[Federal Register Volume 67, Number 10 (Tuesday, January 15, 2002)]
[Proposed Rules]
[Pages 1947-1953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-902]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 51

[CC Docket No. 01-338, CC Docket No. 96-98, CC Docket No. 98-147, FCC 
01-361]


Review of the Section 251 Unbundling Obligations of Incumbent 
Local Exchange Carriers; Implementation of the Local Competition 
Provisions of the Telecommunications Act of 1996; Deployment of 
Wireline Services Offering Advanced Telecommunications Capability

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: This document seeks comment on whether the Commission should 
adopt a more granular approach to its unbundling analysis under section 
251 of the Communications Act of 1934 (the Act) and on the 
identification of specific unbundling requirements for incumbent local 
exchange carriers (LECs). In particular, the Commission seeks comment 
on whether it should consider application of its unbundling 
requirements on the basis of service, geographic, facility, customer or 
other factors. In addition, the Commission seeks comment on whether to 
retain, modify or eliminate its existing definitions and requirements 
for network elements. The Commission also seeks comment on the role of 
state commissions and whether to retain or modify the existing 
triennial review process for examination of its unbundling 
requirements.

DATES: Comments are due March 18, 2002 and Reply Comments are due April 
30, 2002.

FOR FURTHER INFORMATION CONTACT: Jeremy Miller, Attorney Advisor, 
Policy and Program Planning Division, Common Carrier Bureau, telephone 
(202) 418-1580.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM) in CC Docket No. 01-338, FCC 01-361, 
adopted December 12, 2001, and released December 20, 2001. 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 email [email protected]. It is also available on the 
Commission's website at http://www.fcc.gov.

Synopsis of the Notice of Proposed Rulemaking

    1. Background. In the Third Local Competition Report and Order, (65 
FR 19334, April 11, 2000) the Commission stated that it would reexamine 
its network element unbundling requirements every three years. In 
addition, the Commission intends to address a number of outstanding 
issues concerning the unbundling obligations of incumbent LECs raised 
by parties in the last several years.
    2. The Commission seeks comment on how it should apply section 
251(d)(2). In particular, the Commission seeks comment on how to align 
more directly its unbundling requirements with the multiple stated 
goals of the Act, such as the directive to encourage the deployment of 
advanced telecommunications capability. The Commission also seeks 
comment on whether and how to apply a more granular approach to its 
existing unbundling analysis by incorporating such refinements as 
considering for each network element the specific service to be 
provided, the geographic location, the facility to be unbundled, or the 
customer to be served. The Commission also seeks comment on what 
triggers might be adopted to limit or sunset unbundling requirements 
over time.
    3. The Commission seeks comment on its existing rules for network 
elements. The Commission seeks comment on how to apply a more refined 
unbundling analysis to its existing unbundling requirements and whether 
it should retain, modify or eliminate any of these requirements. In 
addition, the Commission seeks comment on parties' practical experience 
with the current unbundling requirements. The Commission also seeks 
comment on a number of general issues including (1) application of the 
``just, reasonable and nondiscriminatory'' standard of section 
251(c)(3); (2) the relationship between services as governed by 
sections 251(c)(4) and 251(b)(1) and network elements as governed by 
sections 251(d)(2) and 251(c)(3); (3) the Commission's existing co-
mingling restrictions; (4) the Commission's safe harbor provisions for 
``significant local usage;'' (5) the relationship between section 
271(c)(2)(B) and sections 251(d)(2) and 251(c)(3); (6) the 
applicability of sections 201, 202 or other sections of the Act to 
incumbent LEC wholesale services in the absence of a section 251 
unbundling obligation; and (7) clarification of the term ``superior'' 
as used in the now invalidated rule 47 CFR 51.311(c).
    4. State Role. The Commission seeks comment on the role of states 
in adoption and implementation of unbundling requirements. Among other 
alternatives, the Commission offers for comment a proposal to adopt 
national standards for unbundling that would leave specific 
implementation to the states.
    5. Procedural Issues. The Commission seeks comment on whether to 
retain or modify the existing triennial review process for the 
examination of its unbundling requirements. The Commission also seeks 
comment on the use of a sunset period for unbundling obligations and 
whether it needs to consider transitional mechanisms to address the 
potential financial impact that would be created by changes to 
unbundling obligations.

I. Initial Regulatory Flexibility Analysis

    6. As required by the Regulatory Flexibility Act (RFA), as amended, 
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 proposed 
in this document. 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 document provided above. The 
Commission will send a copy of the document, including this IRFA, to 
the Chief Counsel for Advocacy of the Small Business Administration 
(SBA). In addition, this document will be published in the Federal 
Register.

[[Page 1948]]

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

    7. In the Third Local Competition Report and Order, the Commission 
stated that it would reexamine its network element requirements within 
a three-year period. In this document, the Commission seeks comment on 
its unbundling analysis under sections 251(d)(2) and 251(c)(3) and 
whether it should retain, modify or eliminate any of the current 
unbundling requirements for network elements. Moreover, the Commission 
seeks comment on the role of the states and whether, in the future, it 
should retain a triennial review process.

III. Legal Basis

    8. The legal basis for any action that may be taken pursuant to 
this document is contained in sections 1-4, 157, 201-05, 251, 252, 254, 
256, 271, 303(r), and 332 of the Communications Act of 1934, as 
amended, 47 U.S.C. 151-54, 157, 201-05, 251, 252, 254, 256, 271, 
303(r), and 332.

IV. Description and Estimate of the Number of Small Entities To 
Which the Proposed Rules Will Apply

    9. 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).
    10. In this section, the Commission further describes and estimates 
the number of small entity licensees and regulatees that may be 
affected by rules adopted pursuant to this NPRM. The most reliable 
source of information regarding the total numbers of certain common 
carrier and related providers nationwide, as well as the number of 
commercial wireless entities, appears to be the data that the 
Commission publishes in its Trends in Telephone Service report. In a 
news release, the Commission indicated that there are 4,822 interstate 
carriers. These carriers include, inter alia, local exchange carriers, 
wireline carriers and service providers, interexchange carriers, 
competitive access providers, operator service providers, pay telephone 
operators, providers of telephone service, providers of telephone 
exchange service, and resellers.
    11. The SBA has defined establishments engaged in providing 
``Radiotelephone Communications'' and ``Telephone Communications, 
Except Radiotelephone'' to be small businesses when they have no more 
than 1,500 employees. Below, we discuss the total estimated number of 
telephone companies falling within the two categories, and the number 
of small businesses in each. The Commission then attempts to further 
refine those estimates to correspond with the categories of telephone 
companies that are commonly used under our rules.
    12. The Commission has included small incumbent LECs in this 
present RFA analysis. As noted above, a ``small business'' under the 
RFA is one that, inter alia, meets the pertinent small business size 
standard (e.g., a telephone communications business having 1,500 or 
fewer employees), and ``is not dominant in its field of operation.'' 
The SBA's Office of Advocacy contends that, for RFA purposes, small 
incumbent LECs are not dominant in their field of operation because any 
such dominance is not ``national'' in scope. The Commission has 
therefore included small incumbent LECs in this RFA analysis, although 
it emphasizes that this RFA action has no effect on Commission analyses 
and determinations in other, non-RFA contexts.
    13. Total Number of Telephone Companies Affected. The U.S. Bureau 
of the Census (``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, covered specialized mobile radio providers, and 
resellers. It seems certain that some of these 3,497 telephone service 
firms may not qualify as small entities 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 is 
reasonable to conclude that fewer than 3,497 telephone service firms 
are small entity telephone service firms that may be affected by the 
new rules.
    14. Wireline Carriers and Service Providers. The SBA has developed 
a definition of small entities for telephone communications companies 
except radiotelephone (i.e., wireless) companies. The Census Bureau 
reports that there were 2,321 such telephone companies in operation for 
at least one year at the end of 1992. According to the SBA's 
definition, a small business telephone company other than a 
radiotelephone company is one employing no more than 1,500 persons. All 
but 26 of the 2,321 non-radiotelephone companies listed by the Census 
Bureau were reported to have fewer than 1,000 employees. Thus, even if 
all 26 of those companies had more than 1,500 employees, there would 
still be 2,295 non-radiotelephone companies that might qualify as small 
entities. 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 wireline carriers and service providers that would qualify as small 
business concerns under the SBA's definition. Consequently, the 
Commission estimates 2,295 or fewer small telephone communications 
companies other than radiotelephone companies are small entities that 
may be affected by rules adopted pursuant to this NPRM.
    15. Local Exchange Carriers. Neither the Commission nor the SBA has 
developed a definition for small providers of local exchange services. 
The closest applicable definition under the SBA rules is for telephone 
communications companies other than radiotelephone (i.e., wireless) 
companies. According to the most recent Telecommunications Industry 
Revenue data, 1,335 incumbent carriers reported that they were engaged 
in the provision of local exchange services. The Commission does not 
have data specifying the number of these carriers that are either 
dominant in their field of operations, are not independently owned and 
operated, or have more than 1,500 employees, and thus it is unable at 
this time to estimate with greater precision the number of LECs that 
would qualify as small business concerns under the SBA's definition. 
Consequently, the Commission estimates that 1,335 or fewer providers of 
local exchange service are small entities or small incumbent LECs that 
may be affected by the new rules.
    16. Interexchange Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
providers of interexchange services (IXCs). The

[[Page 1949]]

closest applicable definition under the SBA rules is for telephone 
communications companies other than radiotelephone (i.e., wireless) 
companies. According to the most recent Trends in Telephone Service 
data, 204 carriers reported that they were engaged in the provision of 
interexchange services. We do not have data specifying the number of 
these carriers that are not independently owned and operated or have 
more than 1,500 employees, and thus are unable at this time to estimate 
with greater precision the number of IXCs that would qualify as small 
business concerns under the SBA's definition. Consequently, we estimate 
that there are 204 or fewer small-entity IXCs that may be affected by 
rules adopted pursuant to this NPRM.
    17. Competitive Access Providers. Neither the Commission nor the 
SBA has developed a definition of small entities specifically 
applicable to competitive access services providers (CAPs). The closest 
applicable definition under the SBA rules is for telephone 
communications companies other than radiotelephone (i.e., wireless) 
companies. According to the most recent Trends in Telephone Service 
data, 349 CAP/CLEC carriers and 60 other LECs reported that they were 
engaged in the provision of competitive local exchange services. The 
Commission does not have data specifying the number of these carriers 
that are not independently owned and operated, or have more than 1,500 
employees, and thus are unable at this time to estimate with greater 
precision the number of CAPs that would qualify as small business 
concerns under the SBA's definition. Consequently, we estimate that 
there are 349 or fewer small-entity CAPs and 60 or fewer other LECs 
that may be affected by rules adopted pursuant to this NPRM.
    18. Operator Service Providers. Neither the Commission nor the SBA 
has developed a definition of small entities specifically applicable to 
providers of operator services. The closest applicable definition under 
the SBA rules is for telephone communications companies other than 
radiotelephone (i.e., wireless) companies. According to the most recent 
Trends in Telephone Service data, 21 carriers reported that they were 
engaged in the provision of operator services. The Commission does not 
have data specifying the number of these carriers that are not 
independently owned and operated or have more than 1,500 employees, and 
thus it is unable at this time to estimate with greater precision the 
number of operator service providers that would qualify as small 
business concerns under the SBA's definition. Consequently, the 
Commission estimates that there are 21 or fewer small-entity operator 
service providers that may be affected by rules adopted pursuant to 
this NPRM.
    19. Pay Telephone Operators. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to pay 
telephone operators. The closest applicable definition under SBA rules 
is for telephone communications companies other than radiotelephone 
(i.e., wireless) companies. According to the most recent Trends in 
Telephone Service data, 758 carriers reported that they were engaged in 
the provision of pay telephone services. The Commission does not have 
data specifying the number of these carriers that are not independently 
owned and operated or have more than 1,500 employees, and thus it is 
unable at this time to estimate with greater precision the number of 
pay telephone operators that would qualify as small business concerns 
under the SBA's definition. Consequently, the Commission estimates that 
there are 758 or fewer small-entity pay telephone operators that may be 
affected by rules adopted pursuant to this NPRM.
    20. Resellers (including debit card providers). Neither the 
Commission nor the SBA has developed a definition of small entities 
specifically applicable to resellers. The closest applicable SBA 
definition for a reseller is a telephone communications company other 
than radiotelephone (i.e., wireless) companies. According to the most 
recent Trends in Telephone Service data, 454 toll and 87 local entities 
reported that they were engaged in the resale of telephone service. The 
Commission does not have data specifying the number of these carriers 
that are not independently owned and operated or have more than 1,500 
employees, and thus it is unable at this time to estimate with greater 
precision the number of resellers that would qualify as small business 
concerns under the SBA's definition. Consequently, the Commission 
estimates that there are 454 or fewer small-toll-entity resellers and 
87 or fewer small-local-entity resellers that may be affected by rules 
adopted pursuant to this NPRM.
    21. Toll-Free 800 and 800-Like Service Subscribers. Neither the 
Commission nor the SBA has developed a definition of small entities 
specifically applicable to 800 and 800-like service (``toll free'') 
subscribers. The most reliable source of information regarding the 
number of these service subscribers appears to be data the Commission 
collects on the 800, 888, and 877 numbers in use. According to the 
Commission's most recent data, at the end of January 1999, the number 
of 800 numbers assigned was 7,692,955; the number of 888 numbers that 
had been assigned was 7,706,393; and the number of 877 numbers assigned 
was 1,946,538. The Commission does not have data specifying the number 
of these subscribers that are not independently owned and operated or 
have more than 1,500 employees, and thus it is unable at this time to 
estimate with greater precision the number of toll free subscribers 
that would qualify as small business concerns under the SBA's 
definition. Consequently, the Commission estimates that there are 
7,692,955 or fewer small-entity 800 subscribers, 7,706,393 or fewer 
small-entity 888 subscribers, and 1,946,538 or fewer small-entity 877 
subscribers that may be affected by rules adopted pursuant to this 
NPRM.
    22. Cellular Licensees. Neither the Commission nor the SBA has 
developed a definition of small entities applicable to cellular 
licensees. Therefore, the applicable definition of small entity is the 
definition under the SBA rules applicable to radiotelephone (i.e., 
wireless) companies. This definition provides that a small entity is a 
radiotelephone company employing no more than 1,500 persons. According 
to the Bureau of the Census, only 12 radiotelephone firms out of a 
total of 1,178 such firms that operated during 1992 had 1,000 or more 
employees. Therefore, even if all 12 of these firms were cellular 
telephone companies, nearly all cellular carriers were small businesses 
under the SBA's definition. In addition, the Commission notes that 
there are 1,758 cellular licenses; however, it does not know the number 
of cellular licensees, since a cellular licensee may own several 
licenses. The most reliable source of information regarding the number 
of cellular service providers nationwide appears to be data the 
Commission publishes annually in its Telecommunications Industry 
Revenue report, regarding the Telecommunications Relay Service (TRS). 
The report places cellular licensees and Personal Communications 
Service (PCS) licensees in one group. According to recent data, 808 
carriers reported that they were engaged in the provision of either 
cellular or PCS services. The Commission does not have data specifying 
the number of these carriers that are not independently owned and 
operated or have more than

[[Page 1950]]

1,500 employees, and thus it is unable at this time to estimate with 
greater precision the number of cellular service carriers that would 
qualify as small business concerns under the SBA's definition. 
Consequently, the Commission estimates that there are no more than 808 
small cellular service carriers.
    23. 220 MHz Radio Service--Phase I Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. Phase I licensing was conducted 
by lotteries in 1992 and 1993. There are approximately 1,515 such non-
nationwide licensees and 4 nationwide licensees currently authorized to 
operate in the 220 MHz band. The Commission has not developed a 
definition of small entities specifically applicable to such incumbent 
220 MHz Phase I licensees. To estimate the number of such licensees 
that are small businesses, the Commission applies the definition under 
the SBA rules applicable to radiotelephone communications companies. 
This definition provides that a small entity is a radiotelephone 
company employing no more than 1,500 persons. According to a 1995 
estimate by the Bureau of the Census, only 12 radiotelephone firms out 
of a total of 1,178 such firms that operated during 1992 had 1,000 or 
more employees. Therefore, assuming that this general ratio has not 
changed significantly in recent years in the context of Phase I 220 MHz 
licensees, we estimate that nearly all such licensees are small 
businesses under the SBA's definition.
    24. 220 MHz Radio Service--Phase II Licensees. The Phase II 220 MHz 
service is a new service, and is subject to spectrum auctions. In the 
220 MHz Third Report and Order (63 FR 2976, January 20, 1998), the 
Commission adopted criteria for defining small businesses and very 
small businesses for purposes of determining their eligibility for 
special provisions such as bidding credits and installment payments. 
The Commission has defined a small business as an entity that, together 
with its affiliates and controlling principals, has average gross 
revenues not exceeding $15 million for the preceding three years. 
Additionally, a very small business is defined as an entity that, 
together with its affiliates and controlling principals, has average 
gross revenues that are not more than $3 million for the preceding 
three years. The SBA has approved these definitions. An auction of 
Phase II licenses commenced on September 15, 1998, and closed on 
October 22, 1998. Nine hundred and eight (908) licenses were auctioned 
in three different-sized geographic areas: 3 nationwide licenses, 30 
Regional Economic Area Group (REAG) licenses, and 875 Economic Area 
(EA) licenses. Of the 908 licenses auctioned, 693 were sold. Companies 
claiming small business status won: 1 of the Nationwide licenses, 67% 
of the Regional licenses, 47% of the REAG licenses and 54% of the EA 
licenses. As of January 22, 1999, the Commission announced that it was 
prepared to grant 654 of the Phase II licenses won at auction. A second 
220 MHz Radio Service auction began on June 8, 1999 and closed on June 
30, 1999. This auction offered 225 licenses in 87 EAs and 4 REAGs. (A 
total of 9 REAG licenses and 216 EA licenses. No nationwide licenses 
were available in this auction.) Of the 215 EA licenses won, 153 EA 
licenses (71%) were won by bidders claiming small business status. Of 
the 7 REAG licenses won, 5 REAG licenses (71%) were won by bidders 
claiming small business status.
    25. Private and Common Carrier Paging. The Commission has adopted a 
two-tier definition of small businesses in the context of auctioning 
licenses in the Common Carrier Paging and exclusive Private Carrier 
Paging services. A small business will be defined as either: (1) An 
entity that, together with its affiliates and controlling principals, 
has average gross revenues for the three preceding years of not more 
than $3 million; or (2) an entity that, together with affiliates and 
controlling principals, has average gross revenues for the three 
preceding calendar years of not more than $15 million. Because the SBA 
has not yet approved this definition for paging services, we will 
utilize the SBA's definition applicable to radiotelephone companies, 
i.e., an entity employing no more than 1,500 persons. At present, there 
are approximately 24,000 Private Paging licenses and 74,000 Common 
Carrier Paging licenses. According to recent data, 172 carriers 
reported that they were engaged in the provision of either paging or 
``other mobile'' services, which are placed together in the data. The 
Commission does not have data specifying the number of these carriers 
that are not independently owned and operated or have more than 1,500 
employees, and thus are unable at this time to estimate with greater 
precision the number of paging carriers that would qualify as small 
business concerns under the SBA's definition. Consequently, we estimate 
that there are no more than 172 small paging carriers. We estimate that 
the majority of private and common carrier paging providers would 
qualify as small entities under the SBA definition.
    26. Mobile Service Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
mobile service carriers, such as paging companies. As noted above in 
the section concerning paging service carriers, the closest applicable 
definition under the SBA rules is that for radiotelephone (i.e., 
wireless) companies, and recent data show that 172 carriers reported 
that they were engaged in the provision of either paging or ``other 
mobile'' services. Consequently, the Commission estimates that there 
are no more than 172 small mobile service carriers.
    27. Broadband Personal Communications Service (PCS). The broadband 
PCS spectrum is divided into six frequency blocks designated A through 
F, and the Commission has held auctions for each block. The Commission 
defined ``small entity'' for blocks C and F as an entity that has 
average gross revenues of less than $40 million in the three previous 
calendar years. For block F, an additional classification for ``very 
small business'' was added and is defined as an entity that, together 
with affiliates, has average gross revenues of not more than $15 
million for the preceding three calendar years. These regulations 
defining ``small entity'' in the context of broadband PCS auctions have 
been approved by the SBA. No small businesses within the SBA-approved 
definition bid successfully for licenses in blocks A and B. There were 
90 winning bidders that qualified as small entities in the C block 
auctions. A total of 93 small and very small business bidders won 
approximately 40% of the 1,479 licenses for blocks D, E and F. On March 
23, 1999, the Commission held another auction (Auction No. 22) of C, D, 
E and F block licenses for PCS spectrum returned to the Commission by 
previous license holders. In that auction, 48 bidders claiming small 
business, very small business or entrepreneurial status won 272 of the 
341 licenses (80%) offered. Based on this information, we conclude that 
the number of small broadband PCS licensees includes the 90 winning C 
block bidders, the 93 qualifying bidders in the D, E and F blocks, and 
the 48 winning bidders from Auction No. 22, for a total of 231 small-
entity PCS providers as defined by the SBA and the Commission's auction 
rules.
    28. Narrowband PCS. The Commission has auctioned nationwide and 
regional licenses for narrowband PCS. There are 11 nationwide and 30 
regional licensees for narrowband PCS. The Commission does not have 
sufficient information to determine

[[Page 1951]]

whether any of these licensees are small businesses within the SBA-
approved definition for radiotelephone companies. At present, there 
have been no auctions held for the major trading area (MTA) and basic 
trading area (BTA) narrowband PCS licenses. The Commission anticipates 
a total of 561 MTA licenses and 2,958 BTA licenses will be awarded by 
auction. Such auctions, however, have not yet been scheduled. Given 
that nearly all radiotelephone companies have no more than 1,500 
employees, and no reliable estimate of the number of prospective MTA 
and BTA narrowband licensees can be made, we assume, for our purposes 
here, that all of the licenses will be awarded to small entities, as 
that term is defined by the SBA.
    29. Rural Radiotelephone Service. The Commission has not adopted a 
definition of small entity specific to the Rural Radiotelephone 
Service. A significant subset of the Rural Radiotelephone Service is 
the Basic Exchange Telephone Radio Systems (BETRS). The Commission will 
use the SBA's definition applicable to radiotelephone companies, i.e., 
an entity employing no more than 1,500 persons. There are approximately 
1,000 licensees in the Rural Radiotelephone Service, and we estimate 
that almost all of them qualify as small entities under the SBA's 
definition.
    30. Air-Ground Radiotelephone Service. The Commission has not 
adopted a definition of small entity specific to the Air-Ground 
Radiotelephone Service. Accordingly, we will use the SBA's definition 
applicable to radiotelephone companies, i.e., an entity employing no 
more than 1,500 persons. There are approximately 100 licensees in the 
Air-Ground Radiotelephone Service, and the Commission estimates that 
almost all of them qualify as small under the SBA definition.
    31. Specialized Mobile Radio (SMR). The Commission awards bidding 
credits in auctions for geographic area 800 MHz and 900 MHz SMR 
licenses to two tiers of firms: (1) ``Small entities,'' those with 
revenues of no more than $15 million in each of the three previous 
calendar years; and (2) ``very small entities,'' those with revenues of 
no more than $3 million in each of the three previous calendar years. 
The regulations defining ``small entity'' and ``very small entity'' in 
the context of 800 MHz SMR (upper 10 MHz and lower 230 channels) and 
900 MHz SMR have been approved by the SBA. The Commission does not know 
how many firms provide 800 MHz or 900 MHz geographic area SMR service 
pursuant to extended implementation authorizations, nor how many of 
these providers have annual revenues of no more than $15 million. One 
firm has over $15 million in revenues. The Commission assumes, for its 
purposes here, that all of the remaining existing extended 
implementation authorizations are held by small entities, as that term 
is defined by the SBA. The Commission has held auctions for geographic 
area licenses in the 800 MHz (upper 10 MHz) and 900 MHz SMR bands. 
There were 60 winning bidders that qualified as small and very small 
entities in the 900 MHz auction. Of the 1,020 licenses won in the 900 
MHz auction, 263 licenses were won by bidders qualifying as small and 
very small entities. In the 800 MHz SMR auction, 38 of the 524 licenses 
won were won by small and very small entities.
    32. Marine Coast Service. Between December 3, 1998 and December 14, 
1998, the Commission held an auction of 42 VHF Public Coast licenses in 
the 157.1875-157.4500 MHz (ship transmit) and 161.775-162.0125 MHz 
(coast transmit) bands. For purposes of this auction, and for future 
public coast auctions, the Commission defines a ``small'' business as 
an entity that, together with controlling interests and affiliates, has 
average gross revenues for the preceding three years not to exceed $15 
million dollars. A ``very small'' business is one that, together with 
controlling interests and affiliates, has average gross revenues for 
the preceding three years not to exceed $3 million dollars. There are 
approximately 10,672 licensees in the Marine Coast Service, and the 
Commission estimates that almost all of them qualify as ``small'' 
businesses under the Commission's definition, which has been approved 
by the SBA.
    33. Fixed Microwave Services. Microwave services include common 
carrier, private-operational fixed, and broadcast auxiliary radio 
services. At present, there are approximately 22,015 common carrier 
fixed licensees and 61,670 private operational-fixed licensees and 
broadcast auxiliary radio licensees in the microwave services. The 
Commission has not yet defined a small business with respect to 
microwave services. For the Commission's purposes here, it will utilize 
the SBA's definition applicable to radiotelephone companies'i.e., an 
entity with no more than 1,500 persons. Under this definition, the 
Commission estimates that all of the Fixed Microwave licensees 
(excluding broadcast auxiliary licensees) would qualify as small 
entities.
    34. Local Multipoint Distribution Service. The Commission held two 
auctions for licenses in the Local Multipoint Distribution Services 
(LMDS) (Auction No. 17 and Auction No. 23). For both of these auctions, 
the Commission defined a small business as an entity, together with its 
affiliates and controlling principals, having average gross revenues 
for the three preceding years of not more than $40 million. A very 
small business was defined as an entity, together with affiliates and 
controlling principals, having average gross revenues for the three 
preceding years of not more than $15 million. Of the 144 winning 
bidders in Auction Nos. 17 and 23, 125 bidders (87%) were small or very 
small businesses.
    35. 24 GHz--Incumbent 24 GHz Licensees. The rules that the 
Commission may later adopt could affect incumbent licensees who were 
relocated to the 24 GHz band from the 18 GHz band, and applicants who 
wish to provide services in the 24 GHz band. The Commission has not 
developed a definition of small entities applicable to licensees in the 
24 GHz band. Therefore, the applicable definition of small entity is 
the definition under the SBA rules for the radiotelephone industry, 
providing that a small entity is a radiotelephone company employing 
fewer than 1,500 persons. The 1992 Census of Transportation, 
Communications and Utilities, conducted by the Bureau of the Census, 
which is the most recent information available, shows that only 12 
radiotelephone firms out of a total of 1,178 such firms that operated 
during 1992 had 1,000 or more employees. This information 
notwithstanding, the Commission believes that there are only two 
licensees in the 24 GHz band that were relocated from the 18 GHz band, 
Teligent and TRW, Inc. Both Teligent and TRW, Inc. appear to have more 
than 1,500 employees. Therefore, it appears that no incumbent licensee 
in the 24 GHz band is a small business entity.
    36. Future 24 GHz Licensees. The rules that the Commission may 
later adopt could also affect potential new licensees on the 24 GHz 
band. Pursuant to 47 CFR 24.720(b), the Commission has defined ``small 
business'' for Blocks C and F broadband PCS licensees as firms that had 
average gross revenues of less than $40 million in the three previous 
calendar years. This regulation defining ``small business'' in the 
context of broadband PCS auctions has been approved by the SBA. With 
respect to new applicants in the 24 GHz band, we shall use this 
definition of ``small business'' and apply it to the 24 GHz band under 
the name ``entrepreneur.'' With regard to ``small business,'' we shall 
adopt the definition of ``very small business'' used for 39 GHz 
licenses and

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PCS C and F block licenses: businesses with average annual gross 
revenues for the three preceding years not in excess of $15 million. 
Finally, ``very small business'' in the 24 GHz band shall be defined as 
an entity with average gross revenues not to exceed $3 million for the 
preceding three years. The Commission will not know how many licensees 
will be small or very small businesses until the auction, if required, 
is held. Even after that, the Commission will not know how many 
licensees will partition their license areas or disaggregate their 
spectrum blocks, if partitioning and disaggregation are allowed.
    37. 39 GHz. The Commission held an auction (Auction No. 30) for 
fixed point-to-point microwave licenses in the 38.6 to 40.0 GHz band 
(39 GHz Band). For this auction, the Commission defined a small 
business as an entity, together with affiliates and controlling 
interests, having average gross revenues for the three preceding years 
of not more than $40 million. A very small business was defined as an 
entity, together with affiliates and controlling principals, having 
average gross revenues for the three preceding years of not more than 
$15 million. The SBA has approved these definitions. Of the 29 winning 
bidders in Auction No. 30, 18 bidders (62%) were small business 
participants.
    38. Multipoint Distribution Service (MDS). This service involves a 
variety of transmitters, which are used to relay data and programming 
to the home or office, similar to that provided by cable television 
systems. In connection with the 1996 MDS auction, the Commission 
defined small businesses as entities that had annual average gross 
revenues for the three preceding years not in excess of $40 million. 
This definition of a small entity in the context of MDS auctions has 
been approved by the SBA. These stations were licensed prior to 
implementation of Section 309(j) of the Communications Act of 1934, as 
amended. Licenses for new MDS facilities are now awarded to auction 
winners in Basic Trading Areas (BTAs) and BTA-like areas. The MDS 
auctions resulted in 67 successful bidders obtaining licensing 
opportunities for 493 BTAs. Of the 67 auction winners, 61 meet the 
definition of a small business.
    39. MDS is also heavily encumbered with licensees of stations 
authorized prior to the MDS auction. SBA has developed a definition of 
small entities for pay television services, which includes all such 
companies generating $11 million or less in annual receipts. This 
definition includes MDS systems, and thus applies to incumbent MDS 
licensees and wireless cable operators which may not have participated 
or been successful in the MDS auction. Information available to us 
indicates that there are 832 of these licensees and operators that do 
not generate revenue in excess of $11 million annually. Therefore, for 
purposes of this analysis, the Commission finds there are approximately 
892 small MDS providers as defined by the SBA and the Commission's 
auction rules.
    40. Offshore Radiotelephone Service. This service operates on 
several UHF TV broadcast channels that are not used for TV broadcasting 
in the coastal area of the states bordering the Gulf of Mexico. At 
present, there are approximately 55 licensees in this service. The 
Commission is unable at this time to estimate the number of licensees 
that would qualify as small under the SBA's definition for 
radiotelephone communications.
    41. Wireless Communications Services (WCS). This service can be 
used for fixed, mobile, radio-location and digital audio broadcasting 
satellite uses. The Commission defined ``small business'' for the WCS 
auction as an entity with average gross revenues of $40 million for 
each of the three preceding years, and a ``very small business'' as an 
entity with average gross revenues of $15 million for each of the three 
preceding years. The Commission auctioned geographic area licenses in 
the WCS service. In the auction, there were seven winning bidders that 
qualified as very small business entities, and one winning bidder that 
qualified as a small business entity. We conclude that the number of 
geographic area WCS licensees affected includes these eight entities.
    42. General Wireless Communication Service (GWCS). This service was 
created by the Commission on July 31, 1995 by transferring 25 MHz of 
spectrum in the 4660-4685 MHz band from the federal government to 
private sector use. The Commission sought and obtained SBA approval of 
a refined definition of ``small business'' for GWCS in this band. 
According to this definition, a small business is any entity, together 
with its affiliates and entities holding controlling interests in the 
entity, that has average annual gross revenues over the three preceding 
years that are not more than $40 million. By letter dated March 30, 
1999, NTIA reclaimed the spectrum allocated to GWCS and identified 
alternative spectrum at 4940-4990 MHz. On February 23, 2000, the 
Commission released its Notice of Proposed Rulemaking (65 FR 14230) in 
WT Docket No. 00-32 proposing to allocate and establish licensing and 
service rules for the 4.9 GHz band.

V. Description of Projected Reporting, Recordkeeping and Other 
Compliance Requirements

    43. In this NPRM, we seek comment on crafting unbundling rules that 
promote the goals of the Act and on a more granular approach to 
unbundling. In addition, the Commission asks for comment on how to 
involve the experience and expertise of state commissions. As a result, 
our unbundling regulations may require incumbent LECs to unbundle their 
networks by facility, service, or geography, rather than on a national 
basis for an entire element as they currently do. However, to identify 
which factors advancing the goals of the Act are relevant to an 
unbundling analysis, the Commission asks about the weight to assign to 
reducing regulatory obligations as alternatives to the incumbent's 
network becomes available, and whether the unbundling obligations are 
administratively practical.

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

    44. The RFA requires an agency to describe any significant 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.
    45. In this NPRM, we seek comment on refining our unbundling rules 
by examining whether we should consider the type of customer that a 
requesting carrier seeks to serve. In particular, the Commission asks 
whether the availability of UNEs should differ on the basis of whether 
the requesting carrier serves business or residential customers, and 
whether to have different rules for facilities serving larger business 
customers. The Commission asks questions in considerable depth with 
regard to the carve-out for the residential market for local switching, 
and seek comment on the practical experience of the carve-out has 
worked in practice and whether a substantially

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revised approach is warranted. The size of the entity as a subscriber 
to telecommunications services is therefore an important component of 
our unbundling analysis.
    46. In addition to examining the economic impact on customers, the 
Commission also examines the economic impact on carriers. It especially 
seeks comment from small entities on these issues. As the Commission 
considers undertaking a more granular approach, it recognizes that the 
resulting rules could be more administratively burdensome on carriers 
because it would be more difficult to keep track of where and under 
what circumstances certain elements must be unbundled. Accordingly, the 
Commission asks for comment about balancing any administrative burden 
against the benefits of a refined approach to unbundling. Particularly 
with regard to definitions of different network elements, the 
Commission asks whether there are less burdensome alternatives 
available to achieve the goals of the Act.

VII. Federal Rules that May Duplicate, Overlap, or Conflict With 
the Proposed Rules

    47. None.

Ordering Clauses

    48. Pursuant to the authority contained in sections 1-4, 157, 201-
05, 251, 252, 254, 256, 271, 303(r), and 332 of the Communications Act 
of 1934, as amended, 47 U.S.C. 151-54, 157, 201-05, 251, 252, 254, 256, 
271, 303(r), and 332, this NPRM Is adopted.
    49. The Commission's Consumer Information Bureau, Reference 
Information Center, Shall send a copy of this document, including the 
Initial Regulatory Flexibility Analysis, to the Chief Counsel for 
Advocacy of the Small Business Administration.

Federal Communications Commission.
William F. Caton,
Deputy Secretary.
[FR Doc. 02-902 Filed 1-14-02; 8:45 am]
BILLING CODE 6712-02-P