[Federal Register Volume 67, Number 40 (Thursday, February 28, 2002)]
[Proposed Rules]
[Pages 9232-9242]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-4679]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 51

[CC Docket No. 02-33, CC Docket No. 95-20, CC Docket No. 98-10; FCC 02-
42]


Appropriate Framework for Broadband Access to the Internet Over 
Wireline Facilities

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: This document initiates a thorough examination of the 
appropriate legal and policy framework under the Communications Act of 
1934, as amended (the Act), for broadband access to the Internet 
provided over domestic wireline facilities. In particular, it seeks 
comment on the appropriate statutory classification and regulatory 
framework for wireline broadband Internet access services. It also 
seeks comment on whether facilities-based providers of broadband 
Internet access services provided over wireline and other platforms, 
including cable, wireless and satellite, should be required to 
contribute to universal service. For purposes of this Notice of 
Proposed Rulemaking, the Commission uses the term ``facilities-based'' 
to refer to providers of broadband Internet access services that 
furnish their own last-mile connection, irrespective of transmission 
medium, to the customer. Through this proceeding, the Commission 
intends to further its goals of encouraging the ubiquitous availability 
of broadband to all Americans, promoting the development and deployment 
of multiple broadband platforms, fostering investment and innovation in 
a competitive broadband market, and developing an analytical framework 
for regulating broadband that is consistent, to the extent possible, 
across multiple platforms.

DATES: Comments are due April 15, 2002 and reply comments are due May 
14, 2002.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM) in CC Docket Nos. 02-33, 95-20 and 98-10, 
FCC 02-42, adopted February 14, 2002, and released February 15, 2002. 
The complete text of this NPRM is available for inspection and copying 
during normal business hours in the FCC Reference Information Center, 
Portals II, 445 12th Street, SW., Room CY-A257, Washington, DC, 20554. 
This document may also be purchased from the Commission's duplicating 
contractor, Qualex International, Portals II, 445 12th Street, SW., 
Room CY-B402, Washington, DC 20554, telephone 202-863-2893, facsimile 
202-863-2898, or via e-mail [email protected]. It is also available on 
the Commission's website at http://www.fcc.gov. 

Synopsis of the Notice of Proposed Rulemaking (NPRM)

    1. Background. In this proceeding, the Commission initiates an 
examination of the legal and policy framework under the Act for 
broadband access to the Internet provided over domestic wireline 
facilities. The widespread deployment of broadband infrastructure has 
become a central communications policy objective and it is believed 
that widespread ubiquitous broadband deployment will bring valuable new 
services to consumers, stimulate economic activity and advance economic 
opportunity. The Commission has also initiated three other proceedings 
that focus on the regulatory treatment of broadband. These proceedings, 
together with this NPRM, build the foundation for a comprehensive and 
consistent national broadband policy. First, near the end of 2000, the 
Commission launched the Cable Modem NOI. (65 FR 60441, October 11, 
2000) This considers, among other issues, the appropriate regulatory 
classification for cable modem service, which is used to provide high-
speed Internet access. Second, in the Incumbent LEC Broadband Notice, 
(67 FR 1945, January 15, 2002) the Commission examines whether 
incumbent local exchange carriers (LECs) that are dominant in the 
provision of traditional local exchange and exchange access service 
should also be considered dominant when they provide broadband 
telecommunications services. Third, in the Triennial UNE Review Notice, 
(67 FR 1947, January 15, 2002) the Commission addresses, among other 
things, the incumbent LECs' wholesale obligations under section 251 of 
the Act to make their facilities available as unbundled network 
elements to competitive LECs for the provision of broadband services. 
These latter two proceedings thus investigate how Title II regulation 
under the Act applies to broadband service provided as 
telecommunications services and whether facilities that can be used to 
provide broadband services should be

[[Page 9233]]

subject to Title II unbundling obligations. By contrast, this NPRM 
addresses the fundamental definitional and classification questions for 
wireline broadband Internet access services. Because the instant 
inquiry overlaps with the Commission's pending Computer III Further 
Remand, (60 FR 12529, March 7, 1995) the Commission incorporates the 
Computer III Further Remand proceeding by reference insofar as it 
relates to the Bell Operating Companies' (BOCs) access obligations with 
respect to broadband services.
    2. This proceeding specifically addresses questions regarding 
classifying Internet access service that were raised in two Commission 
proceedings, the 1998 Report to Congress on Universal Service, 
Federal--State Joint Board on Universal Service, CC Docket No. 96-45, 
Report to Congress, 13 FCC Rcd 11501 (rel Apr. 10, 1998), (63 FR 43088, 
August 12, 1998) and the Missouri/Arkansas 271 Order. See Joint 
Application by SBC Communications Inc., Southwestern Bell Telephone 
Company, and Southwestern Bell Communications Services, Inc. d/b/a 
Southwestern Bell Long Distance Pursuant to Section 271 of the 
Telecommunications Act of 1996 to Provide In-Region, InterLATA Services 
in Arkansas and Missouri, CC Docket No. 01-194, Memorandum Opinion and 
Order, 16 FCC Rcd 20719, 20759-60, paras. 81-82 (2001). (66 FR 59249, 
November 27, 2001)
    3. Application of Statutory Classifications to Wireline Broadband 
Internet Access Services. The NPRM discusses the appropriate 
classification of wireline broadband Internet access services. The 
Commission tentative concludes that, as a matter of statutory 
interpretation, the provision of wireline broadband internet access 
service is an information service. The Commission tentatively concludes 
that when an entity provides wireline broadband Internet access service 
over its own transmission facilities, this service, too, is an 
information service under the Act. In addition, the Commission 
tentatively concludes that the transmission component of retail 
wireline broadband Internet access service provided over an entity's 
own facilities is ``telecommunications'' and not a ``telecommunications 
service'' as defined in section 3 of the Act.
    4. Applying the statutory framework in the Act, the Commission 
tentatively concludes that providers of wireline broadband Internet 
access service offer more than a transparent transmission path to end-
users and offer enhanced capabilities. Thus, it tentatively concludes 
that this service is properly classified as an ``information service'' 
under section 3 of the Act. The Commission bases this tentative 
conclusion on the fact that providers of wireline broadband Internet 
access provide subscribers with the ability to run a variety of 
applications that fit under the characteristics stated in the 
``information service'' definition in section 3 of the Act. The 
Commission seeks comment on these tentative conclusions and the 
supporting statutory analysis asks additional questions with regard to 
the proper classification of wireline broadband Internet access 
service, including asking parties to offer any factual evidence that 
would suggest a contrary application of the statute.
    5. The NPRM also analyzes whether wireline broadband Internet 
access service provided over the provider's own facilities is an 
information service, a telecommunications service, or both. As an 
initial matter, the Commission tentatively concludes that nothing about 
the nature of wireline broadband Internet access services offered over 
a provider's own facilities changes the fact that the end-user service 
is an information service. Consistent with the statutory analysis 
described previously, a provider of end-user wireline broadband 
Internet access service delivered over its own facilities provides the 
end-user the ``capability for generating, acquiring, storing, 
transforming, processing, retrieving, utilizing, or making available 
information via telecommunications.'' The Commission believes that the 
end user is receiving an integrated package of transmission and 
information processing capabilities from the provider. It believes that 
the fact that the provider owns the transmission does nothing to change 
the nature of the service to the end-user. Accordingly, the Commission 
tentatively concludes that wireline broadband Internet access service 
provided over a provider's own facilities is an information service.
    6. Additionally, as a logical extension of the determination that 
the provision of wireline broadband Internet access service over a 
provider's own facilities is an information service, the Commission 
tentatively concludes that the transmission component of the end-user 
wireline Internet access service provided over those facilities is 
``telecommunications'' and not a ``telecommunications service.'' As 
stated previously, an entity provides ``telecommunications'' (as 
opposed to merely using telecommunications) when it both provides a 
transparent transmission path and it does not change the form or 
content of the information. The provision of telecommunications rises 
to the level of a ``telecommunications service'' under the Act when it 
is offered ``for a fee directly to the public.'' It seems as if a 
provider offering the service over its own facilities does not offer 
``telecommunications'' to anyone, it merely uses telecommunications to 
provide end-users with wireline broadband Internet access services, 
which, for the reasons discussed previously, the Commission believes is 
an information service. Therefore, the Commission tentatively concludes 
that in the case where an entity combines transmission over its own 
facilities with its offering of wireline Internet access service, the 
classification of that input is telecommunications, and not a 
telecommunications service. It seeks comment on these tentative 
conclusions and the statutory analysis underlying them.
    7. The Commission also seeks comment on the prior conclusion in the 
Deployment of Wireline Services Offering Advanced Telecommunications 
Capability, CC Docket No. 98-147, Memorandum Opinion and Order and 
Notice of Proposed Rulemaking, 13 FCC Rcd 24012, 24029, para. 35 
(1998)(63 FR 45140, August 24, 1998) that an entity is providing a 
``telecommunications service'' to the extent that such entity provides 
only broadband transmission on a stand-alone basis, without a broadband 
Internet access service. Commenters should address what the appropriate 
statutory classification of broadband transmission should be when it is 
not coupled with the Internet access component. Commenters should also 
address whether the provision of wholesale xDSL transmission should be 
considered ``telecommunications'' or ``telecommunications service'' 
under the Act. If xDSL is being offered on a wholesale basis as an 
input to ISPs' information services, is it being offered ``directly to 
the public''? In this regard, commenters should discuss how judicial 
and Commission definitions of common carriage might apply, and address 
whether ISPs--as a class--might be interpreted as the ``public'' under 
the statutory definition of ``telecommunications service.'' Commenters 
should also discuss the circumstances under which owners of 
transmission facilities offer broadband transmission on a private 
carriage basis. Specifically, the Commission seeks comment on whether 
and how the Commission might regulate incumbent LEC provision of 
broadband to third-party ISPs as private carriage. Further, to the 
extent that a carrier continued to

[[Page 9234]]

offer xDSL transmission under tariff, would all xDSL transmission 
services offered by that carrier be deemed ``telecommunications 
services,'' or could certain xDSL services be concurrently offered 
through individually negotiated contracts as private carriage? 
Commenters should discuss both statutory and policy rationales in 
support of their suggested classification.
    8. Although the Commission tentatively concludes that wireline 
broadband Internet access service is an information service, it asks 
parties to comment on whether it should be classified as something 
other than an information service. For example, is there anything about 
the self-provision of this service that alters the function provided to 
the end user such that the service should be classified as a 
telecommunications service? Alternatively, should it be classified as 
two separate services, both an information service and a 
telecommunications service? Should it instead be classified as a new 
kind of hybrid communications service, neither an information service 
nor a telecommunications service?
    9. The Commission is also considering concurrently with this 
proceeding in the Incumbent LEC Broadband Notice (67 FR 1945, January 
15, 2002) whether incumbent LECs that are dominant in the provision of 
local exchange and exchange access service should also be considered 
dominant when they provide broadband telecommunications services. In 
order to consider broadband issues in a consistent manner, the 
Commission asks parties to comment on whether issues raised in that 
proceeding have an impact on the statutory classifications considered 
in this proceeding.
    10. The Commission also notes that the 1996 Act uses and defines 
the term ``advanced telecommunications capability'' in section 706. To 
date, the Commission has utilized this term for purposes of collecting 
data to measure the deployment of advanced telecommunications. It seeks 
comment on whether wireline broadband Internet access services should 
be classified as an ``advanced telecommunications capability.'' It 
seeks comment on the relevance, if any, that section 706 has to the 
issues raised in this proceeding.
    11. Regulatory Framework for Wireline Broadband Internet Access 
Services. The NPRM also addresses the appropriate regulatory framework 
for wireline broadband Internet access services. The Commission seeks 
comment on what regulations, if any, should apply in the future if 
these broadband offerings are found to be information services subject 
to Title I of the Act. It also asks what regulatory requirements, if 
any, should attach to the transmission component of the information 
service. Specifically, the Commission seeks comment on the relevance of 
access and non-access obligations to providers of self-provisioned 
wireline broadband Internet access services and on how classifying 
wireline broadband Internet access services as Title I service will 
affect public safety and welfare obligations. In addition, the 
Commission seeks comment generally on the role of the states with 
respect to regulating wireline broadband Internet access services.
    12. Access Safeguards. The Commission seeks comment on whether the 
Computer Inquiry requirements that are applicable to the transmission 
component of information services should be modified or eliminated, and 
whether such requirements are overly broad or under inclusive as 
applied to the nascent broadband market. Specifically, the NPRM 
contains specific questions addressing the necessity and usefulness of 
these requirements as applied to self-provisioned wireline broadband 
Internet access service, and seeks comment on whether it may be 
appropriate to impose alternative requirements to better address the 
technology and market characteristics of these services.
    13. In responding to the questions raised in this part of the 
Notice, the Commission asks parties to comment with specificity upon 
whether the various goals articulated in the Computer II and Computer 
III inquiries are equally valid today. Parties should explain the basis 
for their conclusions, and also explain what other goals should be 
taken into account, given the significant changes in the technological 
and competitive landscapes. Further, it seeks comment on the analyses 
employed in the Computer Inquiries, including the factors the 
Commission relied upon in promulgating the Computer II and III regimes. 
Are those factors still relevant today? Should they be modified, or 
given less weight? Are there additional factors that should be taken 
into account today by the Commission as it considers whether to modify 
the Computer II and III regimes?
    14. To the extent the Commission decides that none of the existing 
Computer II/III nondiscriminatory access obligations should apply to 
carriers providing wireline broadband Internet access services, it 
seeks comment on whether alternative access obligations should be 
applied. It notes that Internet Service Providers (ISPs) currently 
purchase transmission services under tariff to provide their own 
information services. Commenters should address how entities have used 
means other than those provided through the Computer II/III access 
requirements to acquire the transmission necessary to provide their 
information service offerings, including reliance on negotiated 
contractual arrangements. In addition, it seeks comment on how any 
proposed alternative regulatory or contractual access obligations might 
be priced in the context of a minimal regulatory Title I regime. For 
example, commenters should consider whether, under a new regulatory 
approach, self-provisioning wireline broadband providers should be 
required to do no more than make transmission available to competitors 
at market-based prices, or whether they should be required to make 
transmission available to competitors at commercially reasonable rates. 
Or, is some alternative set of pricing regulations preferable?
    15. If a regulatory framework is necessary, parties should comment 
on how such a framework could reduce the regulatory burdens on wireline 
broadband providers while promoting the availability of broadband to 
both competitors and consumers. Such an approach might encourage market 
participants to deploy broadband networks more expeditiously and 
increase facilities-based competition. The Commission seeks comment on 
the benefits and costs, as well as concrete details of market-based 
approaches to broadband regulation, and encourages interested parties 
to offer other proposals designed to encourage the deployment of 
broadband. It also asks parties to comment on what the appropriate 
classification would be of any broadband transmission services required 
to be offered to independent ISPs. It also seeks comment on the 
applicability of sections 201 and 202 of the Act to any such stand-
alone broadband offerings, and how those sections should inform any 
determination we may make about the pricing of broadband transmission 
provided to third parties.
    16. The Commission asks parties to comment specifically on the 
incentives that the Commission would create were it to impose 
requirements other than the Computer II/III requirements on the 
provision of wireline broadband Internet access service. For example, 
were the Commission to modify or eliminate the requirements that the 
underlying transmission be made available to other ISPs on a 
nondiscriminatory basis, how would

[[Page 9235]]

this affect the deployment of broadband? How would competing ISPs that 
do not own transmission facilities obtain the inputs they need to 
provide competing broadband Internet access services? Would the removal 
of all unbundling requirements motivate incumbent LECs, including BOCs, 
to only provide broadband transmission as part of integrated 
information services in order to restrict its availability, or would 
there be countervailing reasons why carriers would still choose to 
provide high-speed transmission to other entities on a stand-alone 
basis? Will these incentives be affected to the extent that these 
broadband Internet access services begin replacing traditional 
telecommunications services? Commenters arguing that removal of the 
requirements will lead to a significant reduction in the availability 
of high-speed transmission to non-facilities-based ISPs should address 
with specificity why this situation cannot be addressed through 
private, unregulated contractual arrangements or other marketplace 
solutions. Alternatively, if the Commission were to continue to impose 
unbundling requirements only on incumbent LECs or BOCs, how would this 
affect their incentive to continue deploying new and innovative 
broadband information services?
    17. Other Obligations. The Commission seeks comment on the extent 
to which other obligations might be affected by classifying wireline 
broadband Internet-access services as information services. It asks 
questions about the relevance of three basic public protection 
obligations of telecommunications service providers--(i) national 
security, (ii) network reliability, and (iii) consumer protection--to 
wireline broadband Internet-access services. It also asks how this 
classification may affect unbundling obligations pursuant to sections 
251 and 252 of the Act.
    18. It asks commenters to discuss how our tentative conclusion that 
wireline broadband Internet access service is an information service 
will affect the scope of the CALEA assistance capabilities that 
telecommunications carriers must offer to law enforcement authorities. 
See Communications Assistance for Law Enforcement Act, Report and 
Order, CC Docket No. 97-213, 14 FCC Rcd 16794, 16795-96, paras. 2-3 
(1999). (64 FR 14834, March 29, 1999) Commenters should address what 
effect, if any, the USA PATRIOT Act of 2001 may have on an entity that 
provides information services. Uniting and Strengthening America by 
Providing Appropriate Tools Required to Intercept and Obstruct 
Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001) (USA 
PATRIOT Act) (codified in scattered sections of 18 U.S.C., 47 U.S.C., 
50 U.S.C.). (66 FR 63620, December 7, 2001) While section 222 of the 
USA PATRIOT Act states that ``nothing in this Act shall impose any 
additional technical obligation or requirement on a provider of wire or 
electronic communication service or other person to furnish facilities 
or technical assistance,'' commenters may wish to discuss how the 
expansion of surveillance authority to electronic communications under 
various provision of the USA PATRIOT Act might affect providers of 
wireline broadband Internet access service if these services were 
classified as information services. More generally, the Commission asks 
for comment on how designating wireline broadband Internet access 
service as an information service may affect other national security or 
emergency preparedness obligations applicable to service providers and 
their networks.
    a. Second, commenters should discuss what role, if any, the 
Commission or its designees should have in ensuring the network 
reliability and interoperability of wireline broadband Internet access 
services. For telecommunications service providers, the Commission has 
found that network reliability is of paramount importance in any number 
of settings and, in particular, has directed the Network Reliability 
and Interoperability Council (NRIC) to explore and recommend measures 
that would enhance network reliability and interconnectivity. 
Commenters should address the costs and benefits of authorizing NRIC to 
make technical interconnectivity and interoperability recommendations 
with respect to wireline broadband Internet access service.
    19. Third, commenters should address how classification of wireline 
broadband Internet access as an information service would affect 
existing consumer protection requirements. For instance, section 214 of 
the Communications Act limits the ability of a telecommunications 
carrier to unilaterally discontinue telecommunications service to 
customers. Commenters should address the extent to which it is 
appropriate or necessary to apply such a requirement to the provision 
of wireline broadband Internet access service if we classify such 
services as information services. Consistent with the Communications 
Act, the Commission restricts how telecommunications carriers use, 
disclose, and access customer proprietary network information derived 
from the provision of a telecommunications service (CPNI). Section 258 
of the Act prohibits telecommunications carriers from changing 
consumers' carriers without prior consent. The Commission has also 
adopted truth-in-billing principles and guidelines to ensure that 
telephone bills provide consumers with information they may use to 
protect themselves from fraud and make informed choices in the 
competitive telecommunications marketplace. How would classification of 
wireline broadband Internet access service as an information service 
affect the applicability of these requirements? In addition, section 
255 of the Act requires a provider of telecommunications service to 
ensure the service is accessible and usable by individuals with 
disabilities, if that is readily achievable. How would classification 
of wireline broadband Internet access service as an information service 
affect the applicability of such requirements? Similarly, section 201 
of the Act contains obligations applicable to the furnishing of service 
and charges for ``communication service'' and section 202 makes it 
unlawful for a common carrier to unreasonably discriminate with regard 
to like ``communications service.'' How would our classification affect 
these obligations? Commenters should refer to specific sections of the 
Act when they are addressing these issues. Commenters should address 
whether these requirements are needed to protect the interests of 
consumers in the context of a minimally intrusive regulatory regime for 
wireline broadband Internet access service, and discuss whether, 
through intermodal competition for broadband services, there are 
adequate incentives absent additional regulation for providers of 
wireline broadband Internet access to protect consumers' varied 
interests.
    20. Finally, the Commission seeks comment on the implications of 
its tentative conclusions for incumbent LECs' obligations to provide 
access to network elements under sections 251 and 252 of the Act. 
Because ``network element'' is defined under the Act as a ``facility or 
equipment used in the provision of a telecommunications service,'' how 
could an incumbent LEC provider of wireline broadband Internet access 
service over its own facilities be required to provide access to those 
facilities as ``network elements'' if those facilities are used by the 
incumbent LEC exclusively to provide information services? For example, 
what would be the implications for the Commission's line sharing and 
line splitting rules? See

[[Page 9236]]

47 CFR 51.319(h); Deployment of Wireline Services Offering Advanced 
Telecommunications Capability and Implementation of the Local 
Competition Provisions of the Telecommunications Act of 1996, Third 
Report and Order in CC Docket No. 98-147 and Fourth Report and Order in 
CC Docket No. 96-98, 14 FCC Rcd 20912 (1999). (65 FR 1331, January 10, 
2000) If an incumbent LEC provider of wireline broadband Internet 
access service over its own facilities uses certain facilities to 
provide both information services and telecommunications services, to 
what extent would the LEC be required to provide access to such shared-
use facilities as ``network elements?'' The Commission seeks comment on 
whether the Commission could compel the unbundling of network elements 
used in the provision of information services, pursuant to Title I or 
some other statutory authority. Does the Commission's Title I authority 
allow it to limit such obligations to certain types of providers, such 
as incumbent LECs, or would the Commission be required to adopt rules 
of general applicability under Title I? In addition, because section 
251(c)(3) allows a requesting carrier to request access to network 
elements ``for the provision of a telecommunications service,'' would a 
provider be prohibited from using network elements pursuant to section 
251 to provide wireline broadband Internet access service?
    21. Impact on Federal and State Responsibilities. The Commission 
seeks comment generally on the role of the states with respect to 
wireline broadband Internet access services if the Commission were to 
find it to be appropriately classified as an information service under 
Title I of the Act. The Commission has previously found that when xDSL 
transmission is used to provide Internet access services, these 
services are interstate and, thus, subject to Commission jurisdiction. 
See GTE Telephone Operating Cos., GTOC Tariff No. 1, GTE Transmittal 
No. 1148, CC Docket No. 98-79, Memorandum Opinion and Order, 13 FCC Rcd 
22466 (1998). It thus seeks comment on whether, and if so how, 
classification of wireline broadband Internet access service as an 
information service would affect the balance of responsibilities 
between the Commission and the states. It asks parties to comment on 
what they consider an appropriate role for the states in this area, 
taking into account both policy considerations and legal constraints, 
including any applicable limitations on delegations of authority to the 
states under Title I of the Act. Additionally, parties should comment 
on whether current state regulations, if any, should be preempted to 
any extent if the Commission were to find that wireline broadband 
Internet access service is appropriately classified under Title I of 
the Act. Parties should be specific in identifying such state 
regulations and in explaining how such regulations would interfere with 
the Commission's oversight under Title I. In addition, the NPRM notes 
that the Ninth Circuit Court of Appeals affirmed the Commission's 
authority to preempt state regulation of jurisdictionally mixed 
enhanced services. California v. FCC, 39 F.3d 919, 931-33 (9th Cir. 
1994). Parties should address whether any such existing state laws are 
in fact subject to preemption under that decision.
    Commenters should also address how the dual state-federal 
ratemaking framework might be affected by the regulatory classification 
of wireline broadband Internet access service as an information 
service. For instance, if wireline broadband Internet access service is 
an information service, how should joint and common costs of facilities 
used to provide both those services and telecommunications services be 
allocated under part 64.901 of the Commission's rules, 47 CFR 64.901? 
Should the Commission modify its current cost allocation rules, and, if 
so, how? Commenters should also address the implications for 
jurisdictional separations of the issues addressed in this proceeding. 
It specifically encourages state members of the Federal-State Joint 
Board on Separations (Separations Joint Board) to submit comments on 
the issues addressed previously.
    21a. Universal Service Obligations of All Providers of Broadband 
Internet Access. The NPRM seeks comment on whether providers of 
broadband Internet access services provided over wireline and other 
platforms, including cable, wireless and satellite, should be required 
to contribute to universal service. In this proceeding, the Commission 
will continue to pursue and protect the core objectives of universal 
service, as reflected in our statutory mandates and in many of our 
precedents. It recognizes, however, that the manner in which it 
preserves and advances universal service will, of necessity, change as 
the market, technology and consumers needs and priorities change.
    22. Universal service has historically been based on the assumption 
that consumers use the network for traditional voice-related services 
and that those voice services are provided over circuit-switched 
networks. As traditional services migrate to broadband platforms, the 
Commission needs to assess the implications for funding universal 
service and ask commenters to discuss how to sustain universal service 
in an evolving communications market. Any analysis must take into 
account the Commission's overarching objectives of preserving and 
advancing universal service, as directed by Congress. At the same time, 
however, it seeks to avoid policies that may skew the marketplace or 
overburden new service providers, so that they can continue to innovate 
and have incentives to deploy broadband infrastructure. The Commission 
seeks to further these objectives by exploring the following 
fundamental question: in an evolving telecommunications marketplace, 
should facilities-based broadband Internet access providers be required 
to contribute to support universal service and, if so, on what legal 
basis? This Notice explores this question by seeking comment on what 
universal service contribution obligations such providers of broadband 
Internet access should have as the telecommunications market evolves, 
and how any such obligations can be administered in an equitable and 
non-discriminatory manner.
    23. This fundamental question is intertwined with issues raised in 
the separate Universal Service Contribution Methodology proceeding, 
which explores possible ways to reform our current methodology for 
assessing universal service contributions, and in particular whether to 
modify our present requirement that carriers be assessed based on end-
user telecommunications revenues. Federal-State Joint Board on 
Universal Service, CC Docket Nos. 96-45, 98-171, 90-571, 92-237, 99-
200, 95-116, Notice of Proposed Rulemaking, FCC 01-145 (rel. May 8, 
2001) (Universal Service Contribution Methodology). (66 Fr 28718) Among 
other possible reforms, the Commission is considering assessing 
contributions based upon connections to a public network. FCC Takes 
Next Step To Reform Universal Service Fund Contribution System, CC 
Dockets Nos. 96-45, 98-171, 90-571, 92-237, 99-200, 95-116, News 
Release, FCC 02-43 (rel. Feb. 14, 2002) (Contribution Methodology 
Further Notice). Although it seeks comment in this proceeding on the 
ways in which reform of the current contribution methodology might 
alter the analysis of the fundamental question described previously, 
the Commission leaves questions of whether to make

[[Page 9237]]

such a reform to the separate Contribution Methodology proceeding.
    24. As discussed in greater detail further, this NPRM builds on the 
foundation established in the Report to Congress and seeks comment on 
how the Commission can continue to meet the goals of universal service 
in a changing marketplace where competing providers are deploying 
broadband Internet access. It specifically encourages state members of 
the Federal-State Joint Board on Universal Service to submit comments 
on the issues addressed further.
    25. Section 254 of the Act codified the Commission's historic 
commitment to advancing universal service by ensuring the affordability 
and availability of telecommunications services for all Americans. 
Specifically, section 254 of the Act directed the Commission to reform 
its universal service systems by making them explicit and workable in 
an increasingly competitive market. Section 254 also instructed the 
Commission to collect contributions for the explicit universal service 
support mechanisms from telecommunications carriers that provide 
interstate telecommunications services and, if in the public interest, 
other providers of interstate telecommunications. Based on this 
statutory language, the Commission determined that universal service 
would be funded through contributions based on the interstate end-user 
telecommunications revenues of telecommunications carriers and certain 
other providers of telecommunications. Section 254(d) of the Act states 
``[e]very telecommunications carrier that provides interstate 
telecommunications services shall contribute'' to universal service. As 
noted previously, section 3 of the Act defines a telecommunications 
carrier as ``any provider of telecommunications services * * *,'' and 
``telecommunications service'' as the ``offering of telecommunications 
for a fee directly to the public, or to such classes of users as to be 
effectively available directly to the public, regardless of the 
facilities used.'' In contrast, section 3 of the Act defines mere 
``telecommunications'' as ``transmission, between or among points 
specified by the user, of information of the user's choosing without 
change in the form or content of the information as sent and 
received.'' In the First Report and Order, the Commission interpreted 
this statutory language as imposing a mandatory contribution 
requirement on all telecommunications carriers that provide interstate 
telecommunications services.
    Although section 254 falls within Title II of the Act, which 
generally applies to telecommunications carriers, the Commission has 
interpreted its reach to extend beyond telecommunications carriers. 
Specifically, section 254(d) of the Act provides the Commission the 
permissive authority to require ``[a]ny other provider of interstate 
telecommunications'' to contribute to universal service if required by 
the public interest. In the First Report and Order, the Commission 
exercised its permissive authority over certain other providers of 
interstate telecommunications under section 254(d). The Commission 
required entities that provide interstate telecommunications to end-
users for a fee and payphone aggregators to contribute to universal 
service. This category of providers would include entities that lease 
excess telecommunications capacity to end-users on a private 
contractual basis. The Commission concluded that these providers, like 
telecommunications carriers, ``have built their businesses or part of 
their businesses on access to the [public switched telephone network], 
provide telecommunications in competition with common carriers, and 
their non-common carrier status results solely from the manner in which 
they have chosen to structure their operations.'' The Commission 
declined at that time to exercise its permissive authority over 
entities that provide telecommunications solely to meet their internal 
needs, because telecommunications ``do not comprise the core of [a 
self-provider's] business.'' The Commission noted that private network 
operators that serve only their internal needs do not lease excess 
capacity to end-users and do not charge end-users for use of their 
network.
    26. Under existing rules and policies, telecommunications carriers 
providing telecommunications services, including broadband transmission 
services, are subject to contribution requirements. In particular, with 
respect to wireline telecommunications carriers, such carriers must 
contribute to the extent they provide broadband transmission services 
or other telecommunications services on a stand-alone basis to 
affiliated or unaffiliated Internet service providers (ISPs) or to end-
users. Accordingly, those carriers must contribute based on the 
revenues associated with the telecommunications services. The 
Commission also has concluded that if a wireline telecommunications 
carrier offers wireline broadband Internet access to end-users for a 
single price, it must also contribute to universal service. In the CPE/
Enhanced Service Bundling Order, the Commission addressed the question 
of ``how to allocate revenues when telecommunications services and CPE/
enhanced services are offered as a bundled package, for purposes of 
calculating a carrier's universal service contribution.'' Policy and 
Rules Concerning the Interstate, Interexchange Marketplace; 
Implementation of Section 254(g) of the Communications Act of 1934, as 
amended; 1998 Biennial Regulatory Review--Review of Customer Premises 
Equipment and Enhanced Services Unbundling Rules in the Interexchange, 
Exchange Access and Local Exchange Markets, CC Docket Nos. 96-61 and 
98-183, Report and Order, 16 FCC Rcd 7418, 7445-46, para. 46 (2001). 
(66 FR 19398, April 16, 2001) The Commission concluded that, for 
universal service contribution purposes, the carrier may elect to 
report revenues from the bundle based on the unbundled 
telecommunications service or, if it cannot distinguish 
telecommunications service revenue from non-telecommunications service 
revenue, all revenues from the bundled offering. The Commission seeks 
comment on whether these requirements and their basis in our rules and 
precedents are appropriate and consistent with the tentative 
conclusions regarding the statutory classification of wireline 
broadband Internet access.
    27. The Commission emphasizes that this proceeding does not change 
the mandatory obligations of telecommunications carriers that are 
currently required to contribute to universal service based on their 
provision of broadband services to affiliated or unaffiliated ISPs or 
end-users. To avoid any disruption to universal service funding during 
the pendency of this proceeding, the Commission continues to require 
all such carriers to make universal service contributions in the same 
manner required today, pending the effective date of a final Commission 
decision regarding the status of wireline broadband Internet access. It 
finds that the public interest is served by maintaining the status quo 
and ensuring that universal service contributions continue to be 
assessed and collected under current law without disruption.
    28. ISPs that own no telecommunications facilities and lease 
transmission, such as T1 lines, from telecommunications carriers to 
transmit their information services, do not contribute directly to 
universal service, but they make indirect contributions through charges 
paid to the underlying telecommunications carrier providing

[[Page 9238]]

the leased telecommunications services. As discussed previously, the 
Commission concluded in the Report to Congress that facilities-based 
ISPs that provide no stand-alone telecommunications services could be 
required to contribute to universal service under its permissive 
authority, but the Commission declined to exercise its permissive 
authority at that time. Given the anticipated growth of broadband 
Internet access, and the growth of broadband Internet access provided 
by ISPs, the Commission believes it is now the appropriate occasion to 
investigate, among other things, the questions that remain unanswered 
by the Report to Congress. Specifically, it asks whether broadband 
Internet access providers that supply last-mile connectivity over their 
own facilities should be required to contribute to universal service 
based upon their self-provisioning of telecommunications.
    29. In this NPRM, the Commission tentatively concludes that 
wireline broadband Internet access should be classified as an 
``information service'' and that the transmission aspect of that 
service is ``telecommunications'' when the same entity provides the 
telecommunications input. Accordingly, it must examine how the 
regulatory status of wireline broadband Internet access might impact 
the current system of assessments and contributions to universal 
service. It invites commenters to discuss how this tentative conclusion 
will impact contributions to universal service under current revenues-
based system. It also seeks comment on whether the Commission's current 
treatment of such services as bundled offerings of telecommunications 
services and information services for universal service contribution 
purposes continues to be appropriate or should be modified in some 
fashion. It also seeks comment on the impact on universal service 
implementation if it concludes instead that the transmission input is a 
telecommunications service, separate services (information service and 
telecommunications service), or a new hybrid communications service 
that is neither an information or telecommunications service. In 
addition, it asks commenters whether and under what circumstances the 
public interest would require it to exercise its permissive authority 
over wireline broadband Internet access providers that utilize their 
own transmission facilities to provide a broadband Internet access 
service if such a service were an information service with a 
telecommunications input. Commenters should identify the factors that 
the Commission should consider when deciding whether the public 
interest requires exercise of its permissive authority under section 
254(d) over wireline broadband Internet access providers. Assuming the 
public interest supports exercise of permissive authority, the 
Commission's contribution policies must also be equitable and 
nondiscriminatory. Therefore, the Commission requests that commenters 
describe the competitive impact of contribution requirements in an 
evolving communications marketplace. It asks commenters generally to 
discuss whether either outcome, assessing or not assessing facilities-
based wireline broadband Internet access providers, would be consistent 
with the requirement of section 254 that contributions be assessed on 
an equitable and nondiscriminatory basis. For example, should all 
facilities-based wireline broadband Internet access providers--both 
wireline telecommunications carriers and ISPs--be subject to the same 
contribution requirements? If wireline broadband Internet access 
providers that self-provision telecommunications inputs are required to 
contribute, would that be consistent with the goal suggested in the 
companion Universal Service Contribution Methodology proceeding of 
ensuring that relevant services are assessed only once for universal 
service purposes? Whenever possible, commenters should explain how the 
Commission may minimize the incentives/distortions created solely by 
the contribution requirements.
    If the Commission chooses to revisit its conclusion that wireline 
broadband Internet access should be viewed, for universal service 
contribution purposes, as a bundled offering of a telecommunications 
service and an information service, should it decline to exercise its 
permissive authority over facilities-based providers of wireline 
broadband Internet access or simply modify the basis on which such 
providers contribute to universal service? For example, should 
facilities-based wireline broadband Internet access providers 
contribute based on all of their wireline broadband Internet access 
revenues, some fraction of those revenues, or some other amount? 
Commenters advocating that such providers of wireline broadband 
Internet access should contribute to universal service should discuss 
how to allocate revenues separately associated with the 
telecommunications or telecommunications service input from revenues 
associated with Internet access. As noted previously, in a separate 
proceeding, the Commission is seeking comment on a proposal to assess 
universal service contributions based on connections, rather than 
revenue. If the Commission were to adopt such a reform, how should it 
be implemented with respect to wireline broadband Internet access 
providers? In addition, how would the Commission implement such a 
reform if the Commission were to adopt a connection-based assessment 
methodology?
    30. Broadband Internet access services may also be provided over 
other platforms, e.g., wireless, cable, and satellite. Those other 
platforms may be utilized to provide broadband Internet access services 
in direct competition with wireline broadband Internet access services. 
Thus, while this proceeding largely seeks comment on the classification 
and regulatory implications of wireline broadband Internet access, we 
also undertake a comprehensive review of the effects of the growth of 
broadband Internet access on universal service, regardless of platform. 
It therefore asks whether other facilities-based providers of broadband 
Internet access services may, as a legal matter, or should, as a policy 
matter, be required to contribute. For example, if other broadband 
Internet access services are determined in other proceedings to be 
information services with a telecommunications input, would the public 
interest require exercise of our permissive authority? The Commission 
requests that commenters identify factors that should be considered 
when deciding whether the public interest would be served by requiring 
other facilities-based providers of broadband Internet access to 
contribute. Commenters should discuss whether these factors differ from 
or are the same as those relevant for wireline broadband Internet 
access providers. It also seeks comment on what contribution 
obligations, if any, should apply if other broadband Internet access 
services are classified as something other than information services 
with a telecommunications input. Finally, it seeks comment on the 
implications for each commenter's analysis of a change in the 
assessment system from a revenue-based system to some other basis for 
assessment, such as a per-connection charge.
    31. As the Commission stated in the First Report and Order, 
contribution policies should ``reduce[] the possibility that carriers 
with universal service obligations will compete directly with carriers 
without such obligations.''

[[Page 9239]]

Accordingly, commenters should address the competitive impact across 
broadband platforms, if any, created by the contribution requirements. 
Based on the Commission's understanding of today's communications 
market, wireline broadband Internet access providers may compete 
directly with cable, wireless and satellite operators that provide 
broadband Internet access services for end-user customers. Therefore, 
the Commission seeks comment on whether all facilities-based broadband 
Internet access providers should be subject to the same contribution 
obligations. What are the advantages and disadvantages of such an 
approach? In particular, to what extent is such broad assessment of 
universal service contributions on facilities-based broadband Internet 
access providers necessary to ensure that universal service mechanisms 
will satisfy the objectives of section 254? In addition, if the 
Commission were to adopt a connection-based assessment methodology, 
commenters should address how such a reform would be implemented.
    32. Because section 254 of the Act requires the Commission to 
preserve and advance universal service to the extent possible, it must 
strive to understand changes in technology and the marketplace and 
anticipate their implications for universal service. The Commission 
asks commenters to describe how the growth of broadband Internet access 
services will impact current the universal service system and the 
Commission's ability to support universal service. For example, if 
broadband Internet access service providers increasingly provide 
broadband Internet access services over their own facilities, will that 
result in lost contribution revenues, and if so, how much? It also 
seeks comment on the implications of such developments if the 
Commission were to move to a per-connection-based assessment. 
Commenters should discuss the impact, if any, on the expected growth of 
broadband Internet access services if contributions were assessed on a 
per-connection or some other non-revenue-based system. Additionally, 
commenters should discuss whether they expect voice traffic to migrate 
to broadband Internet platforms. If so, commenters should address the 
potential impact of such migration on the Commission's ability to 
support universal service. Specifically, if voice traffic over 
broadband Internet platforms increases and traditional circuit-switched 
voice traffic decreases, how, if at all, will that impact the 
Commission's ability to support universal service in an equitable and 
non-discriminatory manner? Will migration lower or raise the cost of 
providing service? What, if any, will be the impact on the level of 
high-cost universal service support needed as voice traffic migrates 
from traditional circuit switched networks to broadband Internet 
platforms? For example, will costs of providing supported services in 
high-cost areas increase or decrease as migration occurs?
    33. Section 254(k) of the Act prohibits telecommunications carriers 
from using services that are not competitive to subsidize services that 
are subject to competition. The Commission seeks comment on how this 
provision should be implemented for wireline broadband Internet access. 
Section 254(k) also requires that services supported by universal 
service bear no more than a reasonable share of joint and common costs 
of the facilities used to provide these services. Because information 
services do not currently fall within the definition of services 
supported by universal service, deeming wireline broadband Internet 
access to be an information service would mean that the Commission 
would have to ensure that the costs of the network are properly 
allocated between regulated Title II services and Title I information 
services to comply with this statutory mandate. It seeks comment on how 
it may ensure that services supported by universal service bear no more 
than a reasonable portion of the costs associated with facilities used 
to provide both supported services and unsupported Internet access. 
Specifically, the Commission invites commenters to address the general 
sufficiency of existing allocation rules and policies in a broadband 
environment and whether those rules should be modified in order to meet 
the requirements of section 254(k).

Initial Regulatory Flexibility Analysis

    34. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared the present Initial 
Regulatory Flexibility Analysis (IRFA) of the possible significant 
economic impact on a substantial number of small entities by the 
policies and rules proposed in this NPRM. 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 on the NPRM 
provided previously in Section V.B. The Commission will send a copy of 
the NPRM, including this IRFA, to the Chief Counsel for Advocacy of the 
Small Business Administration. In addition, the NPRM and IRFA (or 
summaries thereof) will be published in the Federal Register.
Need for, and Objectives of, the Proposed Rules
    35. In this proceeding, the Commission seeks comment on the 
appropriate classification and regulatory framework for wireline 
broadband Internet access services. It tentatively concludes that 
wireline broadband Internet access services--whether provided over a 
third party's facilities or self-provisioned facilities--are 
information services subject to regulation under Title I of the Act, 
and asks for comment on this tentative conclusion. The Commission has 
already sought comment on the regulatory classification for cable modem 
service, and this issue will be resolved in a separate proceeding. The 
Commission also addresses the appropriate regulatory framework for 
wireline broadband Internet access services. It seeks comment on what 
regulations should apply in the future if these broadband offerings are 
found to be information services subject to Title I of the Act. 
Specifically, the Commission examines implications of Title I 
classification for wireline broadband offerings for non-discriminatory 
access and other core communications policy objectives. In light of 
these objectives, it seeks comment on whether to modify or eliminate 
existing access obligations on providers of self-provisioned wireline 
broadband Internet access services. The Commission seeks comment on how 
this regulatory classification may impact other obligations, such as 
those associated with public safety and welfare. In addition, the 
Commission seeks comment generally on the role of the states with 
respect to regulating wireline broadband Internet access services. 
Finally, the Commission seeks comment broadly on whether facilities-
based providers of broadband Internet access services provided over 
wireline and other platforms, including cable, wireless and satellite, 
should be required to contribute to universal service. For purposes of 
this NPRM, the Commission uses the term ``facilities-based'' to refer 
to providers of broadband Internet access services that furnish their 
own last-mile connection, irrespective of the transmission medium, to 
the customer.
Legal Basis
    36. The legal basis for any action that may be taken pursuant to 
the NPRM is contained in sections 4, 10, 201-202,

[[Page 9240]]

251, 252, 254, 271, 303 and 403 of the Communications Act of 1934, as 
amended, 47 U.S.C. 154, 201-202, 251, 252, 254, 271, 303, and 403, 
section 706 of the Telecommunications Act of 1996, and sections 1.1, 
1.48, 1.411, 1.412, 1.415, 1.419, and 1.1200-1.1216, of the 
Commission's rules, 47 CFR 1.1, 1.48, 1.411, 1.412, 1.415, 1.419, and 
1.1200-1.1216.
Description and Estimate of the Number of Small Entities to Which the 
Proposed Rules Will Apply
    37. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that will be 
affected by the proposed rules. The RFA generally defines the term 
``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A small business concern is one which: (1) Is independently owned 
and operated; (2) is not dominant in its field of operation; and (3) 
satisfies any additional criteria established by the Small Business 
Administration (SBA). Consistent with SBA's Office of Advocacy's view, 
we have included small incumbent LECs in this present RFA analysis. We 
emphasize, however, that this RFA action has no effect on Commission 
analyses and determinations in other, non-RFA contexts.
    38. Total Number of Telephone Companies Affected. The United States 
Bureau of the Census (``the Census Bureau'') reports that, at the end 
of 1992, there were 3,497 firms engaged in providing telephone 
services, as defined therein, for at least one year. This number 
contains a variety of different categories of carriers, including local 
exchange carriers, interexchange carriers, competitive access 
providers, cellular carriers, mobile service carriers, operator service 
providers, pay telephone operators, PCS providers, covered SMR 
providers, and resellers. It seems certain that some of those 3,497 
telephone service firms may not qualify as small entities or small 
incumbent LECs because they are not ``independently owned and 
operated.'' For example, a PCS provider that is affiliated with an 
interexchange carrier having more than 1,500 employees would not meet 
the definition of a small business. It seems reasonable to conclude, 
therefore, that fewer than 3,497 telephone service firms are small 
entity telephone service firms or small incumbent LECs that may be 
affected by the decisions and rules adopted in this NPRM.
    39. Local Exchange Carriers, Interexchange Carriers, Competitive 
Access Providers, Operator Service Providers, Payphone Providers, and 
Resellers. Neither the Commission nor SBA has developed a definition 
particular to small local exchange carriers (LECs), interexchange 
carriers (IXCs), competitive access providers (CAPs), operator service 
providers (OSPs), payphone providers or resellers. The closest 
applicable definition for these carrier-types under SBA rules is for 
telephone communications companies other than radiotelephone (wireless) 
companies. The most reliable source of information regarding the number 
of these carriers nationwide of which we are aware appears to be the 
data that we collect annually on the Form 499-A. According to the 
Commission's most recent data, there are 1,335 incumbent LECs, 349 
CAPs, 204 IXCs, 21 OSPs, 758 payphone providers and 541 resellers. 
Although it seems certain that some of these carriers are not 
independently owned and operated, or have more than 1,500 employees, we 
are unable at this time to estimate with greater precision the number 
of these carriers that would qualify as small business concerns under 
SBA's definition. Consequently, the Commission estimates that there are 
fewer than 1,335 incumbent LECs, 349 CAPs, 204 IXCs, 21 OSPs, 758 
payphone providers, and 541 resellers that may be affected by the 
decisions and rules adopted in this NPRM.
    40. Small Local Exchange Carriers. We have included small incumbent 
local exchange carriers in this present RFA analysis. A ``small 
business'' under the RFA is one that, inter alia, meets the pertinent 
small business size standard (e.g., a telephone communications business 
having 1,500 or fewer employees), and ``is not dominant in its field of 
operation.'' The SBA's Office of Advocacy contends that, for RFA 
purposes, small incumbent local exchange carriers are not dominant in 
their field of operation because any such dominance is not ``national'' 
in scope. The Commission has therefore included small incumbent local 
exchange carriers in this RFA analysis, although it emphasizes that 
this RFA action has no effect on Commission analyses and determinations 
in other, non-RFA contexts.
    41. Internet Service Providers. Under the new NAICS codes, SBA has 
developed a small business size standard for ``On-line Information 
Services,'' NAICS Code 514191. According to SBA regulations, a small 
business under this category is one having annual receipts of $18 
million or less. According to SBA's most recent data, there are a total 
of 2,829 firms with annual receipts of $9,999,999 or less, and an 
additional 111 firms with annual receipts of $10,000,000 or more. Thus, 
the number of On-line Information Services firms that are small under 
the SBA's $18 million size standard is between 2,829 and 2,940. 
Further, some of these Internet Service Providers (ISPs) might not be 
independently owned and operated. Consequently, we estimate that there 
are fewer than 2,940 small entity ISPs that may be affected by the 
decisions and rules of the present action.
    42. Satellite Service Carriers. The SBA has developed a definition 
for small businesses within the category of Satellite 
Telecommunications. Under that SBA definition, such a business is small 
if it has 1,500 or fewer employees. According to the Commission's most 
recent Telephone Trends Report data, 21 carriers reported that they 
were engaged in the provision of satellite services. Of these 21 
carriers, 16 reported that they have 1,500 or fewer employees and five 
reported that, alone or in combination with affiliates, they have more 
than 1,500 employees. The Commission does not have data specifying the 
number of these carriers that are not independently owned and operated, 
and thus is unable at this time to estimate with greater precision the 
number of satellite service carriers that would qualify as small 
business concerns under the SBA's definition. Consequently, the 
Commission estimates that there are 21 or fewer satellite service 
carriers that may be affected by the rules.
    43. Wireless Service Providers. The SBA has developed a definition 
for small businesses within the two separate categories of Cellular and 
Other Wireless Telecommunications or Paging. Under that SBA definition, 
such a business is small if it has 1,500 or fewer employees. According 
to the Commission's most recent Telephone Trends Report data, 1,495 
companies reported that they were engaged in the provision of wireless 
service. Of these 1,495 companies, 989 reported that they have 1,500 or 
fewer employees and 506 reported that, alone or in combination with 
affiliates, they have more than 1,500 employees. The Commission does 
not have data specifying the number of these carriers that are not 
independently owned and operated, and thus are unable at this time to 
estimate with greater precision the number of wireless service 
providers that would qualify as small business concerns under the

[[Page 9241]]

SBA's definition. Consequently, it estimates that there are 989 or 
fewer small wireless service providers that may be affected by the 
rules.
    44. Cable Systems. The Commission has developed, with SBA's 
approval, its own definition of small cable system operators. Under the 
Commission's rules, a ``small cable company'' is one serving fewer than 
400,000 subscribers nationwide. Based on our most recent information, 
we estimate that there were 1,439 cable operators that qualified as 
small cable companies at the end of 1995. Since then, some of those 
companies may have grown to serve over 400,000 subscribers, and others 
may have been involved in transactions that caused them to be combined 
with other cable operators. Consequently, the Commission estimates that 
there are fewer than 1,439 small entity cable system operators that may 
be affected by the proposals.
    45. The Communications Act also contains a definition of a small 
cable system operator, 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 revenue in the aggregate exceeds 
$250,000,000.'' The Commission has determined that there are 67,700,000 
subscribers in the United States. Therefore, the Commission found that 
an operator serving fewer than 677,000 subscribers shall be deemed a 
small operator, if its annual revenues, when combined with the total 
annual revenues of all of its affiliates, do not exceed $250 million in 
the aggregate. Based on available data, the Commission finds that the 
number of cable operators serving 677,000 subscribers or less totals 
approximately 1,450. Although it seems certain that some of these cable 
system operators are affiliated with entities whose gross annual 
revenues exceed $250,000,000, 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.
Description of Projected Reporting, Recordkeeping and Other Compliance 
Requirements
    46. Should the Commission decide that broadband Internet access 
services are information services with a telecommunications component 
and should the Commission decide to exercise its permissive 
contribution authority over certain facilities-based providers of such 
services, the associated rule changes potentially could modify the 
reporting and recordkeeping requirements of certain providers of 
interstate telecommunications regulated under the Communications Act. 
The Commission could potentially impose contribution requirements on 
certain facilities-based providers of interstate telecommunications 
that are not currently required to contribute. Accordingly, such 
entities would be required to comply with the relevant universal 
service reporting requirements. Any such reporting requirements 
potentially could require the use of professional skills, including 
legal and accounting expertise. Without more data, the Commission 
cannot accurately estimate the cost of compliance by small providers of 
interstate telecommunications. In this NPRM we do not seek comment on 
the actual reporting requirements of entities required to contribute to 
universal service. Rather, we seek comment on whether specific entities 
should be required to contribute. In the related Contribution 
Methodology Further Notice, however, the Commission seeks comment on 
the frequency with which carriers should submit reports to the 
Universal Service Administrative Company (USAC), the types of burdens 
carriers will face in periodically submitting reports to USAC, and 
whether the costs of such reporting are outweighed by the potential 
benefits of the possible reforms. Entities, especially small 
businesses, are encouraged to quantify the costs and benefits of the 
reporting requirement proposals in that proceeding.
Steps Taken To Minimize Significant Economic Impact on Small Entities, 
and Significant Alternatives Considered
    47. 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 or 
reporting requirements under the rule for small entities; (3) the use 
of performance, rather than design, standards; and (4) an exemption 
from coverage of the rule, or any part thereof, for small entities.
    48. The overall objective of this proceeding is to establish an 
appropriate classification and regulatory framework for wireline 
broadband Internet access service. The Commission tentatively concludes 
that wireline broadband Internet access services are information 
services under the Act. If it classifies and regulates this service as 
an information service, providers of this service, including those 
providers that own transmission facilities, could be subject to minimal 
and/or reduced regulatory requirements. The Commission believes that 
this would have a positive economic impact on small entities to the 
extent that it avoids placing restrictions on their operations. The 
Commission also tentatively concludes that the transmission aspect of 
wireline broadband Internet access service is ``telecommunications'' 
under the Act as opposed to ``telecommunications service.'' As part of 
the regulatory framework we are examining, the Commission seeks comment 
on what regulatory requirements, if any, should attach to this 
telecommunications input. It asks whether the Commission should modify 
or eliminate the requirements in the Computer Inquiry framework for 
access to the telecommunications input. The Commission also explores 
the implications for other regulatory requirements, including public 
safety and welfare, if it were to modify the access obligations.
    49. The Commission notes that the Computer Inquiry requirements are 
only applicable to the BOCs, which are not small entities, but that 
ISPs, including small ISP entities, may obtain access to the BOCs' 
network to provide broadband Internet access service pursuant to these 
requirements. Indeed, the Commission notes in the NPRM that ISPs 
currently purchase transmission services under tariff to provide their 
own information services. The NPRM asks parties to comment on 
alternative ways in which ISPs could acquire transmission necessary to 
provide their information service offerings if the Commission modifies 
or eliminates the current access requirements. Specifically, the 
Commission asks whether they can rely on negotiated contractual 
arrangements and how such arrangements could be priced. For purposes of 
this IRFA, we specifically seek comment from small entities on these 
issues, in particular, on the extent to which the use of alternative 
access arrangements could impact them economically. Similarly, the 
Commission also specifically seeks comment from all affected small 
entities regarding the incumbent LECs' obligations to provide access to 
network elements under sections 251 and 252 of the Act if it determines 
that the

[[Page 9242]]

provision of wireline broadband Internet access service over a 
provider's own facilities is an information service and that the 
transmission input is telecommunications and not a telecommunications 
service, including the extent to which these determinations would 
economically impact them. In addition, the Commission generally asks 
small entities to comment on these and any other issues that could have 
an economic impact on them.
    As discussed previously, this NPRM does not seek comment on the 
reporting requirements or assessment methodology for contributors to 
universal service. However, the Contribution Methodology Further Notice 
seeks comment on how to streamline and reform both the manner in which 
the Commission assesses carrier contributions to the universal service 
fund and the manner in which carriers may recover those costs from 
their customers. Wherever possible, the Contribution Methodology 
Further Notice seeks comment on how to reduce the administrative burden 
and cost of compliance for small telecommunications service providers. 
If certain facilities-based providers of interstate telecommunications 
are required to contribute to universal service and are not currently 
contributing, such requirements will result in a financial impact. The 
impact to small entities, however, is mitigated by the Commission's de 
minimis contribution exemption.
Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules
    50. None.

Ordering Clauses

    51. Accordingly, pursuant to the authority contained in sections 2, 
4(i)-4(j), 201, and 303(r) of the Communications Act of 1934, as 
amended, 47 U.S.C. 152, 154(i)-4(j), 201, 303(r), this NPRM IS Adopted.
    52. The Commission's Consumer Information Bureau, Reference 
Information Center, shall send a copy of this NPRM, including the 
Initial Regulatory Flexibility Analysis, to the Chief Counsel for 
Advocacy of the Small Business Administration.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 02-4679 Filed 2-27-02; 8:45 am]
BILLING CODE 6712-01-P