Section 257 Proceeding To Identify and Eliminate Market Entry Barriers for Small Businesses
Federal RegisterJun 27, 1997
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Chapter I
[General Docket No 96-113; FCC 97-164]
Section 257 Proceeding To Identify and Eliminate Market Entry
Barriers for Small Businesses
AGENCY: Federal Communications Commission.
ACTION: Policy statement.
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SUMMARY: The attached Report summarizes the Commission's implementation
of Section 257 of the Telecommunications Act of 1996 (1996 Act), which
requires the Commission to identify and eliminate market entry barriers
for entrepreneurs and small businesses in the provision and ownership
of telecommunications services and information services or in the
provision of parts or services to providers of telecommunications
services or information services. The Report addresses issues raised by
the more than 80 entities that filed comments, describes the
Commission's policies to foster small business opportunities in the
telecommunications industry, and explains agency-wide small business
initiatives that the Commission has undertaken since enactment of the
1996 Act, as well as steps that the Commission intends to take in the
future. The Report also describes the Commission's comprehensive study
of the participation of small businesses and businesses owned by women
or minorities in the telecommunications market. Through this Report the
Commission reaffirms its commitment to achieving the policy goals of
Section 257; to eliminate market entry barriers for small
communications businesses.
ADDRESSES: The complete text of this report is available for inspection
and copying during normal business hours in the FCC Reference Center
(room 239), 1919 M Street, N.W., Washington, D.C.
FOR FURTHER INFORMATION CONTACT: Office of General Counsel: Linda L.
Haller or Sheryl Wilkerson, at (202) 418-1720. Office of Communications
Business Opportunities: Catherine K. Sandoval or Vivian Keller, at
(202) 418-0990.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Report which was adopted on May 8, 1997 and released on May 8, 1997.
The complete text of this report also can be obtained on-line at the
FCC's Internet Home Page at www.fcc.gov., and may be purchased from the
Commission's copy contractor, International Transcription Service (202)
857-3800, 2100 M Street, N.W., Suite 140, Washington, D.C. 20037.
I. Introduction and Statement of Policy
1. Section 257 of the Telecommunications Act of 1996
(Telecommunications Act or 1996 Act) 1 requires the
Commission to identify and eliminate ``market entry barriers for
entrepreneurs and other small businesses in the provision and ownership
of telecommunications
[[Page 34649]]
services and information services, or in the provision of parts or
services to providers of telecommunications services and information
services.'' 2 In carrying out this mandate, the Commission
must ``promote the policies and purposes of this Act favoring diversity
of media voices, vigorous economic competition, technological
advancement, and promotion of the public interest, convenience and
necessity.'' 3
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\1\ Telecommunications Act of 1996, Pub. L. No. 104-104, 110
Stat. 56 (1996), Section 257.
\2\ 47 U.S.C. 257(a).
\3\ 47 U.S.C. 257(b).
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2. This Report summarizes the Commission's implementation of
Section 257, describes our strong commitment to continue to achieve its
statutory goals, and outlines steps we plan to take in the future. Many
of the measures described below occurred apart from this Report in
other Commission proceedings or through agency access and outreach
endeavors, in which the Commission integrated the mandate and policy
goals of Section 257.
3. The Report also demonstrates our commitment to achieving the
policy goals of Section 257(b). As described below, the Commission has
taken a variety of measures to fulfill the four national policy
objectives set forth in Section 257(b). First, with respect to
``vigorous economic competition,'' we have defined the term ``market
entry barrier'' in a manner that facilitates entry by small businesses
yet avoids unwarranted regulatory intervention that could distort a
competitive marketplace.
4. Second, to promote ``technological advancement,'' the Commission
has taken steps to eliminate outdated, unnecessary, or burdensome
requirements and procedures. We have undertaken substantial efforts to
disseminate information to small entities and entrepreneurs about
Commission processes and communications opportunities, and to increase
access to Commission decisionmakers. We also have made additional
spectrum available which in turn should spur technological advancement.
Third, we will continue to consider the policy favoring ``diversity of
media voices,'' in our review of broadcast ownership rules and in other
appropriate contexts, as well as in our further evaluation of issues
relating to small businesses owned by women or minorities. Finally, we
anticipate that our Section 257 actions thus far, combined with our
ongoing commitment to enhance opportunities for small businesses, will
promote the fourth policy goal of serving the ``public interest,
convenience, and necessity'' by expediting entry in the
telecommunications market, encouraging development of new, innovative
communications services, facilitating the availability of services in
various geographic markets, and contributing to a vibrant, competitive
telecommunications marketplace.
5. This Report also reflects our independent recognition of the
crucial role that small businesses play in the U.S. economy. Small
businesses contribute 47% of all sales in the United States, are
responsible for 50% of the private gross domestic product, employ 53%
of the private workforce, and produced an estimated 75% of the 2.5
million new jobs created during 1995. Small businesses also produce
more than twice the number of innovations per employee as large firms.
In addition, while only 3% of the employees in large enterprises work
in research and development, 19% of the employees in comparable small
enterprises with intellectual property work in research and
development. Despite their important role, small businesses represent
only a small portion of the businesses in telecommunications.
6. We initiated an omnibus Section 257 proceeding in May 1996 by
adopting a Notice of Inquiry. Section 257 Proceeding to Identify and
Eliminate Market Entry Barriers for Small Businesses, 11 FCC Rcd 6280
(1996), in FCC 96-216, 61 FR 33066, June 26, 1996 (Market Entry
Barriers Notice of Inquiry). We asked how to define small businesses,
requested profile data about the characteristics of small
telecommunications businesses, inquired about market entry barriers for
small businesses generally, and asked whether small businesses owned by
minorities or women face unique market entry barriers. Over 80 entities
filed comments.4 The commenters represent every sector of
the telecommunications market and include individual entrepreneurs,
small businesses, large communications companies, associations, federal
and state government representatives, telecommunications policy groups,
women's organizations, and minority interests. Many of the parties'
recommendations concern other ongoing Commission rulemakings, and
therefore, must be addressed and resolved under the timeframes and in
the context of the records in those separate proceedings.
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\4\ See Appendix A.
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7. As described in this Report, some of our key measures
implementing Section 257 to date are: deciding to use service-specific
definitions of small businesses, rather than adopting a general
definition; planning new initiatives that will better enable small
businesses to file comments and participate in Commission proceedings;
requiring the Bureaus and Offices to ensure that our rulemaking
processes enable meaningful comment on Commission proposals and their
impact on small businesses; instituting rulemaking proceedings so as to
ensure effective and prompt enforcement of the Communications Act and
our rules; reducing information filing and other burdens that create
obstacles to entry for small businesses; ensuring that the Commission
fully considers the interests of small carriers in proceedings to
determine funding mechanisms for universal service support; adopting
licensing incentives to facilitate small business participation in
spectrum auctions; adopting and proposing policies that permit
geographic partitioning and spectrum disaggregation in various wireless
communications services; adopting spectrum initiatives to encourage
technological innovation by equipment manufacturers and others;
speeding resolution of complaints; sponsoring conferences on
telecommunications services and financing options; increasing public
access to the Commission through technology by creating sites on the
World Wide Web and establishing the National Call Center; and making
continued efforts to ensure that the Telecommunications Development
Fund (TDF or Fund) becomes an effective vehicle for removing financial
obstacles to entry.
8. As this Report demonstrates, we shall give careful consideration
to the commenters' recommendations as we proceed to vigorously pursue
the statutory objective of eliminating obstacles to entry and thereby
to ensure a vibrant and strong telecommunications marketplace.
9. This Report focuses primarily on initiatives that relate to
small businesses generally. Prior to taking any action specifically
oriented to small businesses owned by women or minorities, we must
fully evaluate the Section 257 record according to the constitutional
requirements that govern action by the federal government based on race
(strict scrutiny) or gender (intermediate scrutiny). As part of this
evaluation, we are conducting a comprehensive study of the
participation of small businesses and businesses owned by women and
minorities in the telecommunications market.
[[Page 34650]]
II. General Market Entry Barriers
A. Definitions and Characteristics
1. Definition of ``Market Entry Barrier''
10. In the Market Barriers Notice of Inquiry, we observed that
``market entry barriers'' could include:
obstacles that deter individuals from forming small businesses,
barriers that impede entry into the telecommunications market by
existing small businesses, and obstacles that small
telecommunications businesses face in providing service or expanding
within the telecommunications industry * * * 5
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\5\ Market Barriers Notice of Inquiry, FCC Rcd 6280, 6283
(1996), in FCC 96-216, 61 FR 33066, June 26, 1996. We also stated
that discrimination could be a market entry barrier as well. Id. at
6305-6306. See also infra Paras. 210-225 (addresses unique obstacles
facing small telecommunications businesses owned by women or
minorities).
In their comments, parties discussed various kinds of obstacles and
impediments that are currently faced by small telecommunications
businesses. In this Report, we discuss these obstacles and impediments
without deciding whether they qualify as ``market entry barriers.'' It
is important to note that not all impediments to small business
participation in the telecommunications industry qualify as ``market
entry barriers'' relevant to Section 257(a). We also describe several
other Commission initiatives to encourage small business participation
in the telecommunications industry. In this regard, we believe that
this Report goes beyond what Section 257(a) requires.
11. America's Carriers Telecommunications Association requests that
the Commission construe ``market entry barrier'' in a commercially
effective manner so as to ``create a competitive environment which
permits small business'' ability to expand their market presence once
entry has been achieved.'' The Small Business Administration notes that
Section 257 ``does not define or limit'' the term ``market entry
barrier'' and recommends that the Commission construe the term ``as
aggressively as possible.'' Telecommunications Resellers Association
claims that the market ``is an effective regulator only if market
forces are adequate to discipline the behavior of all market
participants; if one or more such participants retains vestiges of
market power, regulatory intervention is essential to protect the
public interest.'' It argues further that ``[r]egulatory intervention,
therefore, continues to be necessary to ensure opportunities for small
resale carriers in markets that are still dominated by much larger
providers * * * [and that] [s]uch action could be deregulatory, but it
also could require regulatory measures.''
12. AT&T opposes our original construction of ``market entry
barrier,'' stating that the 1996 Act did not intend the Section 257
proceeding ``to carve out certain market niches as the preserve of
small companies, or to subsidize their competition against larger
entities.'' AT&T points out that barriers to small firm entry may
simply result from the fundamental structure of a given market--for
example, a market where there may be efficiencies due to economies of
scale, or where a large up-front investment is required to begin
operations.
13. From a public policy perspective, and consistent with the
``pro-competitive, de regulatory national policy framework''
established by Congress in the 1996 Act, we do not regard all
impediments or obstacles to small business entry to necessarily be
``market entry barriers'' that require governmental intervention under
Section 257. Instead, we believe that the term ``market entry barrier''
as used in Section 257(a) is primarily intended to encompass those
impediments to entry within the Commission's jurisdiction that justify
regulatory intervention because they so significantly distort the
operation of the market and harm consumer welfare. Removing these
impediments will, in our opinion, facilitate the entry or expansion of
small businesses into telecommunications markets as required by Section
257(a) and also fulfill the national policy goals articulated in
Section 257(b).
14. It is not our objective to make viable small business entry
into every sector of the telecommunications and information services
industries because there may be legitimate efficiency reasons that
favor large-scale operation. Finally, our construction of the term
``market entry barrier'' does not in any way limit our broad obligation
under Section 253 of the Act to preempt state or local legal
requirements that ``may prohibit or have the effect of prohibiting the
ability of any entity to provide any interstate or intrastate
telecommunications service.'' 6
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\6\ 47 U.S.C. Sec. 253(a).
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2. Definition of ``Small Business''
15. In the Market Entry Barriers Notice of Inquiry, we requested
comment on how small businesses should be defined under Section 257.
Specifically, we asked whether we should define the term by the number
of employees, gross revenues, net revenues, assets or any other
factors. In addition, we asked whether we should adopt a general size
standard or a specific standard for particular services. We also sought
comment on whether we should use other factors such as minimum capital
requirements, debt/equity ratios, cash flow, net worth or other indicia
of a business' ability to enter and compete in the marketplace.
16. The Commission historically has used a number of different size
standards to define small businesses, depending on the particular
communications service. The Commission has used size standards as a
basis for analyzing the impact of its rules on small business entities
pursuant to the Regulatory Flexibility Act.
17. Those parties commenting on the issue of whether we should
adopt a general size standard or specific standards for particular
services seem to prefer the latter approach. The Small Business
Administration argues that the size standards already in place for all
types of small telecommunications carriers have served small businesses
well and the Commission has not explained why they should be jettisoned
for purposes of this proceeding. The Small Business Administration also
notes that it would be virtually impossible to develop a single
definition of small businesses given the diversity inherent in the
telecommunications industry. It argues that a single definition would
be contrary to the intent of the Small Business Act, which specifies
that the Administrator is to make a detailed definition and that
definitions shall vary from industry to industry to the extent
necessary to reflect differing characteristics of such industries.
Similarly, America's Carriers Telecommunications Association suggests
that the Commission fashion policy on the basis of identifiable spheres
of services being offered.
18. We agree with those commenters who suggest that the Commission
should not adopt a small business definition based on a general size
standard. The comments demonstrate that each service has its own
characteristics.
19. In light of this, we believe that the better approach would be
to adopt specific size standards for individual services in proceedings
implementing Section 257 incentives. We note that our decision here is
consistent with our current approach to adopting small business
definitions in the competitive bidding context.
20. Finally, several parties commented on the small business
definitions adopted by the Commission
[[Page 34651]]
for specific services in other contexts and proposed alternative
definitions for purposes of Section 257. As we are not now adopting a
generic small business definition for purposes of Section 257, we find
it unnecessary to address those comments in this report.
3. Characteristics of Small Telecommunications Businesses
21. In the Market Entry Barriers Notice of Inquiry, we requested
profile data about small telecommunications businesses, including their
financing sources, types of services provided, markets served,
geographic areas of operation, and information concerning their
employee workforces.7 We received much general information
about the nature of small telecommunications businesses, as well as
specific profile information on a number of services, including
Specialized Mobile Radio (SMR) services, cable television services, and
wireless resale services.
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\7\ Market Entry Barriers Notice of Inquiry, FCC Rcd 6280, 6298
(1996), in FCC 96-216, 61 FR 33066, June 26, 1996.
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22. A number of commenters point out that, in contrast to small
businesses in some other industries, small businesses in the
telecommunications industry typically are start-up companies that
require a significant amount of equity capital or a combination of debt
and equity. In addition, Small Business in Telecommunications notes
that due to insufficient capitalization, small telecommunications
businesses tend to engage in localized operations, serving only a
portion of a larger market. Small Business in Telecommunications also
notes that unlike large companies, small businesses do not have the
capital resources to spread costs over an extended period. Thus, they
need to earn a profit in a shorter period of time.
B. Financial Impediments
1. The Record
23. Many parties have identified access to capital as a primary
market entry obstacle for small businesses. Commenters assert that
traditional sources of capital for small businesses are insufficient
for today's entry costs. The record also is replete with comments that
small businesses must assume great risks and make personal capital
contributions to finance their companies.
24. Some parties suggest ways for the Commission to address
financial impediments. One party suggests that the FCC should encourage
lenders to provide non-personally guaranteed funds to small carriers
under the same terms and conditions provided to larger carriers.
Another commenter contends that the FCC must recognize that gaining
access to a spectrum license itself is not enough--the availability and
cost of financing is critical to the success of PCS entrepreneurs.
25. Many parties address the Telecommunications Development Fund as
a source of financing and provide recommendations on how it should be
administered.
2. Commission Measures
26. The record shows that financial obstacles create substantial
impediments to small business entry in the telecommunications market.
We recognize that the telecommunications industry is generally capital
intensive and that substantial financial resources are necessary for
successful participation in most telecommunications sectors. The
Commission is limited, however, in its authority--and concomitant
ability--to remove financial impediments and obstacles. The FCC has no
statutory jurisdiction over the financial industry. Thus, we cannot
directly require banks, lenders, investors, or any other entity to
finance small businesses, or any sized business, in the
telecommunications industry.
27. The Commission, however, has taken measures to enhance access
to capital for small businesses in the auctions process. Pursuant to
Section 309(j) of the Communications Act, the Commission has taken
steps to promote capital access for small businesses, businesses owned
by minorities or women, and rural telecommunications businesses in the
provision of certain spectrum-based services. These mechanisms
facilitate access to capital by making the license costs more
affordable for small businesses.
28. Additionally, Congress created the Telecommunications
Development Fund and provided the Commission with a statutory role in
its operation. As provided in Section 707 of the Telecommunications
Act, the Fund's mission is to promote access to capital for small
businesses in the telecommunications industry, stimulate development of
new technology, promote employment and training, and support universal
service and the delivery of telecommunications services to underserved
areas. TDF is funded primarily by the interest earned on certain
deposits for spectrum auctions, and is authorized to make loans and
extend credit to small businesses.
29. On November 20, 1996, the FCC Chairman appointed the full TDF
board of directors.8 Pursuant to the statute, the board is
in the process of establishing general policies that will govern the
overall structure and operation of the Fund. TDF, a non-profit
corporation, is authorized to make loans, investments, or other
extensions of credit to small businesses; to provide financial advice
to small businesses; and to prepare research studies, financial
analyses, or other services consistent with the purposes of the Fund.
The Board is currently in the process of creating a sustainable source
of capital for small communications businesses and is investigating
means to leverage the more than $20.3 million in initial capitalization
it has received to date from auction upfront payments in order to
create a larger pool for small communications business loans and equity
investments.
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\8\ FCC Public Notice, Public Sector Board Members Appointed to
the Telecommunications Development Board (released Nov. 20, 1996).
The TDF Board members are: Interim Chairperson, Solomon D. Trujillo,
President and Chief Executive Officer, U.S. West Communications
Group; Richard L. Fields, Managing Director of Allen & Company
Incorporated; Thomas A. Hart, Jr., Partner, Ginsburg, Feldman &
Bress; Debra L. Lee, President and Chief Operating Officer of BET
Holdings, Inc. (Black Entertainment Television), Ginger Ehn Lew,
Deputy Administrator, Small Business Administration; Kirsten S. Moy,
Director, Community Development Financial Institutions (CDFI) Fund,
Department of Treasury; and William E. Kennard, General Counsel,
Federal Communications Commission.
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30. The full TDF board is finalizing its review of market
opportunities where TDF could direct its resources. TDF is commencing a
search for a fund manager. The board also is working to develop TDF's
structure to provide loans, equity investments and technical
assistance.
C. General Regulatory Obstacles
31. Many of the market entry impediments identified by the
commenting parties concerned general regulatory issues, and in
particular, difficulties in obtaining access to the Commission itself,
participating in Commission proceedings, and in obtaining information
about new services. The Commission already has taken several steps to
eliminate many of these obstacles.
1. Access to Commission Decisionmakers
32. Several parties point out that, unlike large companies and
associations, small businesses often do not have the time or resources
to meet with Commission staff or participate in Commission proceedings.
Others note that many small businesses historically have had little
representation before the
[[Page 34652]]
Commission and as a consequence, small businesses are frequently viewed
as outsiders in the telecommunications industry.
33. At the outset, we note that particular measures, both
legislative and regulatory, have been created to ensure that the
interests of small businesses are appropriately taken into account by
federal agencies. At the legislative level are the Regulatory
Flexibility Act (RFA),9 and, most recently, the Small
Business Regulatory Enforcement Fairness Act (SBREFA), which Congress
enacted as part of the Contract with America Advancement Act of 1996
(CWAAA), that strengthens and broadens the existing mandate under the
RFA.
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\9\ Pub.L. No. 96-354, 94 Stat. 1164 (1980).
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34. For example, the 1996 amendments to the RFA now provide for
judicial review and include expanded authority for the Chief Counsel
for Advocacy of the Small Business Administration to file amicus curiae
briefs in court proceedings on the question of whether an agency
properly complied with the RFA.
35. Other provisions of the new law expand on these efforts, e.g.,
Section 212 requires federal agencies to publish easily understood
``small entity compliance guides'' to assist businesses in complying
with all regulations for which a final regulatory flexibility analysis
is required. Section 213 requires federal agencies to establish within
one year of enactment a program to answer inquiries of small entities
seeking information on and advice about regulatory compliance, and
Section 222 creates a Small Business and Agriculture Regulatory
Enforcement Ombudsman within the Small Business Administration to give
small businesses a confidential means to comment on agency enforcement
activities.
36. In response to these requirements, the Commission is developing
compliance guides to assist small entities. Small entities can call the
FCC for informal guidance on compliance questions. Small entities and
other businesses may also call the FCC's National Call Center toll free
at 1-888-Call-FCC to receive fact sheets and answers to routine
questions. The Call Center will direct callers to the appropriate
Bureau or Office staff for more detailed questions.
37. The Commission's Office of Communications Business
Opportunities specifically addresses small business concerns. The
Commission is mindful of the financial and other difficulties that many
small businesses face and of the limited resources that are available
to them. As such, OCBO's primary mission is to promote opportunities
for small business participation in the communications industry in
order to increase competition, encourage innovation, increase
employment opportunities, improve services to all communities, and
increase the diversity of voices and viewpoints over the public
airwaves. OCBO serves as the principal small business policy advisor to
the Commissioners and is the Commission's primary resource for
implementing SBREFA.
38. OCBO also engages in extensive outreach and research. It
provides information to the public, industry, trade organizations, and
public interest organizations on the participation of small businesses,
minorities, and women in various communications services. OCBO also
organizes and participates in numerous conferences throughout the
country designed to increase small business participation in the
telecommunications industry and the regulatory process.
39. We also wish to emphasize that any interested party may file or
participate in Commission proceedings and file comments before the
Commission. To assist them, the Commission has published several Fact
Sheets describing how to participate in Commission proceedings. As a
matter of general policy, we believe it is imperative to solicit the
advice and perspectives of all interested parties, including small
businesses. We have sought to do so by reaching out to groups who do
not ordinarily visit the Commission or participate in its proceedings.
40. In addition, last year, the Commission adopted a Notice of
Inquiry seeking suggestions from all interested parties on how best to
streamline its processes and improve its delivery of
services.10 The responses ranged from proposals for major
policy initiatives to suggestions for minor adjustments in the way we
do business. The Commission has released a report summarizing its
efforts to date to improve internal processes and to improve Commission
operations.11
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\10\ In the Matter of Improving Commission Processes, Notice of
Inquiry, 11 FCC Rcd 14006 (1996) (Commission Processes Notice of
Inquiry).
\11\ Report to the Commission, Office of Plans and Policy, In
the Matter of Improving Commission Processes: FCC Notice of Inquiry
PP 96-17, July 25, 1996.
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41. Another vehicle the Commission has used to assist small
businesses in the Commission's processes is the use of seminars. One of
the first seminars the Commission held following passage of the 1996
Act was designed to help individuals participate in the Commission
process.12 This forum provided the general public with
instruction on how to get information from the FCC, how to track
specific issues, how to file comments, and how to understand FCC
terminology. The Commission also held two seminars about its World Wide
Web site 13 and has participated in numerous other
communications conferences for small businesses and minorities.
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\12\ See FCC News Release, Learn Your NOIs: FCC Open Forum on
How to Participate in the FCC Process (released May 2, 1996).
\13\ These fora, titled How to Find FCC Information on the
Internet, were held on June 24, 1996 and October 22, 1996.
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42. The Commission will consider the recommendations developed in
this proceeding as it plans future public seminars. We will encourage
bureaus and offices, to sponsor, on a regular basis, seminars on issues
of importance to small businesses, including emerging technologies,
spectrum opportunities, and financing of communications services. We
also will encourage regional and local conferences, which are
particularly valuable in reaching small businesses that are not able to
attend conferences in Washington, D.C.
43. The Commission also has initiated an electronic comment filing
effort which will make it easier for small businesses and organizations
to file comments and review comments filed by others. On April 3, 1997,
we adopted an Electronic Filing Notice of Proposed Rulemaking, FCC 96-
113, 62 FR 19247, April 21, 1997, which proposes the necessary rule
changes for implementing the electronic filing system and invites
comment on implementation questions. In proceedings where comments have
been filed on diskettes, the public is able to view those comments
online as long as they can access the World Wide Web site. A contract
has been awarded to develop a new database system to receive, process,
and make available comments in electronic form.
44. Further, all Commission Offices and Bureaus are now accessible
through the Commission's Internet site.14 Each office has an
e-mail address and personalized Web page with information about the
office and where to direct inquiries. In addition, texts of Commission
actions, including notices of proposed rulemaking, orders, public
notices, press releases, and speeches are now available on the
Internet. The Commission also has created a general FCC mailbox
entitled ``fccinfo'' for
[[Page 34653]]
electronic mail to the FCC.15 In addition, as described
above, the public may utilize the FCC's National Call Center.
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\14\ The URL address for the FCC home page is http://
www.fcc.gov.
\15\ The general mailbox for e-mail to the FCC is located at
[email protected]. Freedom of Information Act (FOIA) requests can be
sent to [email protected]. See also FCC News Release, FCC Upgrades on
the Internet (released June 6, 1995).
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45. We believe that all of the initiatives described above will
significantly enhance the ability of small businesses to make their
perceived barriers known to the Commission and its decisionmakers. We
also shall continue to be sensitive to the special needs of small
businesses in this regard and to look for new ways to enhance their
ability to have a voice in our decisionmaking process.
2. Commission Procedure as an Obstacle
46. According to the Cable Telecommunications Association, in many
instances, the agency's rulemaking process does not set forth any
proposed rule or variations thereof that enables commenters to analyze
the potential impact on small businesses before final rules are
adopted. It strongly recommends that the Commission reinstitute the
practice of putting out for public comment in notices of proposed
rulemaking the actual proposed language or variations thereof of the
rules the Commission is actually considering adopting.
47. The Administrative Procedures Act (APA) requires an
administrative agency to give ``either the terms or substance of the
proposed rule or a description of the subjects and issues involved.''
16 Thus, it does not require an agency to set forth the
actual text or variations of proposed rules. Nevertheless, we shall
make every effort to ensure our rulemaking process complies with the
spirit and letter of the APA and SBREFA by facilitating meaningful
comment on the effects of our rulemaking proposals and carefully
analyzing, and setting forth in that analysis, the effects of our final
actions on small businesses. To the extent not precluded by statutory
time constraints or the complex nature of the particular subject
matters involved, we can further these goals by including in our
rulemaking notices the text of actual proposed rules or variations
thereof. However, many times the Commission expresses a range of
options in its proposals, to solicit comment on those options, and on
the underlying issue, before concluding that one option is the best. We
believe this practice is consistent with the APA and SBREFA and often
allows small businesses and all commenters a fuller opportunity to be
part of the FCC's decisionmaking process because their comments affect
the Commission's choice of rules. We thus shall strongly encourage
bureaus and offices when they craft rulemaking proposals for our
consideration to set forth actual text of proposed rules where feasible
and practicable, although comment on a range of options and issues also
may be solicited.17
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\16\ 5 U.S.C. Sec. 553(b)(3).
\17\ It should be fully understood, however, that this may not
be possible where statutory time constraints exist, where numerous
broad issues exist that make publication of a particular rule or set
of rules impractical or inappropriate, or where other extenuating
circumstances warrant expeditious action that would preclude setting
forth with particularity a specific rule or versions thereof in the
notice. To the extent that parties and other interested persons
believe that final rules adopted do not adequately address their
concerns, they can seek redress through the reconsideration process,
i.e., requesting the Commission to modify or otherwise reconsider
its rules.
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3. Access to Information
48. Several parties also claim difficulties in obtaining access to
information about new communications services and related regulatory
matters as market entry barriers. To remedy this, the parties recommend
that the Commission make documents and information accessible
electronically to all parties and at costs that are reasonable to the
general public and small businesses.
49. We have taken many significant steps to ensure that information
about new services and regulatory proceedings is made available. In
addition, OCBO and the Commission's Office of Public Affairs (OPA) have
made a special effort to reach out to small businesses and others who
have less experience in working with the Commission and who are
uncertain about how to obtain information from the Commission.
50. OPA's Public Service Division provides a variety of
information, such as Fact Sheets,18 Information Bulletins
and Brochures, and handles incoming phone calls and requests from walk-
in visitors on all topics.19 OPA maintains mailing lists and
performs outreach activities to organizations, businesses and
individuals who are interested in particular issues. OPA also has
expanded its outreach to ``nontraditional'' media, including community
and Spanish language newspapers nationwide. Interested parties can
obtain the Commission's Daily Digest over the Internet by subscribing
to the Commission's list-server 20 or through the
Commission's fax-on-demand 21 phone line service.
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\18\ The Office of Public Affairs, Public Service Division has
published Fact Sheets to help the public obtain information and
participate in the Commission rule making process. They include, but
are not limited to: FCC Fact Sheet, How to Participate in the FCC
Process (released May 1996); FCC Fact Sheet, How to Participate in
the FCC Rule Making Process (released May 1996); FCC Fact Sheet,
Hints on Filing Comments With the FCC (released May 1996).
\19\ The Office of Public Affairs is located at 1919 M Street,
N.W., Room 254, Washington, D.C., (202) 418-0200. Interested parties
who are unable to visit the FCC in person may obtain documents and
services from the FCC's duplicating contractor, International
Transcription Service Inc. (ITS) at 2100 M Street, N.W., Suite 140,
Washington, D.C. 20037, (202) 857-3800.
\20\ Request for subscriptions to the Commission's list-server
should be sent via e-mail to [email protected]. See FCC Public
Notice, Daily Digest on Listserver (released Oct. 30, 1995).
\21\ The ``fax-on-demand'' service uses simple call and prompt
instructions to send materials directly to a fax machine. Lengthy
documents can be downloaded directly from the Commissions World Wide
Web site at http://www.fcc.gov. The listserver provides only the
Daily Digest and has recently expanded to include speeches.
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51. After passage of the Telecommunications Act, OPA established a
special Telecommunications Act home page on the Commission's web site
to provide a central location for all public information regarding
Commission actions to implement the law. OPA also modified the
Commission's Daily Digest to assist the public in tracking the
Commission's proceedings.
52. OPA also publishes an Information Seekers Guide which contains
detailed information about the Commission's reference rooms, and the
various ways the public can obtain information at the Commission. In
addition, OPA is consolidating public reference files into the main FCC
Reference Center, which will enable the public to obtain all ownership,
pending and granted licenses, and EEO files from one central location.
All Commissions documents on the Commission's Internet site are
available for free.
III. Impediments in Specific Services
A. Common Carrier Services
53. In the Market Entry Barriers Notice of Inquiry, the Commission
sought comment on ways to eliminate market entry barriers and enhance
opportunities for entrepreneurs and small businesses in wireline
services. Many of the obstacles identified by small businesses in the
common carrier services relate directly to control of vital inputs by
incumbent carriers and accordingly fall within the definition of
policy-relevant entry barriers. Examples of such barriers include:
incumbent LEC refusal to comply with interconnection obligations;
onerous conditions, such as high deposits for resale; incumbent LEC
monopoly control over subscriber list
[[Page 34654]]
information; and incumbent LEC control and assignment of
NXXs.22
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\22\ An ``NXX'' code, or central office code, is the second
three digits of a ten digit telephone number and identifies the
carrier switch that serves the particular customer location. See
Administration of the North American Numbering Plan, Report and
Order, 11 FCC Rcd 2588, 2593-2594 (1995) (Numbering Plan Order).
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54. Commenting parties also assert that regulatory obstacles have
evolved in a manner that favors incumbent carriers and thus create a
tremendous disincentive for small businesses to enter the
telecommunications marketplace. Examples of these perceived regulatory
barriers include: the formal complaint process; regulatory filing
burdens; support mechanisms for universal service; and the section 214
certification process.
1. Interconnection and Resale Barriers
55. Commenting parties raise a number of issues regarding
interconnection and emphasize that aggressive enforcement of the
interconnection and resale rights set forth in section 251 of the
Communications Act, as amended, is essential for small businesses and
new entrants to compete effectively in the telecommunications
marketplace. Several commenters indicate that national implementation
of the 1996 Act is essential because disparate regulations throughout
the states would operate as a significant obstacle for small
businesses, while some commenters claim that absent strong national
standards, incumbent LECs will retain the ability to erect
insurmountable barriers for new entrants, in particular small
businesses.
56. The Commission concurs that carrier compliance with, and our
diligent enforcement of, the rights and obligations set forth in
section 251 are absolutely necessary for achievement of the pro-
competitive goals and policies of the 1996 Act. In August 1996, as
required by the 1996 Act, the Commission adopted rules to implement
sections 251 and 252 of the Act, which establish the basic obligations
of carriers, especially in the local exchange and exchange access
markets.23 Section 251 establishes the general
interconnection obligations for all telecommunications carriers,
delineates further obligations for LECs, and prescribes additional
requirements for incumbent LECs. Section 252 generally sets forth the
procedures that state commissions, incumbent LECs, and new entrants
must follow to implement the requirements of section 251 and establish
specific interconnection arrangements. The Commission's regulations
implementing the local interconnection and resale provisions of the
1996 Act, however, have been partially stayed by the United States
Court of Appeals for the Eighth Circuit.24 Accordingly,
although the Commission remains fully committed to enforcement of our
rules implementing the various interconnection and resale rights and
obligations set forth in section 251, we may do so only to the extent
those rules are not currently stayed by the appellate court. We will,
however, continue to advocate national pricing rules in court.
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\23\ See generally First Local Competition Order, 11 FCC Rcd
15499; Implementation of the Local Competition Provisions the
Telecommunications Act of 1996, Second Report and Order and
Memorandum Opinion and Order, 11 FCC Rcd 19392 (1996) (Second Local
Competition Order).
\24\ In particular, See Iowa Util. Board v. FCC, No. 96-3221 and
consolidated cases (8th Cir. Oct 15, 1996).
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2. Enforcement and the Complaint Process
57. In the Market Entry Barriers Notice of Inquiry, the Commission
specifically requested comment on whether small businesses have
particular difficulties regarding Commission rules or policies. Several
commenting parties identified the Commission's own formal complaint
process as a barrier. Excessive delay, according to the commenting
parties, renders the complaint process ineffective as a tool to enforce
the Communications Act and the Commission's rules, in particular the
provisions of the 1996 Act designed to promote entry into the local
telecommunications marketplace. To remedy the perceived barriers of the
Commission's existing formal complaint process, commenting parties
advocate that the Commission adopt a streamlined, highly expedited
complaint process for resolving carrier-to-carrier disputes.
58. We agree that effective enforcement of the Communications Act
and existing Commission rules and policies is imperative if small
businesses are to participate fully in the telecommunications
marketplace. In recognition of this need, the Commission released a
notice of proposed rulemaking that proposes procedures designed to
expedite the resolution of formal complaints against common
carriers.25 As some parties recommend in this proceeding,
the Formal Complaint NPRM sets forth proposed procedures, including
legal and evidentiary standards, for requests for cease-and-desist
orders and other forms of interim relief designed to expedite
disposition of formal complaints and associated requests for relief. We
also have proposed to waive potentially burdensome formal and content
requirements upon a showing of financial hardship or other public
interest showing. The Commission anticipates that what has become an
obstacle for small businesses will likely be eliminated as a
consequence of revising and expediting the complaint process for all
common carriers.
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\25\ See Implementation of the Telecommunications Act of 1996:
Amendment of Rules Governing Procedures To Be Followed When Formal
Complaints Are Filed Against Common Carriers, Notice of Proposed
Rulemaking, CC Docket No. 96-238, FCC 96-460 (released Nov. 27,
1996) (Formal Complaint NPRM).
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59. Further, in response to suggestions regarding staffing
necessary to ensure effective enforcement of and compliance with the
Communications Act and the Commission's rules and policies, new staff
has been added to both the formal and informal complaints branches of
the Enforcement Division within the Common Carrier Bureau. A review of
staffing in the Audits Branch of the Accounting and Audits Division in
the Common Carrier Bureau is likewise being undertaken.
60. Finally, a ``paperless environment'' is being implemented to
increase the efficiency of the informal complaint process. All such
correspondence submitted to the Common Carrier Bureau in paper form
will be optically scanned and posted to an imaging database for
processing. This will increase efficiency by, among other things:
providing a means for the Bureau to identify on-line the status of
pending informal complaints and inquiries; facilitating rapid storage
and management of documents associated with a particular complaint or
inquiry; and providing Commission staff with a virtually real-time
means of obtaining statistical information about complaints and
inquiries.
3. Information Filing Burdens
61. Several parties have recognized that with movement to a
competitive telecommunications marketplace, day-to-day regulatory
filings are unnecessary and may serve anti-competitive purposes.
Another commenting party proposes relaxed tariff filing requirements
for all but the largest carriers.
62. As demonstrated by recent orders, the Commission is committed
to eliminating or streamlining tariff filing and other reporting
requirements applicable to entities providing common carrier
services.26 The Commission
[[Page 34655]]
believes that its actions taken with respect to reporting requirements
will facilitate increased participation by entrepreneurs and small
businesses in the provision of telecommunications services, while
preserving their ability to obtain sufficient information to make
rational market entry decisions.
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\26\ See Revision of Filing Requirements, Report and Order, 11
FCC Rcd 14110 (1996) (Revision of Filing Requirements Order). See
also Implementation of the Telecommunications Act of 1996: Reform of
Filing Requirements and Carrier Classifications, Order and Notice of
Proposed Rulemaking, 11 FCC Rcd 11716, 11718 (1996) (amending the
Commission's rules to specify that carriers may now file the
Automated Reporting Management Information System (ARMIS) 43-0
quarterly report and the 43-06 semi-annual Service Quality report on
an annual basis); FCC Public Notice, Common Carrier Bureau Seeks
Suggestions on Forbearance, DA 96-798 (released May 17, 1996)
(requesting suggestions on specific regulatory rules or requirements
that meet the statutory standards for forbearance). The Commission
also has eliminated tariff filing requirements for interstate,
domestic, interexchange services offered by nondominant
interexchange carriers. This detariffing order, however, has been
stayed by the United States Court of Appeals for the D.C. Circuit.
See Policy and Rules Concerning the Interstate, Interexchange
Marketplace, Second Report and Order, CC Docket No. 96-61, FCC 96-
424 (released Oct. 31, 1996), stay granted sub nom., MCI
Telecommunications Corp. v. FCC, No. 96-1459 (D.C. Cir. Feb. 13,
1997).
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4. Impact of Commission Proceedings on Small Telcos
63. Several commenting parties express concern that the Commission
has failed to consider the potential adverse impact that its
proceedings may have on small or rural incumbent LECs by automatically
assuming the dominance of rural incumbent LECs and thus avoiding
analysis under the Regulatory Flexibility Act.
64. The Commission continues to believe that incumbent LECs do not
qualify as small businesses, as defined by the Small Business
Administration, because they are dominant in their field of operation
due to their current control of bottleneck facilities. Our assessment,
however, may change in the future as local telecommunications markets
become fully competitive. In the meantime, the Commission nevertheless
has adopted the practice of including a discussion of the potential
impact of Commission rules on small incumbent LECs. In addition, as
suggested by at least one commenting party, the Commission has
considered the impact on small carriers when revising the structural
safeguards applicable to incumbent LECs as mandated by the 1996 Act.
5. Existing Universal Service Funding Mechanisms
65. According to America's Carriers Telecommunications Association,
the looming reality that any small interexchange carrier will have to
shoulder a portion of the financial burden for universal service once
it reaches a certain size operates to discourage such small carriers
from expanding their existing interexchange operations or from
providing interexchange service in the first place. America's Carriers
Telecommunication Association proposes that the Commission amend part
69 of this Chapter to fund Universal Service and Lifeline Assistance
through a broad-based charge rather than through charges assessed upon
a small segment of interexchange carriers.
66. In implementing the Joint Board's recommendations regarding
reform of the mechanisms for preserving and advancing universal
service, the Commission has already recognized the concern expressed by
America's Carriers Telecommunication Association by adopting
competitively neutral mechanisms for calculating universal service
support.27 Specifically, in the recently adopted Universal
Service Report and Order, the Commission has required that any
telecommunications carrier providing any interstate telecommunications
service for a fee to the public (or to such classes of eligible users
as to be effectively available to the public), and certain other
providers of telecommunications, must contribute to the funding of
universal service as well as that the contributions likewise must be
determined in a competitively neutral manner based on end-user
telecommunications revenues.
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\27\ See Federal-State Joint Board on Universal Service, Report
and Order, FCC 97-157 (adopted May 7, 1997) (Universal Service
Report and Order). See also Federal-State Joint Board on Universal
Service, Recommended Decision, 12 FCC Rcd 87, 91 (1996), FCC 96-45,
61 FR 63778, December 2, 1996 (Joint Board Universal Service
Recommended Decision).
---------------------------------------------------------------------------
67. In a related vein, some commenting parties suggest that the
Commission streamline, or forbear from, its policy of requiring study
area waiver petitions for companies seeking to acquire, and
subsequently add, additional telephone exchanges to their existing
study areas,28 claiming that the waiver procedure serves as
yet another hurdle for small telecommunications carriers venturing to
expand service through the acquisition of exchanges.
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\28\ A study area is a geographical segment of a carrier's
telephone operation, which in general corresponds to a carrier's
entire service territory within a state. See 47 CFR Part 36,
Appendix. For jurisdictional separations purposes, the Commission
froze all service area boundaries effective November 15, 1984.
---------------------------------------------------------------------------
68. In evaluating petitions seeking a waiver of the rule freezing
study areas, the Commission applies a three-prong test: (i) The change
in the study area must not adversely affect the Universal Service Fund
support program; (ii) the state commission having regulatory authority
must not object to the change; and (iii) the public interest supports
the change.29 We just completed the first step in the
process of effecting sweeping reform of the mechanisms for preserving
and advancing universal service and will soon commence a proceeding to
review our jurisdictional separations rules. Accordingly, we believe
that it is premature to consider the streamlining proposal suggested by
a commenter. Nevertheless, we shall carefully consider and evaluate the
merits of any such proposals in future proceedings.
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\29\ See U.S. West Communications, Inc., Memorandum Opinion and
Order, 10 FCC Rcd 1771, 1772 (1995) (U.S. West Order).
---------------------------------------------------------------------------
6. Impartial Administration of NXXs
69. One party, which is a franchise under which individually owned
and operated small business communications consultants provide voice
messaging services, describes difficulties encountered as the result of
allegedly improper administration of central office codes (i.e., NXXs)
by incumbent LECs. This party states that it has encountered multiple
instances of LEC service problems including, for example, LEC failure
to update translation tables to assignment of numbers reserved for the
LEC's own internal use.
70. The Commission agrees that access to numbering resources is
essential to all entities, not just small businesses, desiring to
participate in the telecommunications industry. The concerns raised
over numbering plan administration have been, or are in the process of
being, addressed by the Commission. For example, the newly added
section 251(e)(1) of the Communications Act requires the Commission to
create or designate one or more impartial entities to administer
numbering and to make such numbers available on an equitable basis.
Even prior to the passage of the 1996 Act, the Commission announced the
establishment of the North American Numbering Council (NANC) and
directed that central office code administration be transferred from
the LECs to a neutral entity selected to serve as the North American
Numbering Plan Administrator (NANP Administrator). To ensure efficient
and impartial number administration, the Commission has required that
the new NANP Administrator not be aligned with any particular
telecommunications industry segment.
[[Page 34656]]
71. NANC, through various working groups, is developing a plan for
the transfer of central office code administration. It also anticipates
that it will be recommending a NANP Administrator by May 15, 1997. In
the interim period prior to the transfer, Bellcore and the incumbent
LECs will continue their existing numbering administration functions.
The Commission, however, has declared that any attempts to delay or
deny central office code assignments, or to charge different ``code
opening'' fees for different providers of telecommunications services,
would violate sections 251(b)(3) and 202(a) of the Telecommunications
Act, as well as the Commission's numbering guidelines.30 The
Commission remains committed to closely monitoring actions by incumbent
LECs as central office code administrators until those functions are
transferred to the new NANP Administrator.
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\30\ See Second Local Competition Order, 11 FCC Rcd at 19392.
---------------------------------------------------------------------------
72. In addition, the Commission has specifically declined to allow
states to serve as central office code administrators. Moreover, to
ensure that small businesses do not suffer competitive disadvantages,
we have mandated that state commissions choosing to implement an all-
services area code overlay must include: (i) mandatory 10-digit dialing
by all customers between and within area codes in the area covered by
the overlay; and (ii) the availability of at least one NXX in the
existing area code to every telecommunications carrier authorized to
provide telephone exchange service, exchange access, or paging service
in the affected area code at least 90 days before introduction of the
overlay.
73. The Commission believes that these actions adequately address
any entry barriers that small businesses may have previously faced due
to incumbent LEC control of central office code assignment. In
addition, as further evidence of an ongoing commitment to eliminating
obstacles faced by small telecommunications businesses, the Commission
has recently launched a home page for the NANC to facilitate open
participation in, and wide-spread dissemination of information
regarding, numbering plan administration.31
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\31\ The URL address for the NANC home page is http://
www.fcc.gov/bureaus/common__carrier/www/NANC.
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7. Preemption of Onerous State Requirements
74. Several commenting parties cite perceived onerous state
regulatory requirements as one of the major obstacles to small business
entry into, and expanded participation in, common carrier services
request preemption of burdensome municipal requirements. The Commission
stands ready to enforce the general prohibition set forth in section
253 of the Communications Act, as amended, which prohibits any state or
local requirement that prohibits or has the effect of prohibiting any
entity from providing any interstate or intrastate telecommunications
service. As required by statute, however, the Commission will consider
any preemption request pursuant to section 253 on a case-by-case basis,
after notice and opportunity for comment, depending on the facts
presented.
B. Wireless Services
75. Some commenters argue that many market entry barriers in the
wireless telecommunications services relate to Commission rules,
policies and practices that create disincentives for small businesses
to participate in the wireless telecommunications services. These
include: the Commission's spectrum assignment decisions and its
construction requirements, application processing, and enforcement
practices. Other obstacles identified by commenters relate to the
control of vital inputs by incumbent facilities-based carriers,
including the reluctance of facilities-based carriers to negotiate
resale agreements. Many commenters also express views concerning our
competitive bidding incentives for small businesses in spectrum-based
wireless services. We address all of these issues in this Report.
1. Spectrum Assignment Policies
76. Commenters indicate that our spectrum assignment decisions, and
specifically the assignment of spectrum for large geographic service
areas and in large spectrum blocks, create a barrier to entry for small
businesses. Small Business in Telecommunications explains that wide-
area geographic systems are more capital intensive to construct and
operate than other types of systems. American Mobile Telecommunications
Association argues that entry barriers for small businesses are even
higher in circumstances in which the Commission has decided to convert
from site-specific to geographic area licensing for services in which a
substantial number of small, incumbent licensees are already operating.
The commenters argue that small business incumbents are often left with
limited expansion opportunities because they lack the resources to bid
on more frequencies or territory.
77. As we have discussed in the service-specific rulemakings for
those services where we have decided to or proposed to adopt geographic
area licensing, we believe that using predefined geographic areas
better serves the public interest than other types of licensing
schemes, such as site-specific licensing. Under a geographic licensing
approach, licensees can build and modify their systems in response to
market demands without having to come to the Commission for additional
authorizations. In addition, geographic licensing is administratively
more efficient and less burdensome because licensees are required to
file fewer license applications and, thus, the Commission has fewer
applications to process.
78. With respect to the impact on incumbent licensees of geographic
area licensing, we note that in the context of the service-specific
rulemakings, the Commission has either proposed or adopted provisions
designed to protect incumbent operations from harmful interference as a
result of future operations under the new licensing approach. We
believe that this approach represents a balancing of competing
interests, including those of incumbents, new entrants, small
businesses, and large businesses.
79. While we are mindful of the challenges that small businesses
may face in their efforts to acquire geographic area licenses, we have
taken steps to alleviate the perceived difficulties. For example, in
some services, we have adopted band plans that included licenses for
small geographic areas and spectrum blocks; thus, promoting economic
opportunity for a wide variety of applicants, including small
businesses, rural telephone companies and businesses owned by
minorities or women. Moreover, in many of our auctionable services, we
have adopted special provisions, such as bidding credits and
installment payment plans, to assist small businesses, minority and
women-owned businesses and rural telephone companies in acquiring
spectrum assigned in geographic service areas and spectrum blocks.
80. Finally, we believe, and many commenters in this proceeding
agree, that rules and policies that permit geographic partitioning and
spectrum disaggregation may also address the concerns raised regarding
geographic area licensing. We recently adopted rules permitting all
licensees in the broadband PCS service to partition their license areas
or disaggregate their spectrum blocks to entities that meet
[[Page 34657]]
certain minimum eligibility requirements.32
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\32\ Geographic Partitioning and Spectrum Disaggregation by
Commercial Mobile Radio Services Licensees, Report and Order and
Further Notice of Proposed Rulemaking, WT Docket No. 96-148 and GN
Docket No. 93-113, FCC 96-474 (released Dec. 20, 1996) (CMRS
Partitioning and Disaggregation Order and FNPRM).
---------------------------------------------------------------------------
81. In addition, we currently permit or are considering similar
partitioning and disaggregation rules in services other than broadband
PCS, including the Multipoint Distribution Service (MDS), 800 MHz SMR,
paging, 220 MHz, 38 GHz fixed point-to-point microwave, Wireless
Communications Service (WCS), Local Multipoint Distribution Service
(LMDS), cellular, and General Wireless Communications Services (GWCS).
We also are exploring whether to allow partitioning and disaggregation
for other Commercial Mobile Radio Services. We believe these efforts
may enhance the ability of small businesses to compete in the wireless
telecommunications industry.
2. Spectrum Warehousing and Construction Requirements
82. Small Business in Telecommunications argues that our policies
relating to construction requirements encourage spectrum warehousing
and thus, create a barrier to market entry for small businesses due to
the unavailability of sufficient amounts of spectrum for their use. In
particular, Small Business in Telecommunications points to our policy
of granting extended implementation authority in the Specialized Mobile
Radio (SMR) service to large companies which, it believes, encourages
spectrum warehousing. It also suggests that the Commission's
enforcement of its construction requirements has resulted in disparate
treatment between large and small companies.
83. Extended implementation authority for SMRs was initially
established to facilitate construction of wide-area systems by all
licensees, both large and small.33 In eliminating extended
implementation authority in the 800 MHz SMR service, we noted that the
geographic area licensing plan we adopted for the majority of the
spectrum allocated to the service rendered extended implementation
authority no longer necessary. We intend to initiate a proceeding that
will examine the relationship between longer and more flexible
construction requirements and spectrum warehousing. We also note that
in recent years, we have adopted longer construction periods which
benefit all licensees, both large and small, and have adopted proposals
to adopt flexible construction requirements in other wireless services.
In a separate proceeding, we have sought comment on whether our
finder's preference program should be eliminated.
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\33\ See 800 MHz SMR Order and NPRM, 11 FCC Rcd at 1524.
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3. Application Processing and Filing
One party argues that some methods used by the Commission to
process applications result in entry barriers for small businesses. We
believe our recent Refarming decision 34 addresses some of
the concerns raised. Specifically, we recently adopted rules that will
inject competition in the frequency coordination process. We expect
that such competition will reduce prices, improve coordination
services, and provide more flexibility to private land mobile radio
licensees.
---------------------------------------------------------------------------
\34\ Replacement of Part 90 by Part 88 to Revise the Private
Land Mobile Radio Services and Modify the Policies Governing Them,
Second Report and Order, PR Docket No. 92-235, FCC 97-61 (released
Mar. 12, 1997) (Refarming Second Report and Order).
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85. We agree with one commenter that our processes for electronic
filing and viewing should be readily accessible by small businesses. We
are taking steps to alleviate difficulties experienced by small
businesses and others in accessing application and other licensing
information on-line.
4. Enforcement Policies
86. Small Business in Telecommunications also argues that the
Commission does not allocate sufficient resources to the enforcement of
its rules. It claims that complaints filed by its members remain
pending for long periods, that alleged violations of construction
requirements by large companies go unaddressed and that the Commission
staff has, at times, urged settlement of complaints despite apparent
rule violations. It argues that all of this, Telecommunications creates
regulatory uncertainty which in turn results in unnecessary and
unreasonable risk for small business operators.
87. We agree that speedy enforcement of the Communications Act and
our rules is imperative if small businesses are to participate
effectively in the telecommunications industry and recently issued the
Formal Complaint NPRM, 61 FR 67978, December 26, 1996, proposing
changes to our formal complaint procedures for common carriers in an
effort to improve the speed and effectiveness of our formal complaint
process. In addition, the Wireless Telecommunications Bureau's
Enforcement Division has streamlined its informal complaint processes.
The streamlined procedures have resulted in faster resolution of
written informal complaints.
88. In an effort to reduce the filing of unfounded complaints
against carriers, the Enforcement Division has taken steps to assist
consumers in dealing with wireless carriers. For example, the Division
has published a consumer information bulletin describing how to file a
complaint with the FCC, fact sheets about industry practices and
applicable FCC rules, and a consumer alert to potential investors, such
as small business operators and consumers about how to avoid wireless
telecommunications investment scams. Moreover, the Division provides
information about consumer complaints to the National Fraud Information
Center, provides information on licensing fraud issues to consumer
groups, and provides technical support for the Federal Trade Commission
and the Securities and Exchange Commission regarding wireless
investment scams.
5. Outreach Efforts
89. Some commenters raise the issue of outreach efforts to small
businesses. As discussed above, the Office of Communications Business
Opportunities was established to address issues relating to small
communications businesses. The Wireless Telecommunications Bureau has
designated a small business contact person to coordinate issues of
particular concern to small businesses in the wireless
telecommunications industry, and has sponsored a number of seminars
regarding auctions and wireless telecommunications services. In
addition, members of the Commission and its staff have spoken at
numerous industry, trade association, and public interest organization
conferences on opportunities in wireless services licensed by the
Commission, and will continue to do so.
6. Interconnection and Resale
90. National Wireless Resellers Association argues that the
Commission's decision to sunset its longstanding rule prohibiting
carriers from restricting resale of their services erects a market
entry barrier because as facilities-based carriers will use the
Commission's sunset provision as a basis for refusing to negotiate
resale agreements, while financial institutions, sensing the carriers'
reluctance to negotiate, will refuse to provide capital to resellers.
It further argues that the Commission's inaction in resolving
[[Page 34658]]
disputes about Commercial Mobile Radio Service (CMRS) interconnection
issues and the pending reseller complaints on the same subject have
created a regulatory environment in which carriers, despite the
requirements of Sections 201 and 202 of the Communications Act, feel no
pressing obligation to negotiate in good faith with resellers regarding
either resale or switch-based resale agreements, resulting in
significant barriers to entry and expansion by delaying additional
competition and the deployment of innovative services and by creating
uncertainty in the industry impacting resellers' access to capital. In
addition, National Wireless Resellers Association argues that the
Commission must endeavor to balance the unequal bargaining positions
between facilities-based carriers and resellers.
91. In our CMRS Resale decision, we extended the resale rule
applying to cellular carriers to broadband PCS and covered SMR
providers and provided that this rule will sunset five years after we
award the last group of initial licenses for currently allocated
broadband PCS spectrum. A petition for reconsideration is now pending
regarding this issue and, therefore, we will address concerns about the
resale sunset in the context of that proceeding. We note that we intend
to actively enforce the requirements of Sections 201 and 202, as well
as other provisions of the Act and our rules. To date, the Wireless
Telecommunications Bureau has received ten formal complaints regarding
resale obligations. Of these ten complaints, six have been resolved and
four are pending. The Wireless Telecommunications Bureau also has
received four complaints regarding interconnection obligations
(including reseller/switch interconnection issues), which are pending.
Finally, we note that in the First Local Competition
Order,35 we concluded that CMRS providers are not de facto
LECs simply because they provide telephone exchange and exchange access
services. In addition, we noted that Congress also concluded that CMRS
providers' offering of such services, by itself, did not require them
to be classified as LECs.
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\35\ See First Local Competition Order, 11 FCC Rcd at 15995-
15996 (the Commission declined to treat CMRS providers as local
exchange carriers for purposes of Section 251(c) of the
Communications Act). The National Wireless Resellers Association
states that it disagrees with the Commission's conclusion in that
proceeding.
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7. Definition of ``Covered SMR''
92. In the CMRS proceeding, the Commission determined that an SMR
licensee offering interconnected service falls within the statutory
definition of an CMRS provider. American Mobile Telecommunications
Association argues that this definition will include many licensees
offering primarily local, dispatch service to specialized customers. It
contends that these entities cannot compete against other CMRS
providers and will be subject to a panoply of CMRS related regulations
that will result in increased costs. We note that the ``covered SMR''
definition issue is currently pending before the Commission in a number
of proceedings.36
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\36\ See, e.g., CMRS Resale Order, 11 FCC Rcd 18455; Telephone
Number Portability, First Report and Order and Further Notice of
Proposed Rulemaking, 11 FCC Rcd 8352 (1996,) First Memorandum
Opinion and Order on Reconsideration, FCC 97-74 (released Mar. 11,
1997); American Mobile Telecommunications Association Petition for
Declaratory Ruling (filed Dec. 16, 1996).
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8. Competitive Bidding Incentives
93. As we stated in the Market Entry Barriers Notice of Inquiry,
Section 309(j) of the Act, like Section 257, embodies Congress' intent
to facilitate opportunities for small businesses in telecommunications.
Section 309(j) requires the Commission to establish competitive bidding
rules and other provisions to ensure that small businesses, businesses
owned by minorities and women, and rural telephone companies
(collectively referred to as ``designated entities'') have an
opportunity to participate in the wireless telecommunications industry.
94.Many commenters stated that despite our incentives, the use of
competitive bidding itself has become a barrier as it has resulted in
higher costs for entry into wireless spectrum-based services. We have
recognized previously that competitive bidding, despite the public
interest benefits associated with its use, has the potential to erect
another barrier for small businesses and other designated entities by
raising the costs of entry into spectrum-based services.37
However, we note that Section 309(j) provides mechanisms to address
this potential problem, and the Commission has adopted special
incentives for designated entities in various services. In addition,
our policies regarding geographic partitioning and spectrum
disaggregation should aid small businesses and other entrepreneurs
through the creation of smaller, less capital intensive licenses that
are more easily within the reach of smaller entities. Moreover, such
policies may increase access to capital that can be used to construct
and maintain wireless systems.38 We further note that small
businesses have both participated in and been successful bidders in the
majority of spectrum auctions we have conducted to date. Specifically,
in our simultaneous multiple-round spectrum auctions, 79% of the
auction bidders were small businesses (as defined for each respective
service) and small businesses acquired 54% of the total licenses
offered in these auctions.39
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\37\ See, e.g., Competitive Bidding Fifth Report and Order, 9
FCC Rcd at 5599-5600 (25% reduction for all broadband PCS C block
small business applicants). See, e.g., D, E & F Block Competitive
Bidding Report and Order, 11 FCC Rcd at 7875-7876 (25% bidding
credit for small businesses and 15% bidding credit for very small
businesses); Competitive Bidding Sixth Report and Order, 11 FCC Rcd
at 161 (25% bidding credit for small businesses in broadband PCS C
block auctions); 900 MHz SMR, 11 FCC Rcd at 1705-06 (15% bidding
credit for very small businesses and 10% bidding credit for small
businesses). See also 800 MHz SMR Order and NPRM, 11 FCC Rcd at
1574; Allocation of Spectrum Below 5 GHz Transferred from Federal
Government Use, Second Report and Order, 11 FCC Rcd 624, 662-663
(1996) (GWCS Second Report and Order).
\38\ See Geographic Partitioning and Spectrum Disaggregation by
Commercial Mobile Radio Services Licensees, Notice of Proposed
Rulemaking, 11 FCC Rcd at 10195-10196 (1996).
\39\ These results include auctions for the narrowband PCS,
broadband PCS, direct broadcast satellite, multipoint and/or
multichannel distribution, 900 MHz SMR, and digital audio radio
services. The Interactive Video and Data Service (IVDS) service
auction was an oral outcry auction; thus, those results are
excluded.
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94. Finally, with respect to Small Business in Telecommunications'
suggestion that the Commission examine alternatives to competitive
bidding, we note that in granting the Commission authority to assign
licenses through competitive bidding, Congress recognized the benefits
of this assignment method in ensuring the efficient use of spectrum and
faster deployment of new services and technologies to the public as
opposed to other methods of licensing. Specifically, Congress found
that other licensing methods such as lotteries and comparative hearings
``in many respects * * * have not served the public interest.'' Indeed,
in authorizing the Commission's use of competitive bidding, Congress
limited the Commission's authority to license spectrum using lotteries.
Consequently, we will continue to seek comment, where appropriate, on
the use of competitive bidding to assign licenses for individual
services in specific rulemaking proceedings, and we will continue to
assign licenses for spectrum-based services through competitive bidding
where permitted by the Communications Act and where we find that the
public interest would be served. In addition, we note that Section
309(j)(12) requires the Commission, no later than September 30, 1997,
to
[[Page 34659]]
conduct a public inquiry and submit a report to Congress evaluating the
use of competitive bidding, including the extent to which competitive
bidding has improved the efficiency and effectiveness of the process
for granting licenses and has facilitated the introduction of new
spectrum-based technologies and the entry of new companies in the
telecommunications market.
96. In the Market Entry Barriers Notice of Inquiry, we asked , we
sought preliminary views on how Section 309(j) incentives have operated
in the completed auctions employing small business incentives. While
one party had a positive view of the competitive bidding incentives
used thus far, other commenters, however, did not. Other commenters
allege that the Commission has a practice of changing rules in mid-
stream. Minority and women entrepreneurs, complain that they lost
financing once the Commission eliminated its race and gender-specific
competitive bidding provisions in light of Adarand v.
Pena.40
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\40\ 115 S.Ct. 2097 (1995) (Adarand).
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97. We agree that we must continue to take steps to eliminate entry
barriers and other burdens that discourage small businesses from
participation in auctions for spectrum-based services. Some of the
suggestions made by commenters already have been implemented. For
example, the Commission continues to adopt special incentives to
encourage the participation of small businesses in auctions. Indeed,
the Commission has adopted or proposed tiered bidding credits and, in
some cases, tiered installment payment plans as suggested in Williams'
testimony in a number of services, such as: broadband PCS D, E & F
block, WCS, 900 MHz SMR, 800 MHz SMR, Interactive Video and Data
Service (IVDS), and paging. The Commission also has eliminated the PCS
cross-ownership rule and is considering procedural changes to increase
the pace of auctions, and thereby, shorten the duration of each
auction.
98. Finally, one party argues that the Commission should consider
policies that support entrepreneurs in their efforts to build their
systems, recognizing that these small businesses will need to build out
quickly not only to comply with FCC rules, but also to reduce the lead
time of licensees in the Broadband PCS ``A'' and ``B'' block.
99. We are considering some steps to facilitate faster build-out of
PCS systems by entrepreneurs. For example, we recently adopted rules,
62 FR 12752, March 18, 1997, that shorten the voluntary negotiation
period for relocation of microwave incumbents by PCS licensees in the
``C,'' ``D,'' ``E,'' and ``F'' blocks from two years to one
year.41 We believe this rule change will help to eliminate
an obstacle to entry for ``C'' and ``F'' block licensees by encouraging
faster relocation of microwave incumbents and, therefore, enabling
these licensees to more quickly build-out their PCS systems and
commence operation. In addition, the Wireless Telecommunications Bureau
is exploring using its current licensing databases to fashion
specialized licensing databases which we anticipate will be of
particular interest to small businesses. The Bureau is exploring ways
to provide interested parties with information concerning spectrum
availability and types of services being provided by existing
licensees. We believe that the availability of such databases will
facilitate small businesses' efforts to discover and realize
partitioning and disaggregation opportunities.
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\41\ Amendment to the Commission's Rules Regarding a Plan for
Sharing the Costs of Microwave Relocation, Second Report and Order,
WT Docket No. 95-157, FCC 97-48 (released Feb. 27, 1997).
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C. Cable Services
100. Before addressing the specific cable-related market entry
concerns raised by commenters, we note that even prior to the enactment
of Section 257, the Commission already had taken significant steps to
minimize the impact of our regulations on small cable businesses. In
1995, we established a new form of cable rate regulation designed to
take into account the unique circumstances of small cable systems and
companies.42 By tailoring rules specifically for small cable
systems, the Small System Order has had a significant impact in easing
the burdens of regulation for smaller cable companies. The commenters
in this proceeding have brought to our attention certain areas in which
they believe market entry barriers exist for small cable operators and
other small video programming providers.
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\42\ Implementation of Sections of the Cable Television Consumer
Protection and Competition Act of 1992; Rate Regulation, Sixth
Report and Order and Eleventh Order on Reconsideration, 10 FCC Rcd
7393 (1995) (Small System Order).
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1. Access to Programming and Related Obstacles
101. Several commenters assert that, due to their size, small cable
operators have difficulty in obtaining programming on terms and
conditions comparable to their larger competitors. These concerns
implicate the program access rules we adopted pursuant to Section 628
of the Communications Act.43 One of the purposes of Section
628 is to increase ``competition and diversity in the multichannel
video programming market * * *.'' In adopting program access rules,
the Commission sought to carry out Congress' preference that program
access disputes be resolved in the marketplace 44
specifically rejecting a generally applicable approach to program
access issues, such as requiring program vendors to offer their
programming to all MVPDs [multichannel video programming distributors]
at the same rate on the same terms narrowly tailoring our rules to
address conduct by vertically integrated programmers, i.e., programmers
affiliated with cable operators. Absent regulation, such programmers
have the incentive and ability to favor their affiliated cable
operators over competing MVPDs. Our rules thus focus on discrimination
between MVPDs that are in competition with each other. Commenters in
the instant proceeding urge us to expand the focus of the program
access rules by more broadly regulating the disparity between
programming rates paid by small cable operators and rates paid by
larger MVPDs, even where that disparity does not involve competing
MVPDs.
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\43\ 47 U.S.C. Sec. 548. See 47 CFR Sec. 76.1000-76.1003.
\44\ Applications of Turner Broadcasting System, Inc.,
Memorandum Opinion and Order, 11 FCC Rcd 19595 (1996) (Turner).
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102. We do not deem it appropriate to seek to impose new
regulations governing the relationship between programmers and
distributors at the wholesale level. While higher programming rates
obviously are not in the financial interest of smaller operators, this
alone does not allow the Commission to step in with a new scheme of
regulation. As discussed elsewhere in this item, our efforts to take
account of the hardships faced by small cable systems have been aimed
more at eliminating potentially burdensome regulatory requirements,
rather than marketplace activity that does not appear to be intended to
deter competition. The complaints articulated by commenters are
consistent with the common practice of vendors offering discounts for
bulk purchasers. Even our rules regulating vertically integrated
programming vendors allow variations in rates, terms, and conditions
when selling to a particular programming distributor based on
``economies of scale, cost savings, or other direct and legitimate
economic benefits reasonably
[[Page 34660]]
attributable to the number of subscribers served by the distributor. *
* *'' Likewise, Congress recently re-affirmed the right of a cable
operator to engage in discriminatory pricing at the retail level by
offering bulk discounts to multiple dwelling units. Although we found
in 1992 that Congress sought to rely on the marketplace to the extent
possible, the Telecommunications Act of 1996 reflects an even more
deregulatory intent on the part of Congress. In this environment, we
therefore do not believe it appropriate to seek to expand the scope of
our program access rules to address the disparity in programming rates
where competing MVPDs are not involved.
103. With respect to disparate pricing for programming acquired
through broadcaster retransmission consent, Section 325 of the
Communications Act 45 imposed upon the Commission the duty
to ensure that its regulation of broadcaster retransmission consent did
not conflict with its obligation under Section 623 46 to
ensure that basic service rates are reasonable. Subject to this
proviso, Congress expressly gave broadcasters flexibility to negotiate
the terms of carriage and did not appear to exclude from the
negotiating table such factors as the individual characteristics of the
cable system requesting carriage. As the Senate Committee Report
explaining Section 325 states, it ``is the Committee's intention to
establish a marketplace for the disposition of the rights to retransmit
broadcast signals; it is not the Committee's intention in the bill to
dictate the outcome of the ensuing marketplace negotiations.''
47 We thus are reluctant to limit the scope of negotiations
under the retransmission provisions of Section 325 absent clear and
persuasive evidence that the present system is not meeting the
objectives Congress had in mind.
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\45\ 47 U.S.C. Sec. 325.
\46\ 47 U.S.C. Sec. 543.
\47\ Senate Committee on Energy and Commerce, S. Rep. No. 92,
102d Cong., 2nd Sess. at 36 (1991).
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2. Cable Technical Standards
104. Southwest Missouri Cable asserts that the Commission's
stringent proof of performance technical standards require considerable
expense and expertise that many small cable operators cannot afford.
Our cable technical standards serve a number of important objectives,
including ensuring broadcast signals retransmitted by cable systems are
not subject to material degradation, promoting uniform and nationwide
standards generally, and ensuring cable systems do not exceed our cable
signal leakage standards by causing excessive radiation that might
interfere with use of aeronautical radio services and thereby endanger
life or property. In Cable Television Technical Standards,48
we revised our cable technical rules and required proof of performance
testing to ensure compliance. In addition, we stated that we would
allow local franchising authorities of small cable systems to adopt
less stringent standards because they are in the best position to
evaluate the costs of compliance with technical standards and the
impact that such costs will have on the provision of cable service. We
continue to believe that this is a reasonable approach with respect to
ensuring adequate signal quality and, absent a fuller reexamination,
represents an appropriate balancing of the need for adequate technical
standards and the interests of small cable businesses.
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\48\ Cable Television Technical and Operational Requirements,
Review of the Technical and Operational Requirements of Part 76
Cable Television, Report and Order, 7 FCC Rcd 2021 (1992) (Cable
Television Technical Standards).
---------------------------------------------------------------------------
105. Additional testing and reporting requirements apply when a
cable operator transmits signals over aeronautical frequencies.
Although these rules further important safety considerations, it may be
possible to eliminate certain reporting requirements to ease regulatory
burdens on smaller entities, without jeopardizing public safety. After
further examination, we will decide whether to propose relaxed
reporting requirements in this context.
3. Access to Capital and the Definition of ``Affiliate''
106. Commenters suggest the Commission could ease the difficulty
small cable operators face in obtaining access to capital by narrowly
defining the term ``affiliate'' as that term is used in the small cable
operator provisions of the Telecommunications Act.49 As
enacted by the 1996 Act, Section 623(m) of the Communications
Act,50 grants partial and, in some cases, total rate
deregulation to small cable operators in franchise areas where they
serve 50,000 or fewer subscribers. The Commission has requested comment
on the manner in which the term ``affiliate'' should be defined for
purposes of determining whether a particular cable operator qualifies
as a ``small cable operator'' entitled to rate deregulation.
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\49\ 1996 Act, Sec. 302(c). See Cable Act Reform Order, 11 FCC
Rcd at 5947-48.
\50\ 47 U.S.C. Sec. 543(m).
---------------------------------------------------------------------------
107. The Commission intends to give full and careful consideration
to the concerns raised by small cable companies in the Cable Act Reform
proceeding (Docket 96-85), 61 FR 19013, April 30, 1996, including the
extent to which it would be appropriate to define the term
``affiliated'' to exclude passive investments in small cable companies.
The commenters have raised important issues concerning the benefits of
permitting such passive investments, but we note that substantial
countervailing arguments also have been made that merit our
consideration. We expect to address and resolve these issues in the
near future.
4. Franchise Renewal Process
108. The Small Cable Business Association maintains that many cable
operators face significant abuse in the franchise renewal process
because municipalities fail to follow the procedural protections of 47
U.S.C. Sec. 546, and, in other instances, demand system upgrades wholly
unrelated to community needs and costs or seek compensation in excess
of the five percent franchise fee cap. The Small Cable Business
Association recommends that the Commission initiate an inquiry into the
franchise renewal processes that exist at the municipal level and, from
this investigation, recommend to Congress changes in federal law that
will more affirmatively preempt overreaching by local franchise
authorities.
109. As the commenters recognize, Section 626(e)(1) expressly
provides for a right of judicial appeal for cable operators who have
been denied renewal or have been ``adversely affected by a failure of
the franchising authority to act in accordance with the procedural
requirements'' of Section 626. In view of Congress' enactment of a
specific judicial remedy, and in the absence of specific information
that abuses have occurred, we believe it would be premature at this
juncture to move forward on the Small Cable Business Association's
proposal. Nevertheless, commenters are free to bring to the
Commission's attention documented instances of abuse and, if
appropriate, we shall recommend legislative initiatives to address any
such issues.
5. Leased Access Requirements
110. Southwest Missouri Cable argues that imposing leased access
requirements is not practicable, is a severe economic burden imposed on
small business, and is totally unnecessary. The Small Cable Business
Association states the Commission should adopt leased access rules that
adequately compensate small cable companies for their true costs in
meeting leased access requests so that such requirements do not cripple
small
[[Page 34661]]
cable financially or competitively. Blab Television, on the other hand,
asserts that the complexity of Commission rules and the inaccessibility
of underlying information from cable operators make it extremely
difficult to determine if a given rate is ``reasonable'' under the
statute and that, consequently, leased access programmers face
artificially high carriage rates. It states that a low, across-the-
board, fixed rate would eliminate market entry barriers and protect
both programmers and cable operators.
111. Section 612(b)(1)(D) exempts many smaller cable operators from
leased access requirements altogether. In addition, we recently
modified our leased access rules, excusing operators of eligible small
systems from having to respond to requests for leased access unless the
leased access programmer provides specified information designed to
show that its request is bona fide and providing qualifying small
system operators twice as much time as other cable operators to comply
with certain procedural deadlines. The revised rules should benefit
small leased access programmers such as Blab Television because they
should result in lower maximum rates for tiered services, permit
resale, grant access to highly penetrated tiers, and require part-time
rates to be prorated without a surcharge. We believe the modified
leased access rules strike the proper balance required to ensure that
the congressional objectives underlying Section 612 are fully realized
without imposing onerous burdens on small cable systems.
6. Access Contracts to Multiple Dwelling Units
112. OpTel maintains that cable operators often enter into service
contracts with owners of multiple dwelling units (MDUs) that end up
being ``perpetual'' and thus allow franchised cable operators to lock-
up whole blocks of subscribers. It maintains that the Commission should
apply a ``fresh look'' policy to perpetual or other long-term contracts
and provide an opportunity for MDU owners or managers to escape such
contracts. In a similar vein, Watson Cable states that exclusive
agreements of larger cable companies with apartment complexes deny
access to smaller cable companies that serve the same area. Both the
National Cable Television Association and Tele-Communications, Inc.
state that the contracts about which OpTel is concerned are not the
type of market entry barrier contemplated by Section 257 because they
do not reflect legal or regulatory barriers nor result from disparities
in the ability to raise capital. Instead, such contracts are the result
of arms-length, privately-negotiated agreements which are equally
available to franchised cable operators and other MVPDs.
113. These issues are related to matters that are the subject of a
pending proceeding known as the ``Inside Wiring''
rulemaking,51 where the Commission is addressing, among
other things, the ability of a cable operator or other MVPDs to claim
ownership or control over wiring installed within MDUs. The Commission
is considering whether MDU owners and residents have sufficient
flexibility to choose between competing MVPDs, or whether Commission
action would be appropriate. We believe the Inside Wiring rulemaking is
the better forum to address the MDU issues raised by commenters in the
instant proceeding. The Commission intends to act in the Inside Wiring
proceeding shortly, and will address issues related to MDUs in an
appropriate manner.
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\51\ Implementation of the Cable Television Consumer Protection
and Competition Act of 1992; Cable Home Wiring, Final Order on
Reconsideration and Further Notice of Proposed Rulemaking, 11 FCC
Rcd 4561 (1996).
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7. Pole Attachment-Related Impediments
114. Both the Small Cable Business Association and the National
Cable Television Association maintain that cable systems that operate
in rural areas face entry barriers and competitive barriers from
electrical and telephone cooperatives because the rates and conditions
which these entities charge for pole attachment usage are not subject
to pole attachment regulation. They ask that we propose to Congress a
statutory amendment to Section 224 of the Communications
Act,52 that would apply the pole attachment/access to right-
of-way rules to telephone cooperatives and electric cooperatives.
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\52\ 47 U.S.C. Sec. 224.
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115. When it created this exemption almost twenty years ago,
Congress found that cooperative utilities charge the lowest pole rates
to pole users. Further, in the rural areas generally served by
cooperatives, the technical quality of over-the-air television was
often poor, giving the customer-owners of these utilities an added
incentive to foster the growth of cable television in their areas.
While the comments suggest that some of the circumstances that gave
rise to the exemption no longer exist, the record in this proceeding
provides an inadequate basis to make a firm recommendation whether to
retain or eliminate the exemption. We will continue to consider the
matter.
8. Other Matters
116. The Commission is examining other areas not specifically
raised in the Section 257 proceeding that have the potential for
imposing barriers on small cable businesses. For example, the
Commission is revisiting its current regulation that requires cable
operators to be able to override normal programming to give viewers
notice of a national emergency. The Commission also is giving careful
consideration to whether an extended implementation schedule for
smaller cable systems can be developed that would satisfy Section 624,
without undermining the congressional intent underlying that section.
117. In Closed Captioning Notice 53 we have sought
comment on the implementation of Section 713 which requires the
Commission to prescribe rules mandating that video programming be
closed captioned for the benefit of persons with hearing disabilities.
Specifically, we recognized the market entry objectives of Section 257
and seeks comment on whether we should define economic burdens based on
the size of the programmer or provider.
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\53\ 47 U.S.C. Sec. 613. See In the Matter of Closed Captioning
and Video Description of Video Programming, Notice of Proposed
Rulemaking, 12 FCC Rcd 1044 (1997) (Closed Captioning Notice).
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D. Mass Media Services
118. In the mass media area, the Commission already has made
considerable progress in reducing regulatory hurdles that may impact
small businesses and impede entry. We have streamlined and improved our
processes so that the average time for processing routine television
station sales has been reduced from three months to two months and the
average time for processing non-routine radio station sales from twelve
months to five months. The Mass Media Bureau also has begun publishing
radio application status and station technical information on the
Internet so that it is readily available to the public. It has
commenced work on a project to provide for electronic filing of
broadcast applications, which will scan for incomplete or inaccurate
applications and provide for automatic computer analysis of
interference issues. The Commission also plans to resolve the
proceeding instituted to reform the comparative hearing process for the
award of new broadcast licenses. All of these efforts should
significantly assist small businesses by generally easing the burdens
and delays associated with the regulatory process. The commenters
[[Page 34662]]
have raised additional entry barrier issues and these are addressed
below.
1. Low Power Television
119. Community Broadcasters Association argues that small
businesses, particularly, low power television (LPTV), have not been
given the amount of regulatory attention they deserve and that Section
257 requires. More specifically, some commenters state that Section
257's goal of diversity will be rendered virtually meaningless under
the Commission's proposed digital television (DTV) conversion proposal
because low power television stands to lose approximately forty-five
percent of its stations, thereby decreasing diversified ownership which
will result in significantly less diversified programming. According to
these interests, the Commission should change its ``small business''
focus from trying to facilitate multi-billion dollar bidding in
spectrum auctions to assisting currently-existing businesses that are
truly small so that these business are not eradicated. In particular,
these commenters believe the Commission should propose multiple classes
of DTV--full power and small stations--and open a second window for
these smaller DTV allotments and designate only low power television
station licensees as eligible. They urge the Commission to use a wide
range of solutions proposed by the low power television industry to
protect as many existing low power television authorizations as
possible and to accommodate as many of these businesses with DTV
conversion channels as feasible.
120. With respect to concerns expressed by some commenters about
the impact of the conversion of DTV on LPTV stations, on April 21,
1997, the Commission released the DTV Fifth Report and Order in MM
Docket No. 87-268,54 62 FR 26684, May 14, 1997, which issued
initial licenses and established the service rules for
DTV.55 In the DTV Fifth Report and Order, following
Congress' direction in Section 336(a)(1) of the 1996 Act, we determined
that initial eligibility for DTV licenses should be limited to those
full-power broadcasters who, as of the date of issuance of the initial
digital licenses, hold a license to operate a television broadcast
station or a permit to construct such a station, or both. We reiterated
our previous determination that there is insufficient spectrum to
include LPTV stations and translators, which are secondary under our
rules and policies, to be initially eligible for a DTV channel and that
we had not been able to find a means of resolving this problem.
However, we also pointed out that limiting initial eligibility to full-
power broadcasters does not necessarily exclude LPTV stations from the
conversion to DTV.
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\54\ See Advanced Television Systems and Their Impact Upon the
Existing Television Broadcast Service, Fifth Report and Order, MM
Docket No. 87-268, FCC 97-116 (released Apr. 21, 1997) (DTV Fifth
Report and Order).
\55\ See DTV Sixth Further Notice, 11 FCC Rcd 10968. While this
proceeding progressed further, all-digital advanced television
systems were developed. Thereafter, the Commission began to refer to
``advanced television'' as ``digital television'' or ``DTV'' in
recognition that, with the development of the technology, any
advanced television system was certain to be digital. See Advanced
Television Systems and Their Impact upon the Existing Television
Broadcast Service, Fourth Report and Order, 11 FCC Rcd 17771, 17773
(1996).
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121. On the same day, in the DTV Sixth Report and Order in MM
Docket No. 87-268,56 62 FR 26996, May 16, 1997 we adopted a
number of measures intended to minimize the impact of DTV
implementation on existing LPTV service. These measures include many of
the changes to the technical rules requested by the LPTV and TV
translator industries. The new rules provide additional flexibility to
accommodate low power operations during and after the transition to DTV
and thus mitigate the impact of DTV implementation on LPTV. For
example, low power stations that are displaced by new DTV stations may
apply for a suitable replacement channel in the same area, on a first-
come, first-served basis, without being subject to competing
applications. We also deleted the restrictions on use of a channel
either seven channels below or fourteen channels above the channel of
another station in the low power TV service, allowed LPTV and TV
translator stations to make use of appropriate interference abatement
techniques to show that the station will not cause interference to
other full or low power stations, and allow LPTV and TV translator
station operators and applicants to agree to accept interference from
other LPTV and TV translator stations.
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\56\ See Advanced Television Systems and Their Impact Upon the
Existing Television Broadcast Service, Sixth Report and Order, MM
Docket No. 87-268, FCC 97-115, Paras. 6, 114-147 (released Apr. 21,
1997) (DTV Sixth Report and Order) (adopting a Table of Allotments
for DTV, rules for initial DTV allotments, procedures for assigning
DTV frequencies, and plans for spectrum recovery). Thus, LPTV
stations will continue to have secondary status to full-service
television stations. See 47 CFR Sec. 73.702(b).
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122. In the DTV Sixth Report and Order, we also noted that, as
secondary operations, LPTV and TV translator stations would be able to
continue to operate until a displacing DTV station or a new primary
service provider is operational. We concluded that these various rule
changes would preserve many existing low power operations, open many
new channels for those low power operations subject to possible
displacement by DTV, and allow hundreds of LPTV and TV translators to
continue service to their viewers. We further recognized that most low
power stations would be able to continue to operate throughout the DTV
transition.
123. We note that DTV may offer new opportunities for small
businesses. For example, small businesses may have opportunities to
apply for licenses to use much of the recovered spectrum. Also, new
opportunities might arise for small businesses to participate in the
manufacturing or sale of equipment for DTV, LPTV, and related services,
or for wireless services that might possibly be provided over recovered
spectrum from the transition by broadcasters to DTV.
2. Wireless Cable
124. Integration Communications International et al. maintain that
the biggest barrier to wireless cable's competition with wireline cable
and DBS services and to the goal of a level playing field is
insufficient channel capacity. They state that wireless cable operators
must digitize and compress the signal to increase capacity but the high
costs of hardware to digitize and compress is prohibitive for small
businesses. Wireless cable interests also contend that the Commission
should allow wireless cable operators to receive digitalized,
compressed signals from one source such as DBS service, in order to
avoid the enormous capital investment that otherwise would be necessary
for digital compression equipment at each system headend.
125. The Commission is sensitive to the commenters' complaint that
existing technology for digital modulation in Multipoint Distribution
Service station operation is too expensive for small businesses, and
that the Commission should approve more cost effective methods of
digitized signal reception by wireless cable operators. We already have
taken some steps to address this issue. Specifically, we authorized the
use of digital modulation techniques in MDS and ITFS on an interim
basis until final rules could be promulgated.57 In addition,
on March 14, 1997, a group of entities in the wireless cable industry
filed a petition for rulemaking
[[Page 34663]]
proposing to engage in fixed two-way digital transmissions, and we
issued a public notice seeking comment on the petition.58
The Commission will continue to take suitable steps to enhance the
wireless cable operators' ability to provide competition in the video
marketplace, including, as appropriate, authorization of new
technological advancements for use by such operators. Broadcast Data et
al. maintain that the Commission should repeal or modify Sections 21.44
and 21.912, which, in their view, unfairly impose a so-called ``death
penalty'' on MDS licensees. They apparently believe that, in order to
operate, small MDS businesses must enter into channel leasing
agreements whereby larger wireless cable entities provide programming
or equipment in exchange for channel capacity as part of a channel
aggregation strategy. Thus, the commentators urge that the Commission
eliminate the ``death penalty'' provisions of the rules or guarantee
the licensee access to the larger operator's site, equipment, and, if
necessary, channel capacity.
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\57\ Request for Declaratory Ruling on the Use of Digital
Modulation by Multipoint Distribution Service and Instructional
Television Fixed Service Stations, Declaratory Ruling and Order, 11
FCC Rcd 18839 (1996).
\58\ FCC Public Notice, Pleading Cycle Established for Comments
on Petition for Rulemaking to Amend Parts 21 and 74 of the
Commission's Rules to Enhance the Ability of Multipoint Distribution
Service and Instructional Television Fixed Service Licensees to
Engage in Fixed Two-Way Transmissions, DA 97-637 (released Mar. 31,
1997).
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126. Because wireless cable's ability to compete effectively with
other providers on a more equal footing is tied, with other factors, to
MDS operators' ability to attract investment capital, we continue to
believe that channel accumulation is an essential element in the
accomplishment of that goal.59 Section 21.932 of our rules
was specifically adopted to enhance the auction winner's opportunity
for success. Thus, we held that the ``available MDS spectrum within a
BTA authorization will increase if the unconstructed facilities or
unused channels held by an MDS incumbent with transmitter locations
within a particular BTA are forfeited or if previously proposed
conditional licenses or modifications are not granted.'' Moreover, we
believe our rules provide sufficient safeguards to protect existing
licensees in a manner consistent with the public interest. Where
appropriate we will grant reinstatement pursuant to Section 21.44(b)
and waivers pursuant to Section 21.303 of our rules. We caution all
small business licensees, however, to scrutinize carefully any channel
lease agreement before entering into such an arrangement. We believe it
is the responsibility of the respective parties to negotiate the terms
most suited to their needs.
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\59\ See Amendment of Parts 21 and 74 of the Commission's Rules
With Regard to Filing Procedures in the Multipoint Distribution
Service and in the Instructional Television Fixed Service and
Implementation of Section 309(j) of the Communications Act--
Competitive Bidding, Notice of Proposed Rulemaking, 9 FCC Rcd 7666,
7667 (1994).
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3. Broadcast Ownership Consolidation
127. Some commenters maintain that ownership consolidation in the
broadcast industry under relaxed ownership restrictions constitute
market entry barriers. For example, United Church of Christ and
Minority Media and Telecommunications Council assert that minority-
owned businesses are effectively being squeezed out of local markets by
better financed group owners and that the Commission's definition of
``local market,'' in combination with Section 202(b) of the 1996 Act,
permits undue concentrations of ownership in local communities. One
party contends that FCC policies on consolidations, mergers, and
acquisitions constitute market entry barriers for minorities because
the resources of small businesses are limited and group owners greatly
influence major advertisers and media budgets and buys.
128. Similarly, National Association of Black Owned Broadcasters
maintains that the Commission, the courts, and Congress have fostered
policies that have resulted in consolidation of ownership in the
broadcast industry and a retreat from promotion of minority ownership
and that these actions include: (1) Repeal of the ``seven station
rule''; (2) adoption of rules permitting radio duopolies; (3) Congress'
repeal of the tax certificate for sales to minorities and women; (4)
the U.S. Supreme Court's Adarand decision; and (5) the
Telecommunications Act of 1996. It, as well as the United Church of
Christ and Minority Media and Telecommunications Council, maintain that
the Commission should recommend to Congress reinstatement of the
minority tax certificate policy.
129. Commenters are correct in pointing out that there has been
greater consolidation of radio ownership since the relaxation of the
Commission's broadcast radio ownership rules. This, however, is
consistent with congressional policy as reflected in the 1996 Act,
which explicitly directed the FCC to eliminate the national radio
ownership rule and to replace the local radio ownership rule with
specific, significantly relaxed limits on local radio ownership
depending on the size of the local market. The Commission issued an
order on March 8, 1996, revising the radio ownership rules
accordingly.60 In addition, we will consider the issues
raised by the commenters regarding our former minority tax certificate
program in our subsequent evaluation of unique obstacles for small
businesses owned by women and minorities.
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\60\ See Implementation of Sections 202(a) and 202(b)(1) of the
Telecommunications Act of 1996, Order, 11 FCC Rcd 12368 (1996).
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130. As to the commenters' proposals to redefine the local
television market for purposes of enforcing the television duopoly
rule, the Commission has recently released a Second Notice of Proposed
Rule Making, 61 FR 66978, December 19, 1996, in its local television
ownership proceeding.61 This proceeding seeks comment on
revising the television duopoly rule, including whether to modify the
current Grade B signal contour test for measuring the local geographic
market, as well as revising the radio-television cross-ownership rule.
The Commission expressly sought comment on what aggregate effect these
proposed rules may have on small stations, or stations owned by
minorities and women. In addition, in a pending rulemaking, the
Commission sought comment on the potential impact on our attribution
rules resulting from the relaxation of our multiple ownership rules as
required by the 1996 Act.62
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\61\ Review of the Commission's Regulations Governing Television
Broadcasting, Second Further Notice of Proposed Rule Making, FCC 96-
438 (released Nov. 7, 1996).
\62\ Review of the Commission's Regulations Governing
Attribution of Broadcast and Cable /MDS Interests, Review of the
Commissions Regulations and Policies Affecting Investment in the
Broadcast Industry, Reexamination of the Commission's Cross-Interest
Policy, Further Notice of Proposed Rule Making, MM Docket Nos. 94-
150, 92-51 & 87-154, FCC 96-436 (released Nov. 7, 1996).
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131. Finally, Section 202(h) of the 1996 Act directs the Commission
to conduct a biennial review of all its ownership rules. The first such
review will be conducted in 1998. In this review, we expect to examine
issues related to the changes and consolidation that have resulted in
the market since the passage of the 1996 Act, including the impact on
small businesses and small businesses owned by minorities or women,
resulting from the industry and regulatory changes during the past
several years. In addition, there is a pending proceeding in which the
Commission proposed initiatives to increase minority and female
ownership of mass media facilities.63
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\63\ See Policies and Rules Regarding Minority and Female
Ownership of Mass Media Facilities, Notice of Proposed Rulemaking,
10 FCC Rcd 2788 (1995) (Minority and Female Ownership NPRM).
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[[Page 34664]]
4. FCC Policing of Abuse and Enforcement of Rules
132. Brown-Blackwell states the Commission should be more active in
investigating possible fraud and in monitoring licensees for abuse and
enforcing its rules where ownership interests of minorities and women
are affected because apathy in such areas can prevent entry into the
marketplace. In a similar vein, Romar contends that the Commission
should police against abuse of preferences, i.e., where after a
construction permit is awarded, the interest of the minority or female
is transferred to others.
133. As discussed in Part IV of this Report, the Commission is
continuing to explore issues relating to minorities and women in
telecommunications services and expects to issue a more comprehensive
report on those issues in the future. As part of that effort, we shall
fully consider issues relating to the potential abuses described by
these commenters and take appropriate action where warranted.
E. Other Services
1. International Bureau
134. With respect to international services, several commenters
express concern about Commission actions that they believe may hinder
small businesses' ability to enter the telecommunications market, such
as the Commission's actions with respect to TelQuest's application to
operate a fixed transmit/receive earth station to uplink and receive
U.S. and Canadian DBS programming. On July 15, 1996, the International
Bureau concluded that, because Canada had not yet authorized the
satellites with which TelQuest proposed to communicate, TelQuest's
earth station applications should be dismissed, without prejudice, as
premature. In taking this action, the International Bureau reiterated
that its policy is to dismiss earth station applications where the
space station with which the earth station will communicate has not yet
been authorized.64
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\64\ See Applications of TelQuest Ventures, L.L.C. and Western
Tele-Communications, Inc., 11 FCC Rcd 8151 (1996). The Commission
noted that this policy prevents premature consideration of systems
that may never operate and deters applicants from filing competing
premature applications in the hope of obtaining earth station
authorizations for the purpose of influencing space station
licensing decisions. Id. at 8154. On October 29, 1996, the
International Bureau denied TelQuest's petition for reconsideration
finding that TelQuest's earth station application was properly
dismissed, without prejudice. See Applications of TelQuest Ventures,
L.L.C and Western Tele-Communications, Inc., Report and Order, 11
FCC Rcd 13943 (1996), applications for review pending.
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135. The specific matter of TelQuest's application is pending
separately in connection with TelQuest's application for review of two
International Bureau Orders. We will address that matter in that
proceeding. Based on the comments received in this proceeding, we find
nothing in the International Bureau policy reflected in that case that
imposes burdens uniquely or predominantly on small
businesses.65
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\65\ TelQuest has also sought reconsideration of our decision in
Streamlining the Commission's Rules and Regulations for Satellite
Application and Licensing Procedures, Report and Order, FCC 96-425
(released Dec. 16, 1996), on a number of related grounds. The
arguments raised in that proceeding will be addressed in that
proceeding.
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136. Several commenting parties object to the Commission's
financial qualifications requirements for satellite applicants, on the
ground that the Commission's standards are an entry barrier for small
businesses. Mobile Communications Holdings contends that Commission
Rule 25.143(b)(3) adversely affects small businesses because it fails
to take into account the unique ways that small businesses obtain
capital. As a means of addressing these concerns, parties generally
recommend that the Commission apply the financial standards more
flexibly. However, one party disagrees with this proposal and asserts
that a less rigorous standard is not in the public interest.
137. The specific requests for action concerning financial
standards as applied to satellite services generally relate to other
ongoing proceedings pending before the Commission and the courts, and
are more appropriately addressed in connection with those specific
proceedings. We also have pending petitions for reconsideration of our
decision in the DISCO I Order to adopt a uniform financial standard for
domestic and international fixed satellite service satellites.
Furthermore, we have raised issues concerning the proper financial
standard to be applied in the non-voice non-geostationary mobile
satellite service (Little LEOs) in an outstanding Notice of Proposed
Rulemaking.66 We believe these matters are most
appropriately addressed in connection with the records developed in
those proceedings.
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\66\ See Amendment of Part 25 of the Commission's Rules to
Establish Rules and Policies Pertaining to the Second Processing
Round of the Non-Voice, Non-Geostationary Mobile Satellite Service,
Notice of Proposed Rulemaking, IB Docket No. 96-220, FCC 96-426
(released Oct. 29, 1996).
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2. Office of Engineering and Technology
138. In December 1996, the Commission adopted a Notice of Proposed
Rulemaking, 61 FR 68698, December 30, 1996, to eliminate unnecessary
and burdensome Experimental Radio Service (ERS) regulations for ERS
applicants and licensees, many of which are small
entities.67 If adopted, the proposals in the Experimental
Radio Notice would provide an increased opportunity for manufacturers,
inventors, entrepreneurs, and students to experiment with new radio
technologies, equipment designs, characteristics of radio wave
propagation, and new service concepts using the radio spectrum. Because
the proposals would streamline the ERS regulations and would remove
excessive regulatory burdens, they would be beneficial to small
businesses.
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\67\ Amendment of Part 5 of the Commission's Rules to Revise the
Experimental Radio Service Regulations, Notice of Proposed
Rulemaking, ET Docket No. 96-256, FCC 96-475 (released Dec. 20,
1996) (Experimental Radio Notice).
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139. In another recent proceeding, 62 FR 04920, February 3, 1997,
the Commission has provided licensees an alternative means of
demonstrating compliance with the Commission's antenna performance
standards.68 This measure removes an obstacle that had
previously existed for manufacturers and licensees, a number of which
are small businesses. The practical effect of the Flexible Antenna
Report and Order is to permit licensees to use technologically
innovative directional microwave antennas (such as planar-array
antennas), which our rules had unintentionally prohibited.
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\68\ Amendment of Parts 74, 78, and 101 of the Commission's
Rules to Adopt More Flexible Standards for Directional Microwave
Antennas, Report and Order, 12 FCC Rcd 1016 (1997) (Flexible Antenna
Report and Order).
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140. On January 9, 1997, the Commission adopted the U-NII Report
and Order, 62 FR 04649, January 31, 1997, making available 300
megahertz of spectrum at 5.15-5.35 GHz and 5.725-5.825 GHz for a new
category of Unlicensed National Information Infrastructure (U-NII)
devices 69 that will provide short-range, high speed
wireless digital communications on an unlicensed basis.
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\69\ Amendment of the Commission's Rules to Provide for
Operation of Unlicensed NII Devices in the 5 GHz Frequency Range,
Report and Order, 12 FCC Rcd 1576 (1997) (U-NII Report and Order).
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141. By fostering development of a broad range of new devices and
service offerings, the U-NII Report and Order should stimulate economic
development and the growth of new industries and, at the same time,
further our Section 257 objectives. Specifically, allowing unlicensed
devices access to the 5.15-5.35 GHz and 5.725-5.825 GHz
[[Page 34665]]
bands will enable educational institutions to form inexpensive
broadband wireless computer networks between classrooms, thereby
providing cost-effective access to an array of multimedia services on
the Internet. Use of the new spectrum by unlicensed wireless networks
also could help improve the quality and reduce the cost of services
provided by small business users (including medical providers) of the
networks.
142. On March 13, 1997, the Commission adopted its Simplify and
Streamline the Equipment Authorization Process Notice, 62 FR 24383, May
5, 1997.70 By this action, the Commission proposes to
eliminate two of its five equipment authorization procedures, namely,
the type acceptance procedure and the notification procedure. As a
result, there will be only one procedure for equipment that must be
authorized by the Commission: certification. These proposals would lead
to a simpler and far less cumbersome set of equipment authorization
requirements, which will promote compliance. In addition, the
Commission proposes to relax the equipment authorization requirements
for a broad array of equipment, including unintentional radiators,
consumer ISM equipment and a variety of radio transmitters. Thus,
adoption of these proposals would further advance our Section 257
objectives to enhance market opportunities for small businesses, such
as manufacturers who supply parts and services to telecommunications
service providers, to speed delivery of their products to the public,
and would save manufacturers some $100 million by reducing the number
of applications necessary for equipment authorization.
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\70\ Amendment of Parts 2, 15, 18 and Other Parts of the
Commission's Rules to Simplify and Streamline the Equipment
Authorization Process for Radio Frequency Equipment, Notice of
Proposed Rule Making, ET Docket No. 97-84, FCC 97-84 (released Mar.
27, 1997) (Simplify and Streamline the Equipment Authorization
Process Notice).
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3. Compliance and Information Bureau
143. The FCC's Compliance and Information Bureau is furthering the
Commission's Section 257 mandate through information dissemination
initiatives that are particularly valuable to small businesses, which,
as discussed above, often lack resources and information. First, as
part of its ongoing commitment to make information available to the
public expeditiously and inexpensively, in 1996, CIB established a new
FCC National Call Center.71 The National Call Center
provides consumers with free, one-stop shopping for Commission
information in English and Spanish in 26 states, (it is being phased-in
geographically as budget constraints permit). The Call Center also
provides TTY access.72
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\71\ The National Call Center can be accessed by dialing 1-888-
CALL FCC (1-888-225-5322). See FCC News Release, FCC's Toll-Free
Information Service Expanded (September 30, 1996). The Call Center
has received nearly 160,000 calls. Additional information about CIB
resources and the National Call Center is available on the World
Wide Web (http://www.fcc.gov/cib) (CIB homepage) and (http://
www.fcc.gov/cib/ncc).
\72\ Full Call Center services for the hearing impaired can be
accessed through the Telecommunications Device of the Deaf (TYY) by
dialing 1-888-TELL-FCC (835-5322).
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144. CIB Public Affairs Specialists and Compliance Specialists in
field offices throughout the country have provided various small
telecommunications businesses, including women and minority businesses,
information regarding telecommunication issues. In addition, CIB faxes
a ``Welcome Letter'' to new telecommunications companies listed in
local newspaper legal notices, advising that the FCC can assist and
answer communications questions. In conjunction with the SBA,
participated in the U.S. General Store for Small Businesses in Houston,
Texas, which provides at one location all the information necessary to
operate a small business.
145. CIB has specifically required state broadcast associations to
include non-member licensees, many of which are small businesses, in
their Alternative Broadcast Inspection Program (ABIP). On an continuing
basis, CIB notifies radio stations about information regarding various
communications-related matters, e.g., spectrum auctions, and cable
complaint procedures, for inclusion in stations' public service
information programs. CIB also made outreach efforts to manufacturers
as well as participants to implement the new Emergency Alert System
(EAS), and has worked with the cable industry to ensure that emergency
messages will reach as many members of the public as possible without
adverse financial impact on small cable operators. Further, CIB works
closely with local chambers of commerce, which has been particularly
effective in reaching small businesses. All of these steps serve to
promote opportunities for small businesses by ensuring that, despite
limited resources, small business have access to the most current
information available about new telecommunication policies and
services.
IV. Unique Obstacles for Small Businesses Owned by Women or Minorities
A. Background
146. In the Market Entry Barriers Notice of Inquiry, we inquired
whether small businesses owned by women or minorities encounter unique
obstacles in the telecommunications market.73 We asked
parties to submit personal accounts of individual experiences, studies,
reports, statistical data, or any other information. We recognized that
a prospective barrier is discrimination and requested evidence of any
past or current discrimination or unfavorable treatment. Because
governmental action that takes race or gender into account is subject
to heightened judicial scrutiny, we sought comment on whether as a
legal matter, the obstacles that women and minorities encounter are
significant enough to justify special incentives for those
groups.74 We specifically asked whether there is sufficient
evidence of discrimination in the communications industry against any
particular minority group to support race-based incentives under the
strict scrutiny standard and whether there is sufficient evidence to
warrant incentives for women under either strict scrutiny (in the event
that the Supreme Court raised the gender standard to strict scrutiny)
or intermediate scrutiny (in the event that the Court maintained the
existing intermediate scrutiny standard).
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\73\ As explained in the Market Entry Barriers Notice of
Inquiry, we explored this area for several reasons: the legislative
history of Section 257 suggests Congress was concerned about the
under representation of minority and women-owned small businesses in
the telecommunications market and sought to increase competition by
diversifying ownership, see 142 Cong. Rec. H1141 at H1176-77 (daily
ed. Feb. 1, 1996) (statement of Rep. Collins); Section 309(j)
requires the Commission to further opportunities for businesses
owned by women and minorities in the provision of spectrum-based
services; and FCC licensing and other statistical data show that a
portion of small communications businesses are owned by women and
minorities and there is evidence that these entities encounter
unique market barriers. Market Entry Barriers Notice of Inquiry, 11
FCC Rcd at 6301-6305.
\74\ Market Entry Barriers Notice of Inquiry, 11 FCC Rcd at
6308, 6315-6317. In Adarand, the Supreme Court held that government
classifications based on race must satisfy strict scrutiny. 115
S.Ct. at 2113. For a full discussion of the constitutional
standards, see Market Entry Barriers Notice of Inquiry, 11 FCC Rcd
at 6309-6315.
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147. In addition, we sought comment on any nonremedial objectives
that would justify the use of race and gender-based incentives while
furthering the Section 257 mandate. Finally, we asked parties to
propose specific licensing incentives to redress any discrimination or
to further any nonremedial objectives. We encouraged parties to support
their proposals with
[[Page 34666]]
data and to identify specific provisions of the Act that would
authorize us to implement any such proposals.
148. At the Market Entry Barriers Forum, which included a panel on
``Unique Barriers for Minority or Women-Owned Businesses,'' several
women and minority entrepreneurs described their personal experiences
in trying to enter and participate in the telecommunications market,
members of the financial industry described lending and advertising
practices, and a representative from the Department of Justice
addressed the constitutional standards for race and gender programs.
Although we will address in more detail the comments regarding women
and minorities in our subsequent report, in this Report we provide a
summary of the principal barriers and proposals raised in the record to
date.
B. Principal Obstacles and Proposals Identified in the Record
149. Parties to the Section 257 proceeding identify several
obstacles that women or minority-owned businesses face based on race or
gender. The predominant impediment to entry identified is access to and
cost of capital. Many parties cite difficulty in obtaining credit and
time-delayed payment options, as well as negative attitudes toward
women or minority-owned businesses. Ofori, United Church of Christ and
Minority Media and Telecommunications Council assert that minority
entrepreneurs often must rely on financiers and venture capitalists
that impose unfavorable terms, for example, requiring unreasonable
performance goals for returns on investment or advertising revenue.
Williams states that traditional sources of capital for minority
businesses, such as small business investment companies (SBICs), are
inadequate to cover entry costs into telecommunications. In addition,
some parties contend that historical treatment of minorities and women
has contributed to the difficulty those entities experience in
financing small telecommunications ventures.
150. Some parties point to other possible barriers. For example,
some commenters identify barriers in licensing of specific
telecommunications services; numerous parties assert that employment
and management experience is valuable for ownership in
telecommunications and that lack of employment opportunity or
employment discrimination is a barrier; several commenters advocate
stronger enforcement of the Commission's EEO rules or preference
policies; some parties contend that women and minorities are excluded
from government procurement, which impedes participation in the
telecommunications market, and one party cites political changes as
barring entry. The Small Business Administration maintains that beyond
all the general barriers that small businesses encounter, women and
minorities also face an entirely different set of market entry barriers
that result in a disproportionately low rate of ownership and
participation in virtually every telecommunications field.
151. Numerous parties advocate adoption of licensing incentives for
women and minorities. American Women in Radio and Television and Women
of Wireless recommend that the Commission adopt gender-based policies
for both remedial and nonremedial purposes--to redress prior and
ongoing discrimination against women; to foster diversity in media
voices under Section 257(b); and to widely disseminate spectrum
licenses under Section 309(j). National Black Caucus of State
Legislators argues that the Adarand decision, coupled with
Congressional repeal of the tax certificate program, and the FCC's
response to Adarand demonstrates that the federal government fails to
address the ``growing erosion of economic opportunity on the part of
African-Americans.'' Some commenters suggest that the Commission
encourage industry to establish partnerships with women or minority-
owned companies, and to provide training programs, business
opportunities, or mentoring programs to assist such groups in
developing skills and becoming successful telecommunications
entrepreneurs. Some parties recommend specific auction-related
provisions. They argue that the FCC should reinstate its pre-Adarand
PCS incentive policies for women and minorities, while others raise
Section 309(j) issues. Many parties urge the FCC to conduct a study of
the participation of women and minorities in the telecommunications
industry and market entry barriers.
C. Ongoing Commission Evaluation
152. There is a long history of recognition by this agency, as well
as by courts, Congress, and the public, that minorities and women have
experienced serious obstacles in attempting to participate in the
telecommunications industry and that their greater participation would
enhance the public interest. Since the late 1960's, the Commission has
addressed women and minority access to employment and ownership
opportunities in the telecommunications area. In 1982, Congress
observed that ``the effects of past inequities stemming from racial and
ethnic discrimination have resulted in a severe underrepresentation of
minorities in the media of mass communications'' and enacted Section
309(i)(3)(A) of the Communications Act, authorizing the Commission to
provide minority preferences in awarding spectrum licenses by lottery.
More recently, in 1993, Congress reached beyond broadcast services to
wireless spectrum-based services and enacted Section 309(j), which
requires the Commission to adopt competitive bidding procedures that
promote economic opportunity to a wide variety of applicants, including
minorities and women. In implementing Section 309(j), the Commission
designed rules to assist small, rural, women, and minority-owned
businesses ``to overcome barriers that have impeded these groups'
participation in the telecommunications arena, including barriers
related to access to capital.'' Although the specific auction rules we
adopted for businesses owned by women and minorities were held in
abeyance after Adarand, since then, we have continued to request
comment on the effect of Adarand on our policies and to seek evidence
of discrimination against women or minorities in telecommunications
services. Later, in enacting Section 257 of the 1996 Act, one member of
Congress noted that women and minorities are ``extremely under
represented'' in the telecommunications industry.
153. Thus, our Section 257 mandate continues a succession of
measures over several decades to enhance opportunities for women and
minorities. The goal in this aspect of the Section 257 proceeding is to
identify the specific obstacles that women and minorities face and to
determine whether they are of the nature that will satisfy heightened
judicial scrutiny. As a federal government agency, our ability to adopt
race or gender based incentives is limited by constitutional
requirements. Under Adarand, any governmental classification based on
race must satisfy strict scrutiny: it must be narrowly tailored to
further compelling governmental interests. Remedying discrimination
against a particular racial group in a specific field has been
recognized as a compelling government interest. Thus, for us to adopt
race-based incentives, there must be an appropriate record of
discrimination against minorities in telecommunications. After we
released the Market Entry Barriers Notice of Inquiry, the Supreme Court
clarified the
[[Page 34667]]
applicable constitutional standard for classifications regarding
gender. In United States v. Commonwealth of Virginia,75 the
Court affirmed and applied its pre-existing standard for reviewing
gender classifications--intermediate scrutiny--to hold that a state
male-only military college violated the Equal Protection
Clause.76 Under intermediate scrutiny, a government's
justification for gender-based classifications must be ``exceedingly
persuasive'' and specifically, the government must show at least that
the classification serves important governmental objectives and is
substantially related to those objectives.
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\75\ 116 S.Ct. 2264 (1996).
\76\ United States v. Virginia, 116 S.Ct. 2264, 2274-2276
(citing J.E.B. v. Alabama ex rel. T.B., 511 U.S. 127, 136-137 & n.6
(1994) and Mississippi University for Women v. Hogan, 458 U.S. 718,
724 (1982)).
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154. The record in this proceeding, including comments on the
Market Entry Barriers Notice of Inquiry and the testimony at the Market
Entry Barriers Forum, supplemented by the record in various other
proceedings, strongly indicates that minorities and women have
experienced tremendous obstacles in participating in the
telecommunications industry. To satisfy our statutory obligations under
both Section 257 and Section 309(j), we are commencing a comprehensive
study to further examine the role of small businesses and businesses
owned by minorities or women in the telecommunications industry and the
impact of our policies on access to the industry for such businesses.
In addition to furthering the requirements of Section 257, the study
will assist us in fulfilling our Section 309(j) mandates and in
determining whether there are constitutionally-sound bases for adopting
licensing incentives for women or minorities.
155. As to Section 257, the study will provide data and information
to help us identify and eliminate market entry barriers for small
businesses in the telecommunications market as the statute requires. In
addition, the study will assist the Commission in reporting to Congress
on our implementation of Section 257, as the statute also
requires.77 As to Section 309(j), the study will be useful
in comparing the effectiveness of auction and non-auction
methodologies, and in assessing entry of new companies into the market,
prompt delivery of service to rural areas, and the participation and
success of small businesses and businesses owned by minorities or women
in the competitive bidding process, as well as reporting to Congress on
the auction process as required.
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\77\ 47 U.S.C. Sec. 257(c). Section 257(c) requires the
Commission to report to Congress every three years following
completion of the proceeding on regulations that have been issued to
eliminate barriers and any statutory barriers that the Commission
recommends be eliminated.
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156. The study will be conducted by an external contractor. It will
focus on two types of communications services, the oldest and the
newest--broadcast and wireless.78 Specifically, the study
will develop a profile of applicants and participants in broadcast
licensing and the licensing of certain wireless services, both by
auction and other previously used methods. It will analyze
participation rates of small businesses, minority-owned businesses,
women-owned businesses, and the difference between participants and
potential participants. The study will identify and evaluate the effect
of any market entry barriers and other impediments on participation and
attainment of licenses, the impact of incumbency in the
telecommunications industry, the effect of previous FCC licensing
proceedings, the effect of the presence, absence and removal of race
and gender-based provisions, and the effect of past employment or
management experience in the communications industry on auction
participation and success.
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\78\ An analysis of broadcast licensing also will assist the
Commission's analysis of auction participation. Many auction
participants and investors are broadcast licensees. For example, the
study will examine the impact of incumbency and the regulatory
structure the FCC established for the licensing of broadcast
spectrum on auction bidding.
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V. Conclusion
This Report, we believe, demonstrates our implementation of Section
257. As described above, the Commission has taken numerous steps to
eliminate regulatory and other impediments to entry for small
businesses in the telecommunications market and will continue to do so.
VI. Ordering Clauses
158. The motion of Blab Television to accept late-filed comments in
this proceeding is Granted.
159. The motion of National Association of Black Owned Broadcasters
to accept late-filed comments in this proceeding is Granted.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 97-16868 Filed 6-26-97; 8:45 am]
BILLING CODE 6712-01-P
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.