the separations 
freeze is not expected to have a significant economic impact on a 
substantial number of small entities. To the contrary, an extension of 
the separations freeze constitutes an essential step towards reducing 
unnecessary and burdensome costs to small entities when compared to the 
alternative of not doing so. For example, if the freeze was allowed to 
expire and was not extended, the outmoded separations rules would be 
reinstated. The Commission has consistently over the years found that 
such a result would impose new significant economic burdens on rate-of-
return carriers, particularly smaller rural carriers, and create undue 
instability for those carriers. Indeed, if the separations rules were 
reinstated after an absence of more than two decades, most affected 
carriers would find it extremely difficult, if not impossible, to 
perform all of the studies needed to remain in full compliance. This 
would require substantial training and investment by affected rural 
incumbent LECs, and could cause significant disruptions in regulated 
rates, cost recovery, and other operating conditions when applying the 
outdated separations rules to today's operations.
    38. In addition, the jurisdictional freeze has eliminated the need 
for many rate-of-return incumbent LECs that still perform cost studies, 
including incumbent LECs with 1,500 employees or fewer, to complete 
certain annual separations studies that otherwise would be required by 
the Commission's part 36 jurisdictional separations rules. Thus, an 
extension of this freeze would avoid increasing the administrative 
burden of regulatory compliance for these carriers, including small 
incumbent LECs.
    39. The Commission has thus previously concluded that the benefits 
that will result from an additional extension of the freeze far exceed 
any possible harms and anticipates that those prior conclusions are 
compelling and remain relevant today. The Commission therefore proposes 
to extend the separations freeze to permit rate-of-return incumbent 
LECs to continue to use the same frozen category relationships and 
jurisdictional allocation factors. The Commission invites comment on 
this proposal and on the relative costs and benefits of continuing the 
separations freeze.
    40. When the Commission granted a six-year freeze in 2018, it 
concluded that this time period best ``balances the competing 
considerations'' of enabling the Joint Board to focus on solving the 
complex issues versus the Commission's experience in granting a series 
of short-term separations extensions in the past when attempts at 
separations reform stalled. The Commission seeks comment on whether 
this assessment continues to weigh in favor of the Commission granting 
another six-year freeze extension, whether any circumstances changed 
that would lead to a different assessment, and whether parties have 
other views on the length of an extension.

F. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules

    41. None.

VI. Ordering Clauses

    42. Accordingly, it is ordered, pursuant to sections 1, 4(i) and 
(j), 205, 220, 221(c), 254, 303(r), 403, and 410 of the Communication 
Act of 1934, as amended, 47 U.S.C. 151, 154(i) and (j), 205, 220, 
221(c), 254, 303(r), 403, 410, and section 706 of the 
Telecommunications Act of 1996, as amended, 47 U.S.C. 1302, that this 
Further Notice of Proposed Rulemaking and is adopted.
    43. It is further ordered, pursuant to section 220(i) of the 
Communications Act, 47 U.S.C. 220(i), that notice be given to each 
State commission of the above rulemaking proceeding, and that the 
Secretary shall serve a copy of this Further Notice of Proposed 
Rulemaking on each State commission.
    44. It is further ordered that the Commission's Office of the 
Secretary shall send a copy of this Further Notice

[[Page 58698]]

of Proposed Rulemaking, including the Initial Regulatory Flexibility 
Analysis and Final Regulatory Flexibility Certification, to the Chief 
Counsel for Advocacy of the Small Business Administration.

List of Subjects in 47 CFR Part 36

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone.

Federal Communications Commission.
Katura Jackson,
Federal Register Liaison Officer, Office of the Secretary.

Proposed Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR part 36 as follows:

PART 36--JURISDICTIONAL SEPARATIONS PROCEDURES; STANDARD PROCEDURES 
FOR SEPARATING TELECOMMUNICATIONS PROPERTY COSTS, REVENUES, 
EXPENSES, TAXES AND RESERVES FOR TELECOMMUNICATIONS COMPANIES

0
1. The authority citation for part 36 continues to read as follows:

    Authority:  47 U.S.C. 151, 152, 154(i) and (j), 201, 205, 220, 
221(c), 254, 303(r), 403, 410, and 1302 unless otherwise noted.


Sec. Sec.  36.3, 36.123, 36.124, 36.125, 36.126, 36.141, 36.142, 
36.152, 36.154, 36.155, 36.156, 36.157, 36.191, 36.212, 36.214, 36.372, 
36.374, 36.375, 36.377, 36.378, 36.379, 36.380, 36.381, and 
36.382  [Amended]

0
2. In 47 CFR part 36 remove the date ``December 31, 2024'' in the 
following places wherever it appears and add, in its place, the date 
``December 31, 2030''.
0
a. Section 36.3(a) through (c), (d) introductory text, and (e);
0
b. Section 36.123(a)(5) and (6);
0
c. Section 36.124(c) and (d);
0
d. Section 36.125(h) and (i);
0
e. Section 36.126(b)(5) and (6), (c)(4), (e)(4), and (f)(2);
0
f. Section 36.141(c);
0
g. Section 36.142(c);
0
h. Section 36.152(d);
0
i. Section 36.154(g);
0
j. Section 36.155(b);
0
k. Section 36.156(c);
0
l. Section 36.157(b);
0
m. Section 36.191(d);
0
n. Section 36.212(c);
0
o. Section 36.214(a);
0
p. Section 36.372;
0
q. Section 36.374(b) and (d);
0
r. Section 36.375(b)(4) and (5);
0
s. Section 36.377(a) introductory text, (a)(1)(ix), (a)(2)(vii), 
(a)(3)(vii), (a)(4)(vii); (a)(5)(vii), and (a)(6)(vii);
0
t. Section 36.378(b)(1);
0
u. Section 36.379(b)(1) and (2);
0
v. Section 36.380(d) and (e);
0
w. Section 36.381(c) and (d); and
0
x. Section 36.382(a).

[FR Doc. 2024-15567 Filed 7-18-24; 8:45 am]
BILLING CODE 6712-01-P