Assessment and Collection of Regulatory Fees for Fiscal Year 1997
Federal RegisterJul 11, 1997
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SUMMARY: The Commission has revised its Schedule of Regulatory Fees in
order to recover the amount of regulatory fees that Congress has
required it to collect for fiscal year 1997. Section 9 of the
Communications Act of 1934, as amended, provides for the annual
assessment and collection of regulatory fees. For fiscal year 1997
sections 9(b)(2) and (3) provide for annual ``Mandatory Adjustments''
and ``Permitted Amendments'' to the Schedule of Regulatory Fees. These
revisions will further the National Performance Review goals of
reinventing Government by requiring beneficiaries of Commission
services to pay for such services.
EFFECTIVE DATE: September 15, 1997.
FOR FURTHER INFORMATION CONTACT: Peter W. Herrick, Office of Managing
Director at (202) 418-0443, or Terry D. Johnson, Office of Managing
Director at (202) 418-0445.
SUPPLEMENTARY INFORMATION:
Adopted: June 16, 1997; Released: June 26 , 1997
By the Commission:
Table of Contents
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Paragraph
Topic number
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I. Introduction............................................ 1
II. Background............................................. 4
III. Discussion:...........................................
A. Summary of FY 1997 Fee Methodology.................. 7
B. Cost-Based Fee Methodology.......................... 12
C. Relationship of Cost of Service to Revenue
Requirements.......................................... 21
D. Application of Cost-Based Methodology To Determine
Fee Amounts...........................................
1. Adjustment of Payment Units..................... 31
2. Calculation of Revenue Requirements............. 32
3. Calculation of Regulatory Costs................. 33
4. Establishment of 25 Percent Revenue Ceiling..... 35
5. Calculation of Fees............................. 42
E. Other Changes....................................... 43
1. Consolidation of Private Microwave and Domestic
Public Fixed Fee Categories....................... 44
2. Commercial AM/FM Radio.......................... 47
3. Personal Communications Service (PCS)........... 57
4. Commercial Mobile Radio Services (CMRS)......... 58
5. Intelsat & Inmarsat Signatories................. 65
6. Non-Common Carrier International Bearer Circuits 66
7. Low Earth Orbit Satellite Systems............... 73
8. Broadcast Auxiliary Services.................... 76
9. Amateur Vanity Call Signs....................... 77
10. Interstate Common Carriers..................... 78
11. New Filing Requirements........................ 79
F. Schedule of Regulatory Fees......................... 80
G. Effect of Revenue Redistributions on Major
Constituencies........................................ 81
H. Procedures for Payment of Regulatory Fees...........
1. Installment Payments for Large Fees............. 82
2. Annual Payments of Standard Fees................ 84
3. Advance Payment of Small Fees................... 85
4. Standard Fee Calculations and Payment Dates..... 86
5. Minimum Fee Payment Liability................... 88
IV. Ordering Clause........................................ 89
V. Authority and Further Information....................... 90
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Rule Changes
Attachments to Preamble:
Attachment A--Final Regulatory Flexibility Analysis
Attachment B--Sources of Payment Unit Estimates for FY 1997
Attachment C--Calculation of Revenue Requirements
Attachment D--Calculation of Regulatory Costs
Attachment E--Calculation of FY 1997 Regulatory Fees
Attachment F--FY 1997 Schedule of Regulatory Fees
Attachment G--Comparison Between FY 1996 & FY 1997 Proposed &
Final Regulatory Fees
Attachment H--Detailed Guidance on Who Must Pay Regulatory Fees
Attachment I--Description of FCC Activities
Attachment J--FCC Cost Accounting Activity and Project Codes
Attachment K--AM/FM Fees
Attachment L--Parties Filing Comments and Reply Comments
I. Introduction
1. By this Report and Order, the Commission concludes its
rulemaking proceeding to revise its Schedule of Regulatory Fees in
order to recover the amount of regulatory fees that Congress, pursuant
to Section 9(a) of the Communications Act, as amended, has required it
to collect for Fiscal Year (FY) 1997. See 47 U.S.C. 159(a).
2. Congress has required that we collect $152,523,000 through
regulatory fees in order to recover the costs of our enforcement,
policy and rulemaking, international and user information activities
for FY 1997. Public Law 104-208 and 47 U.S.C. 159(a)(2). This amount is
$26,123,000 or nearly 21% more than the amount that Congress designated
for recovery through regulatory fees for FY 1996. See
[[Page 37409]]
Assessment and Collection of Regulatory Fees for Fiscal Year 1996, FCC
96-295, released July 5, 1996, 61 FR 36629 (July 12, 1996). Thus, we
are revising our fees in order to collect the increased amount that
Congress has required that we collect. Additionally, we are amending
the Schedule in order to assess regulatory fees upon licensees and/or
regulatees of services not previously subject to payment of a fee, to
simplify and streamline the Fee Schedule, and to clarify and/or revise
certain payment procedures. 47 U.S.C. 159(b)(3).
3. In revising our fees, we have adjusted the payment units and
revenue requirement for each service subject to a fee, consistent with
Sections 159(b) (2) and (3). In addition, we have made changes to the
fees pursuant to public interest considerations including the
establishment of a procedure to limit the maximum increase in a fee for
any individual fee category. The current Schedule of Regulatory Fees is
set forth in Secs. 1.1152 through 1.1156 of the Commission's rules. 47
CFR 1.1152 through 1.1156. See rule changes and Attachment F for our
revised fee schedule for FY 1997.
II. Background
4. Section 9(a) of the Communications Act of 1934, as amended,
authorizes the Commission to assess and collect annual regulatory fees
to recover the costs, as determined annually by Congress, that it
incurs in carrying out enforcement, policy and rulemaking,
international, and user information activities. See 47 U.S.C. 159(a).
See Attachment I for definitions of these and other activities of the
Commission. In our FY 1994 Fee Report and Order, 59 FR 30984 (June 16,
1994), we adopted the Schedule of Regulatory Fees that Congress
established and we prescribed rules to govern payment of the fees, as
required by Congress. 47 U.S.C. 159 (b), (f)(1). Subsequently, in our
FY 1995 and FY 1996 Fee Reports and Orders, 60 FR 34004 (June 29, 1995)
and 61 FR 36629 (July 12, 1996), we modified the Schedule to increase
by approximately 93 percent and 9 percent, respectively, the revenue
generated by these fees in accordance with the amounts Congress
required us to collect in FY 1995 and FY 1996. Also, in both our FY
1995 and FY 1996 fee decisions, we amended certain rules governing our
regulatory fee program based upon our experience administering the
program in prior years. See 47 CFR 1.1151 et seq.
5. For fiscal years after FY 1994, Sections 9(b) (2) and (3),
respectively, provide for ``Mandatory Adjustments'' and ``Permitted
Amendments'' to the Schedule of Regulatory Fees. 47 U.S.C. 159 (b)(2),
(b)(3). Section 9(b)(2), entitled ``Mandatory Adjustments,'' requires
that we revise the Schedule of Regulatory Fees whenever Congress
changes the amount that we are to recover through regulatory fees. 47
U.S.C. 159(b)(2). Section 9(b)(3), entitled ``Permitted Amendments,''
requires that we determine annually whether adjustments to the fees are
warranted based upon the requirements of this subsection and that,
whenever we make such adjustments, we take into account factors that
are reasonably related to the benefits provided to the payer of the fee
and factors that are in the public interest. In making these
amendments, we are to ``add, delete, or reclassify services in the
Schedule to reflect additions, deletions or changes in the nature of
its services.'' 47 U.S.C. 159(b)(3).
6. Section 9(i) requires that we develop accounting systems
necessary to adjust our fees when making permitted amendments to the
Fee Schedule and for other purposes and that we provide interested
persons with an opportunity to comment concerning the allocation of our
regulatory costs. 47 U.S.C. 9(i). Finally, Section 9(b)(4)(B) requires
that we notify Congress of any permitted amendments 90 days before
those amendments go into effect. 47 U.S.C. 159(b)(4)(B).
III. Discussion
A. Summary of FY 1997 Fee Methodology
7. As noted above, Congress has required that we recover
$152,523,000 for FY 1997 through the collection of regulatory fees,
reflecting its determination of the costs of our enforcement, policy
and rulemaking, international, and user information
activities.1 47 U.S.C. 159(a).
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\1\ The impact of regulatory fees on the FCC's appropriation is
substantial. For example, without regulatory fees to offset the
Commission's costs, the FCC would require a Congressional
appropriation of $189 million for FY 1997. When offsetting
regulatory fees are taken into consideration, only $37 million must
be appropriated from tax receipts to fund the Commission. Thus,
taxpayers are spared the expense of funding almost 80% of the
Commission's annual budget. Funds collected as application or filing
fees pursuant to Section 8 of the Act are deposited into the General
Fund of the U.S. Treasury as reimbursement to the United States but,
unlike Section 9 regulatory fees, do not offset funds appropriated
to the Commission. 47 U.S.C. 158(a)
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8. In our FY 1997 NPRM we developed our proposed FY 1997 fee
schedule by first estimating payment units 2 for FY 1997 in
order to determine the aggregate amount of revenue we would collect
without any revision to our FY 1996 fees. Next, we compared this
revenue amount to the $152,523,000 that Congress has required us to
collect in FY 1997 and pro-rated the shortfall of $15,188,635 among all
the existing fee categories. We then adjusted the projected revenue
requirements of each category of service so that it equaled the actual
cost of each service, using data accumulated by our cost accounting
system to ensure that revenues from each category of service
approximated, to the extent possible, our regulatory costs for each fee
category.
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\2\ Payment units are the number of subscribers, mobile units,
pagers, cellular telephones, licenses, call signs, adjusted gross
revenue dollars, etc. which represent the base volumes against which
fee amounts are calculated.
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9. We next examined the impact on each class of regulatees of using
actual costs to establish regulatory fees in order to determine whether
any regulatees would experience an unduly large fee increase. Our
review disclosed that cost-based fees would result in fee payments
dramatically higher for regulatees in many service categories in FY
1997 compared with their fees in FY 1996. Therefore, rather than
proposing fully cost-based fees for FY 1997, we proposed to phase in
full reliance on cost-based fees and, for FY 1997, to establish a
revenue ceiling in each service no higher than 25 percent above the
revenue that payers within a fee category would have paid if FY 1997
fees had remained at FY 1996 levels adjusted only for changes in
payment unit volumes and the overall increase required by Congress.
10. Once we established our tentative FY 1997 fees, we evaluated
various proposals made by Commission staff concerning other adjustments
to the Fee Schedule and to our collection procedures. We discussed
these proposals in Paragraphs 20-40 of the NPRM and factored them into
our proposed FY 1997 Schedule of Regulatory Fees, set forth in
Attachment F of the NPRM.
11. Finally, we incorporated, as Attachment H of the NPRM, proposed
Guidance containing detailed descriptions of each fee category,
information on the individual or entity responsible for paying a
particular fee and other critical information designed to assist
potential fee payers in determining the extent of their fee liability,
if any, for FY 1997.
B. Cost-Based Fee Methodology
12. In our NPRM, we announced that we had implemented our new cost
accounting system and that we would rely on the cost accounting system
to
[[Page 37410]]
assist us in determining our costs of regulation of those services
subject to a fee for FY 1997. In response, several interested parties,
including the Personal Communications Industry Association (PCIA),
Century Cellunet, Inc. (Century), and PanAmSat Corporation (PanAmSat),
contend that we failed to explain the accounting system sufficiently to
permit interested parties to determine how the system distributes costs
among our various services. Comsat argues that we merely disclosed the
results of the cost accounting system and, therefore, interested
parties cannot evaluate our cost accounting system or suggest
improvements. In addition, PCIA, Arch Communications Group, Inc. (Arch)
and Columbia Communications Corporation (Columbia), among others, argue
that without more data concerning our assignment of costs, they cannot
determine whether the costs attributed to their services are reasonable
estimates of our actual costs of regulating their services.
13. We are satisfied that our NPRM provided sufficient information
describing the accounting system to afford interested parties the
opportunity to comment. Our NPRM made it clear that our cost accounting
system relied upon information derived from our personnel/payroll
system and our fiscal accounting system as the basis for recording
direct and indirect costs, separately and combined, for every major
category of service subject to a fee. Also, we stated that the cost
accounting system was designed to generate useful data for identifying
the actual costs of our regulation by category of service and that this
information, combined with other information,3 would yield
fees more closely reflecting our cost of service. We stated that the
system was integrated with our personnel/payroll system and collected
both personnel and payroll information by category of service to insure
accurate and timely production of cost of service information. In sum,
the system we developed for distributing costs is a derivative of our
payroll and accounting systems with the added feature that it collects
cost of service information on an employee-by-employee basis.
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\3\ Specifically, information pertaining to payment units and
total amounts required to be collected.
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14. Moreover, we are confident that our NPRM provided sufficient
detail concerning not only our manner of distributing costs of
personnel directly assigned to regulatory activities, but other costs
included in our determination of regulatory costs. We stated that the
system separately identifies direct costs, including salary and
expenses for staff directly assigned to our operating Bureaus, and
other costs, such as rent, utilities and contracts, directly
attributable to such personnel. Also, we stated that we included as
indirect costs those costs attributable to personnel assigned to
overhead functions, including such functions as field and laboratory
staff, on a proportional basis; i.e., spread among all categories of
service subject to a fee according to their share of direct costs.
Finally, in Attachment D of the NPRM, we provided a precise calculation
of the regulatory costs, including separate discussions of the cost
accounting system's accumulation of the direct, indirect and total
actual costs for each major category of service. Thus, we are satisfied
that our NPRM, consistent with Section 9(i) of the Act, sufficiently
described our cost accounting system, including how it distributes
actual costs among the various categories of service, affording parties
an understanding of the system sufficient for them to submit comments
on how the system allocated costs among those services subject to a
regulatory fee. 47 U.S.C. 159(i).
15. Nevertheless, in consideration of the increased amount that
Congress has required that we recover through regulatory fees in FY
1997, we believe that we should describe our cost accounting system in
further detail so that interested parties may be reassured about the
integrity of the system and its unbiased distribution of costs.
16. Our cost accounting system was developed under contract by
American Management Systems, Inc (AMS) in FY 1995. From its inception,
the system has been integrated with the Commission's bi-weekly payroll
and fiscal accounting systems and, as such, its procedures conform to
generally accepted cost accounting principles and standards as mandated
by the General Accounting Office (GAO) and by the U.S. Treasury
Department. The cost accounting system contains built-in safeguards and
internal controls designed to ensure data integrity. For example,
employees are required to certify the accuracy of the service category
codes they designate on their time and attendance reports, timekeepers
must enter data according to procedures established in system
guidelines, and supervisors are required to review and attest by their
signature that coding appears to be appropriate. Additionally,
standards are in place which prevent employees from altering their own
cost accounting data in the automated payroll system. Standardized
system follow-up reports are also periodically provided to Bureau/
Office administrative and management officials for their review to
ensure that staff are following system guidelines.
17. Additionally, as official financial records, employee cost
accounting code sheets are associated with formal time and attendance
records and maintained in accordance with prescribed GAO standards. As
with all financial systems, criminal and/or administrative penalties
apply should any fraudulent or coercive actions associated with either
the payroll or cost accounting system be discovered. To date, no known
deficiencies of this nature have been identified or alleged.
18. As we have noted, the actual accumulation of cost of service
information is derived from our automated personnel/payroll system. In
order to collect cost of service information, the cost accounting
system requires that each Commission employee select or designate a
particular cost code or multiple codes when completing bi-weekly
payroll sheets.4 Cost codes consist of a two digit code
designating the proper ``Activity'' (e.g., Authorization of Service,
Policy & Rulemaking, Enforcement, Public Information) together with a
three digit code designating the ``program'' or fee
category.5 The Commission has utilized its basic
``activity'' definitions for Office of Management and Budget (OMB) and
Congressional Budget purposes and for fiscal accounting reporting
requirements for many years, with agency employees generally well
acquainted with the distinction between feeable (i.e., Policy &
Rulemaking, Enforcement, Public Information, International) and non-
feeable (i.e., Authorization of Service) activities. The selection of
``program codes'' used for accumulating regulatory fee costs by service
category, on the other hand, were newly established for the cost
accounting system. 6 7 To ensure
[[Page 37411]]
smooth implementation, extensive training was provided to timekeepers
and each Commission employee was provided with detailed instructions
pertaining to use of the cost accounting system prior to system
implementation.
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\4\ Some employees who routinely work on the same activities
each pay period may use default codes which reduce the need to enter
new codes each pay period. These employees have the option of
changing codes as dictated by the work they perform.
\5\ Although the Commission collects cost data for Authorization
of Service activities and for reimbursable activities, these costs
are not used in developing annual regulatory fees.
\6\ See Attachment J for a list of all cost accounting codes.
\7\ The Commission's cost accounting system was designed to
provide the flexibility to add or delete cost codes not only at the
beginning (or end) of a fiscal year, but during the course of the
fiscal year as well. This increases the accuracy of cost allocation
by allowing the agency to quickly begin accumulating costs when
required for operational or fee development purposes without waiting
weeks or months to do so. In June 1996, two new codes were added to
the cost code structure in place at the beginning of FY 1996. One of
the codes was for accumulating costs relative to LEOs and the other
was for accumulating costs associated with Signatory activities.
Prior to establishment of these new codes, International Bureau
staff were only able to allocate their work time to existing fee
categories (i.e., space stations, earth stations, international
public fixed radio, international HF radio stations and
international bearer circuits). To obtain an approximation of full-
year costs in these situations, the standard mathematical procedure
would normally be to ``annualize'' the partial year costs.
Annualization is a simple predictive process which estimates what
accumulated costs would be for a full year based on partial year
data. It assumes that costs for similar periods during the fiscal
year would mirror the costs accumulated in the partial year period.
For example, if $500 in costs were accumulated for three months of a
fiscal year, the annualized cost accumulation would total $2000
($500/3 months times 12 months). Unfortunately, due to
administrative oversight, many employees actually working on
activities related to LEOs and signatory activities were not made
aware of the new cost codes and, therefore, the time allotted by
employees to these two activities was inadvertently less than the
time actually spent by employees on these two activities. To correct
this imbalance, the International Bureau reviewed its actual FY 1996
FTE usage to identify by Activity and fee category where it had
actually been spending its finite staff resources during FY 1996.
This breakout of staff time was then used to allocate actual
International Bureau costs to its several fee categories as shown on
Attachment D.
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19. As noted, the program cost codes that we designated for
regulatory fee development correspond to the major fee categories
contained in the Commission's Schedule of Fees. Every pay period, each
employee completes a time and attendance form and verifies with his or
her initials the accuracy of the distribution of worktime among the
various Commission programs, including those programs covered by
regulatory fees.8 In turn, the employee's supervisor is
required to review and to certify the accuracy of the employee's
entries before the details of the employee's work statement are key-
entered into our automated payroll system (operated by the Department
of Agriculture's National Finance Center) along with all other bi-
weekly payroll data by time and attendance clerks. Built-in system
checks and detailed follow-up reports are distributed to all Bureaus/
Offices to insure that data entry is completed in an accurate manner
and that resulting reports are accurate.9 During FY 1996,
senior administrative staff were assigned to carefully monitor the new
cost accounting system to insure system integrity. Although the
government-wide furlough in early FY 1996 hindered the resolution of
minor problems pertaining to integration of the new program codes at
the onset of system implementation, these problems were subsequently
corrected and cost accounting data for FY 1996 used in the formulation
of FY 1997 fees do not contain any known omissions or erroneous data.
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\8\ As noted in the NPRM, it is impractical to require employees
to allocate their time into very small increments. However, most
employees do allocate their time in increments of one hour.
\9\ The Commission's cost accounting system also accumulates
detailed FTE data. Prior to implementation of the cost accounting
system, FTEs used in budget and fee development were estimated by
agency program managers.
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20. In addition to personnel costs, which make up about 80% of the
Commission's overall costs, the agency's cost accounting system also
accumulates non-personnel costs. These are the costs of office rental,
equipment, travel, information technology, supplies, contracts and
telecommunications services. Non-personnel costs are generally accrued
on an actual basis at the time the Commission obligates itself to pay
for these materials and services. Some costs, such as annual and sick
leave costs, and other obligations such as rental of space and
telecommunications, are not logically chargeable to a specific fee
category at the time they are incurred. In these situations, they are
allocated at month-end to all fee categories based on how direct costs
were incurred during the reporting period. For example, costs for
annual and sick leave are allocated on a pro-rated basis to fee
categories incurring direct costs during the accounting period. In an
effort to report costs as accurately as possible, the allocation is
limited to the organizations where the leave was taken, rather than
across all organizations. Costs for office space rental and
telecommunications, on the other hand, are allocated to each fee
category--FCC-wide--that incurred direct costs during the month. At the
end of each accounting period, the cost accounting system combines the
non-personnel costs with the Commission's salary and benefits (payroll)
costs and then distributes various overhead costs to specific fee
categories based on pre-determined allocation formulas.10
11
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\10\ Overhead costs include a number of components: (a) The time
of employees whose functional activities cannot logically be
designated or allocated to a single or even several fee categories
(e.g., Commissioners and their immediate staffs, staff supporting
all Commission organizations); and (b) subsidized activities
specifically excluded from fee assessment (e.g., amateur radio,
public safety and government licensee oversight, non-commercial
radio and TV licensees, CB, ship and aircraft radio users and non-
profit organizations). Together these costs are estimated to total
nearly 40% of the Commission activity costs covered by regulatory
fees. As noted elsewhere in this Report and Order, additional
allocations are made proportionally to all the fee categories in
order to bring total accumulated costs up to the total amount
Congress requires us to collect. Additionally, actual costs at any
point in time, including the end of a fiscal year, will not exactly
equal the amount Congress requires us to collect because Congress'
estimate of costs to be recovered through regulatory fees is
generally determined at least twelve months before the end of the
fiscal year to which the fees actually apply. As such, year-end
actual activity costs will not equal exactly the amount Congress
designates for collection in a particular fiscal year.
\11\ Leave costs, indirect costs related to centralized services
and bureau-specific support costs are distributed among the various
fee categories that a particular organization supports. The costs
are distributed on a pro-rata basis to only those fee categories
that incurred direct costs during the accounting period. As a final
step, executive direction and related support costs are distributed
FCC-wide to all fee categories incurring direct costs during the
accounting period.
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C. Relationship of Cost of Service to Revenue Requirements
21. PCIA and other commenters contend that there is no basis for or
relationship between the revenue that the Commission is proposing to
collect from a particular fee group and the amount of regulatory work
or oversight associated with that fee group. As discussed in Paragraph
2, the Commission, by statute, must collect annually from its licensees
and regulatees the amount specified by Congress. Further, in Paragraph
14, we stated that the direct costs of our regulatory oversight
comprise only a portion of the overall costs we are required to recover
through regulatory fees. Direct costs include salary and expenses for
(a) Staff directly assigned to our operating Bureaus and performing
regulatory activities and (b) staff assigned outside the operating
Bureaus to the extent that their time is spent performing regulatory
activities pertinent to an operating Bureau. Indirect costs include
costs of support personnel assigned to overhead functions such as field
and laboratory staff and certain staff assigned to the Office of
Managing Director. Support costs, for both direct and indirect staff,
also must be recovered. These costs include rent, utilities, equipment
and
[[Page 37412]]
contractual costs attributable to regulatory oversight.
22. Our fees also recover costs attributable to regulatees that
Congress, in Section 9(h) of the Act, has exempted from payment of a
fee and those regulatees that obtain a waiver or reduction of their fee
payment pursuant to Section 9(d) of the Act. 47 U.S.C. 159 (d), (h).
Fee payers must also offset other costs attributable to regulatees
whose fees have been eliminated or reduced through permitted amendments
in accordance with Section 9(b)(3) of the Act. For example, Citizen's
Band Radio and most recreational ship and aircraft radio station
operators, amateur radio licensees, governmental entities, licensees in
the public safety radio services, and all non-profit groups are not
required to pay a fee. The costs of regulating these entities is borne
by those regulatees subject to a fee requirement, with no direct
measurable benefit accruing to such fee payers. We recover our costs of
regulation for exempt entities by allocating our regulatory costs
attributable to them on a proportional basis across all fee categories
so as to not unduly impact any particular category of fee payers.
23. Thus, in direct response to PCIA, our fees are designed to
recover the amount that Congress has required us to collect and,
although based upon the cost of service of each category of regulatee,
include costs that are not directly related to those entities subject
to a fee. Therefore, a particular fee and resulting revenue collection
will invariably exceed the service's direct regulatory costs because
the revenue requirement for any of our services, and thus the fees
assessed upon fee payers in those services, will be higher than their
actual cost of service, notwithstanding that actions by Congress and
the Commission to deregulate would appear to warrant a lower fee.
24. Several commenters also allude to our proposal to use actual FY
1996 regulatory costs as the basis for determining FY 1997 costs and
question whether FY 1997 costs will approximate FY 1996 costs. For
example, PCIA contends that we have not demonstrated that our FY 1996
costs are sufficiently related to our FY 1997 costs to rely our FY 1996
costs to establish our fees for FY 1997.
25. Clearly, the Commission cannot determine actual FY 1997 costs
until well after the close of FY 1997, several weeks after the
collection of FY 1997 fees must be completed. Moreover, even though we
could have estimated our FY 1997 costs per service in our NPRM, that
estimate would have been based on only three months of FY 1997 data.
Also, any method for estimating future FY 1997 costs would become a
point of controversy and contention because it is difficult, if not
impossible, to predict with any certainty the regulatory costs per
service in view of today's dynamic telecommunications regulatory
environment. Under our proposal to base our fees on the previous year's
actual costs of regulation, we eliminated the need to rely on estimated
costs. Because we foresee no lessening in the dynamic pace of
technological development and innovation in the communications
regulatory environment, we are reluctant to continue to rely on
estimated future costs when actual costs for a prior year are
available. Therefore, we shall not rely on estimates of future costs,
and, henceforth, will develop our fees based on historic cost data. We
note that even if FY 1997 costs were ultimately to differ from those
based on FY 1996 data, our proposed methodology would effectively
adjust FY 1998 fees to take into account actual FY 1997 costs.
26. Several of the parties contend that their fees bear little or
no relationship to their costs of regulation or to the benefits they
receive from our regulation. These parties contend that our fees should
be calculated to recover an amount reflecting the cost of the services
performed and the value conferred on the payor pursuant to Section
9(b)(1)(A) of the Act. 47 U.S.C. 159(b)(1)(A).
27. We again reject the arguments that our proposed fees are
inconsistent with the statute or otherwise unlawful because they are
not completely cost-based or do not reflect the benefits received by
entities subject to a fee payment. Section 9(a) requires that we
recover our costs ``in the total amounts required in Appropriations
Acts.'' 47 U.S.C. 159(a). Section 9(a) does not require that we base
our fees solely on benefits to regulatees or that the fees recover from
an entity only its particular cost of regulation. In our FY 1995 Report
and Order, we stated that we are not limited to setting regulatory fees
only in the amount that reflects services received by regulated
entities. 10 FCC Rcd at 13521, citing Skinner v. Mid-America Pipe Line
Co., 490 U.S. 212, 224 (1989). Rather, once Congress, as in Section 9,
has made a proper delegation of authority to raise funds, ``so long as
the fees in question are within the scope of Congress' lawful
delegation of authority in Section 9, they are constitutional.'' Id.
Thus, as we noted in our FY 1995 Report and Order, we ``can collect
fees from regulatees for their use of frequencies and for the potential
benefits of [our] regulatory activities, even if they do not utilize
these activities.'' See 60 FR 34008 (June 29, 1995), citing United
States v. Sperry Corp., 493 U.S. 52, 63. Moreover, no requirement
exists that the fees we establish be designed to recover only the costs
of those benefits directly received by an entity.
28. Arch and PCIA point out that our NPRM did not provide actual FY
1996 fee collection data, including the number of actual payment units
and the actual amount of fees collected in certain fee categories.
These commenters contend that such information is essential to its
evaluation of Commission fee proposals for FY 1997. We recognize that
we did not provide a detailed listing of actual FY 1996 collections
data in the NPRM. However, Attachment B of the NPRM contained a
service-by-service explanation of the basis for our estimated FY 1997
payment units. Several of these are based on actual FY 1996 payments.
Others are based on estimates obtained from Commission program experts
or from regulated industries. In any case, as we noted in the NPRM, we
consider as one factor in estimating payment units the actual number of
payment units recorded in our fees collection system for FY 1996. These
payment unit estimates use ``as of'' dates corresponding to the
beginning of the current fiscal year or, for some fee categories, at
the end of the previous calendar year. We believe that this reliance
upon actual ``historical'' or retrospective FY 1996 data provides us a
much greater confidence level than would an estimate of payment units
made prospectively. Finally, from the inception of the regulatory fee
collection program, actual historical payment units and collection
amounts for the various categories of services have been routinely
available for inspection to interested persons upon request. In sum, we
cannot find that there is a basis for concluding that these commenters
could not fairly evaluate our proposed fees for FY 1997 given the
information pertaining to payment units contained in the NPRM and
detailed collections data readily available from the Commission.
Additionally, we note that no interested party proposed alternative
payment units for any category of service for FY 1997.
29. Finally, PCIA, Century, Columbia and other interested parties
are concerned about the amount of our proposed increase in their
revenue requirements and in their fee amounts for FY 1997 compared with
those established for FY 1996. They question how estimates of actual
costs for FY
[[Page 37413]]
1996 and FY 1997 could differ so significantly from one year to the
next in certain fee categories. The most obvious reason for major
differences, as we have noted elsewhere, is that Congress has increased
the total amount we are to collect by more than 20% in FY 1997 compared
to FY 1996. Also, we must recover our indirect and overhead costs as
well as direct costs of regulating services and also must recover our
regulatory costs generated by regulatees not subject to a regulatory
fee. Our fees for FY 1996 were developed using existing FY 1995 fee
amounts adjusted for changes in payment units. These fees were
developed without the benefit of actual cost data and were essentially
based on (a) the Congressionally established relationships between fees
contained in Section (g) of the Act, and (b) subsequent adjustments
based on estimated changes in FTE levels and payment units. By
contrast, for FY 1997, we proposed to rely upon actual cost accounting
data as the basis for determining revenue requirements and fee amounts.
Thus, there are few, if any, grounds for comparison between FY 1996
fees and revenue requirements and corresponding fees and revenue
requirements for FY 1997. Accordingly, the amount that FY 1997 fees
rise or fall relative to FY 1996 fees is essentially unrelated to any
change in actual costs, but instead to the application of different
methodologies and an increasing revenue requirement mandated by the
Congress.
30. After taking into consideration the comments received in this
proceeding concerning our regulatory costs and our cost accounting
system, we have decided to adopt the overall cost-based methodology
proposed in the NPRM for developing FY 1997 fees. As discussed in the
preceding paragraphs, we believe adoption of this methodology will best
insure the fairest allocation of costs and resultant fees among the
Commission's regulatees in FY 1997.
D. Application of Cost-Based Methodology To Determine Fee Amounts
1. Adjustment of Payment Units
31. As the first step in calculating individual service regulatory
fees for FY 1997, we adjusted the estimated payment units for each
service because payment units for many services have changed
substantially since we adopted our FY 1996 fees. We obtained our
estimated payment units through a variety of means, including our
licensee data bases, actual prior year payment records, and industry
and trade group projections. Whenever possible, we verified these
estimates from multiple sources to ensure the accuracy of these
estimates.\12\ Attachment B provides a summary of how payment units
were estimated for each fee category.
---------------------------------------------------------------------------
\12\ Certain payment unit estimates have been revised since
release of the NPRM due to additional or updated information
obtained by the Commission. This may result in changed fee amounts
from those proposed in the NPRM. It is also important to note that
Congress' required revenue increase in regulatory fee payments of
approximately 21 percent in FY 1997 will not fall equally on all fee
payers due to differences in payment unit estimates between FY 1996
and FY 1997.
---------------------------------------------------------------------------
2. Calculation of Revenue Requirements
32. We next multiplied the revised payment units for each service
by our FY 1996 fee amounts in each fee category to determine how much
revenue we would collect in FY 1997 without any change to the existing
Schedule of Regulatory Fees. The amount of revenue we would collect is
approximately $137.3 million.\13\ This amount is approximately $15.2
million less than the amount the Commission is required to collect in
FY 1997. We therefore adjusted the revenue requirements for each fee
category on a proportional basis, consistent with Section 9(b)(2) of
the Act, to obtain an estimate of revenue requirements for each fee
category necessary to collect the $152,523,000 amount required by
Congress for FY 1997. Attachment C provides detailed calculations
showing how we determined the revised revenue amount for each service.
---------------------------------------------------------------------------
\13\ This revenue amount has changed since release of the NPRM
due to changed estimates of payment units.
---------------------------------------------------------------------------
3. Calculation of Regulatory Costs
33. On October 1, 1995, the Commission implemented, in accordance
with 47 U.S.C. 159(i), a cost accounting system designed, in part, to
provide us with useful data, in combination with other information, to
help ensure that fees closely reflected our actual costs of regulation.
34. In order to utilize actual costs derived from our cost
accounting system for fee development purposes, indirect support costs
contained in the cost accounting system have to be added to direct
costs \14\ and the results adjusted further to approximate the amount
of revenue that Congress requires us to collect in FY 1997
($152,523,000).\15\ Thus, we proportionally adjusted the actual cost
data related to regulatory fee activities recorded for the period
October 1, 1995 through September 30, 1996 among the fee categories so
that total costs approximated $152,523,000. The results of these
calculations are shown in detail in Attachment D and represent our best
estimate of actual total attributable costs relative to each fee
category and sub-category for FY 1997. For fee categories
differentiated by class or market (e.g., VHF and UHF Commercial
Television), we distributed the costs to the class or market group by
maintaining the relationships between class or market revenue
requirements shown on Attachment C.\16\ \17\
---------------------------------------------------------------------------
\14\ One feature of the cost accounting system is that it
separately identifies direct and indirect costs. Direct costs
include salary and expenses for (a) staff directly assigned to our
operating Bureaus and performing regulatory activities and (b) staff
assigned outside the operating Bureaus to the extent that their time
is spent performing regulatory activities pertinent to an operating
Bureau. These costs include rent, utilities and contractual costs
attributable to such personnel. Indirect costs include support
personnel assigned to overhead functions such as field and
laboratory staff and certain staff assigned to the Office of
Managing Director. The combining of direct and indirect costs is
accomplished on a proportional basis among all fee categories as
shown on Attachment D.
\15\ Congress' estimate of costs to be recovered through
regulatory fees is generally determined at least twelve months
before the end of the fiscal year to which the fees actually apply.
As such, year-end actual activity costs will not equal exactly the
amount Congress designates for collection in a particular fiscal
year.
\16\ While some might argue that the Commission's cost
accounting system should further distinguish our work activities to
the television market or radio class level, it would not be
practical to record employee work time in such small incremental
breakouts.
\17\ In the NPRM we erroneously distributed these costs by
maintaining the relationship between fees contained in the FY 1996
Fee Schedule. As commenters pointed out, we should have made these
distributions by maintaining the relationship between FY 1996
revenue requirements for these fee categories. The following example
illustrates the allocation process:
Under the FM Radio fee classification, the actual costs
attributable to FM radio are $8,465,118. This amount is allocated to
FM Classes C,C1,C2,B; Classes A,B1,C3; and FM Construction Permits
(CP) as follows:
(1) First we determine the relationships between the three
categories (see Attachment C) by dividing the smallest of the pro-
rated FY 1997 FM revenue requirements into the sum of the pro-rated
FY 1997 FM revenue requirements to determine the appropriate ratios
for allocation of the revenue requirement.
(a) Pro-rated FY 1997 FM CP revenue requirement = $235,258
Pro-rated FY 1997 FM Classes A, B1, and C3 revenue requirement
= $2,546,006
Pro-rated FY 1997 FM Classes C, C1, C2, and B revenue
requirement = $3,621,944
Sum = $6,403,208
(b) FM CP percentage is $235,258 divided by $6,403,208 = 0.0367
FM Classes A, B1, and C3 percentage is $2,546,006 divided by
$6,403,208 = 0.3976
FM Classes C, C1, C2, and B percentage is $3,621,944 divided
by $6,403,208 = 0.5656
(2) Finally, we determine the new revenue requirement for each
of the three by multiplying the cost-based revenue requirement for
all of FM by each of the percentages calculated in (1)(b).
FM CP revenue requirement = 0.0367 times $8,465,118 = $310,670
FM Classes A, B1, and C3 revenue requirement = 0.3976 times
$8,465,118 = $3,365,731
FM Classes C, C1, C2, and B revenue requirement = 0.5656 times
$8,465,118 = $4,787,871
(3) The revenue requirements calculated in (2) are inserted in
Attachment D for the three FM categories.
---------------------------------------------------------------------------
[[Page 37414]]
4. Establishment of 25 Percent Revenue Ceiling
35. Our next step was to determine whether reliance on actual costs
to develop FY 1997 regulatory fees would result in fees which were too
disparate from corresponding FY 1996 fees. As a result of this
analysis, we proposed establishing a ceiling of 25 percent on the
increase in the revenue requirement of any service over and above the
Congressionally mandated overall increase in the revenue requirement
and after taking into consideration changes in payment unit counts.\18\
---------------------------------------------------------------------------
\18\ For example, the regulatory cost associated with the
Aviation (Aircraft) service is $934,905. If no change were made to
this service's FY 1996 regulatory fee ($3 per year), the total
revenue collected from licensees in this service would be only
$70,634 in FY 1997, a shortfall of $864,271. Application of the
proposed 25 percent revenue ceiling to this service results in a
capped revenue ceiling of $88,293 ($70,634 x 125%).
---------------------------------------------------------------------------
36. Because Congress has increased our overall fee collection
requirement, we are already required to collect substantially more than
we collected in FY 1996. Nevertheless, capping each service's revenue
requirement at no more than a 25 percent increase would enable us to
begin the process of realigning fees to account for differences in
regulatory costs. As we noted in the NPRM, we are not suggesting that
FY 1997 fee increases be limited to a 25 percent increase over FY 1996
fees. The 25 percent increase would be over and above the revenue which
would be required after adjusting for the projected FY 1997 payment
units and the proportional share of the 21 percent increase in the
amount that Congress requires us to collect. Thus, FY 1997 fees could
increase by more than 25 percent over FY 1996 fees. Under this
methodology, fees could actually increase by as much as 40% or more.
37. An important consideration in establishing a revenue ceiling is
the impact on other fee payers. Because the Commission is required to
collect $152,523,000 in FY 1997 regulatory fees, the additional revenue
that would have been collected from classes of licensees subject to a
revenue ceiling, instead needs to be collected from licensees not
subject to the ceiling. This results in a certain amount of
subsidization between fee payer classes.\19\ We believe, however, that
the public interest would best be served by adopting a revenue ceiling
because, otherwise, several entities would be subjected to unexpected,
substantial increases which could severely impact the economic well
being of these licensees.\20\
---------------------------------------------------------------------------
\19\ Revenues from current fee payers already offset significant
costs attributable to regulatees exempt from payment of a fee or
otherwise not subject to a fee pursuant to Section 9(h) of the Act
or the Commission's rules. For example, CB and ship radio station
users, amateur radio licensees, governmental entities, licensees in
the public safety radio services, and all non-profit groups are not
required to pay a fee. The costs of regulating these entities is
borne by those regulatees subject to a fee requirement.
\20\ For example, the following illustrate the annual fees that
would be in effect if fees were cost-based without application of a
revenue ceiling:
LEOS--$2,412,025
International Public Fixed Radio Stations--$6,750
MDS/MMDS--$1,025
International Bearer Circuits--$25
Marine Coast & Ship Stations--$30 (Total upfront payment=$300)
Aircraft--$45 (Total upfront payment=$450)
---------------------------------------------------------------------------
38. SBC Communications Inc. and Ameritech submit that the
subsidization resulting from application of the 25% revenue ceiling is
unfair and that the phased-in methodology proposed by the Commission
has the effect of moving revenues further from actual costs than they
would be without the ceiling, contrary to the goal of eventually having
revenue requirements approximate actual costs. Both suggest that the
Commission abandon the revenue ceiling concept, with SBC proposing that
the Commission merely apply a uniform 21% increase to all regulatees'
fees.
39. Regulation of interstate telephone service providers accounts
for approximately 36% of all Commission costs. Therefore, any
methodology which employs a subsidization feature, such as our proposed
revenue ceiling, will impact these regulatees to a greater extent than
others, at least in the short term. As other fee payers' fees approach
amounts that bring their revenues closer to actual costs, as our
phased-in revenue ceiling technique would do, the amount of
subsidization required of fee payers below their revenue ceilings (such
as those common carriers providing interstate telephone service) will
steadily decrease. Thus, in the long term, subsidization will decrease
and revenue requirements for all services will approach actual costs
(assuming other factors, such as the total amount that Congress
requires us to collect, remain constant).
40. Additionally, although SBC and Ameritech are correct that the
revenue requirement proposed for FY 1997 for telephone companies
providing interstate toll services is higher than the total costs
attributable to these companies, revenues are only up 6.5% from what
they would be if FY 1996 fees remained in place. Further, proposed
revenues from these carriers would increase 23% over the applicable FY
1996 revenue requirement for these entities, comparing well with the
overall 21% increase in fee collections ordered by the Congress for FY
1997. Additionally, SBC's proposal to set fees at amounts 21% over FY
1996 fee amounts is not mathematically sound. As we note elsewhere in
this item, changes to payment units from FY 1996 to FY 1997 must be
taken into consideration when determining the amount of revenue that
would be collected from one year to the next. Overall increases to
payment unit estimates from one year to the next, even without changes
to previous year fee amounts, provides additional revenue, offsetting
to some extent, any required increase to overall collections. On the
other hand, any reduction in payment units requires higher fees to
offset the resultant loss of revenue. The application of a percentage
increase to either prior year fee amounts or prior year revenue
requirements, as proposed by SBC, would therefore not provide any
benefit and is rejected as non-workable in concept.
41. For the reasons discussed above, we will adopt the 25% revenue
ceiling proposed in the NPRM. Attachment E contains a description of
the step-by-step process we used to calculate adjusted revenue
requirements for each fee category for FY 1997, including the
reallocation of revenue requirements resulting from the application of
our revenue ceiling.21
---------------------------------------------------------------------------
\21\ Application of the 25% ceiling was accomplished by choosing
a ``target'' fee revenue requirement for each individual fee
category. This ``target'' was either the actual calculated revenue
requirement (for those categories at or below the 25% ceiling) or,
in cases where the calculated revenue exceeded the ceiling, an
amount equal to the ceiling. The shortfall created by reducing the
revenue requirement of those whose revenue requirement exceeded the
revenue ceiling was proportionately spread among those fee
categories whose revenue requirements were below the ceiling. This
computation required more than one round of adjustment because the
allocation of this revenue, in a few instances, caused the new
revenue requirement amount to exceed the 25% ceiling. After two
iterations (rounds), all the revenue requirements were at or below
the revenue ceiling. See Attachment E.
---------------------------------------------------------------------------
5. Calculation of Fees
42. Once we determined the amount of fee revenue needed to be
collected from each class of licensee, we divided the individual
revenue requirements by the number of associated payment units (and by
the license term, if applicable,
[[Page 37415]]
for ``small'' fees) to obtain actual fee amounts for each fee category.
These calculated fee amounts were then rounded in accordance with
Section 9(b)(3) of the Act. See Attachment E.
E. Other Changes
43. In our NPRM, we proposed several adjustments to our fees and/or
changes to payment procedures based upon the public interest and other
criteria established in 47 U.S.C. 159(b)(3). Additionally, we received
several comments and suggestions unrelated to our specific proposals
contained in the NPRM.
1. Consolidation of Private Microwave and Domestic Public Fixed Fee
Categories
44. In our prior fee schedules, we required Private Microwave
licensees to pay ``small'' regulatory fees, in advance, for an entire
license term at the time of filing an initial, renewal or reinstatement
application. Congress established this requirement in its statutory fee
schedule. 47 U.S.C 159(g). In contrast, our fee schedules and the
statutory fee schedule have required licensees in the Domestic Public
Fixed Service category to file an annual ``standard'' regulatory fee.
Private Microwave licensees include systems authorized under Part 101
of the Commission's rules to provide point-to-point telecommunications
services to private parties. The Domestic Public Fixed Service
comprises several commercial microwave services, including microwave
multiple address, microwave common carrier fixed, microwave digital
electronic message, and microwave local TV transmission.22
---------------------------------------------------------------------------
\22\ Although the Multipoint Distribution Service (MDS) and the
Multichannel Multipoint Distribution Service (MMDS) were originally
grouped with Domestic Public Fixed services, we have, since FY 1995,
listed them separately in our Fee Schedule.
---------------------------------------------------------------------------
45. In our NPRM at Paragraph 23, we stated that many microwave
licensees had expressed confusion concerning whether to submit a small
fee or a standard fee. We noted that the operational and technical
characteristics of private microwave and commercial microwave systems
are similar. Thus, we proposed to consolidate these fee categories into
a single Microwave category for FY 1997. Only one interested party, IXC
Carrier, Inc. (IXC), commented on our proposal. IXC supports our
proposal, stating that not only are these services similar in their
operational and technological characteristics, but that our regulatory
oversight of these services is identical.
46. Accordingly, we are adopting our proposal to establish in our
fee schedule a single fee category covering licensees in both the
Domestic Public Fixed Service and the Private Microwave Service. As we
have noted, these services are operationally and technologically
similar, and we agree with IXC that our regulation is essentially the
same for these services. Thus, these payers would be subject to payment
of a single ``small'' fee, payable in advance for the entire term of
their license when filing an initial, renewal, or reinstatement
application. Those licensees that paid the standard ``annual''
regulatory fee per station in FY 1996 are not subject to a fee payment
for FY 1997 unless they file a new, renewal or reinstatement
application. The regulatory fee for Microwave licensees for FY 1997
will be $10 per license.
This new fee is calculated as follows:
(a) From Attachments C and E:
(1) 5,350 private microwave stations (units) (Revenue requirement =
$535,000)
(2) 18,845 commercial microwave/public fixed stations (units)
(Revenue requirement = $94,225)
(b) Converting from annual payment (``standard fee'') to license term
payment (``small fee''):
(1) 18,845 commercial microwave units divided by 10 year license
term = 1,885 commercial microwave units to be licensed each year.
(c) Calculation of new microwave fee: The sum of the two revenue
requirements divided by the sum of the units to be licensed and divided
by the license term as follows:
(1) (($535,000 + $94,225) divided by (5,350 + 1,885)) divided by 10
years = $8.70.
(d) Round fee to the nearest five dollars = $10 (47 U.S.C 159(b)(2)).
2. Commercial AM/FM Radio
47. In our NPRM to establish regulatory fees for FY 1996, we stated
that we ``were particularly interested in a proposal which would
associate population density and service area contours with license
data'' and we requested interested parties to propose alternatives for
assessment of AM and FM fees. Assessment and Collection of Regulatory
Fees for Fiscal Year 1996, FCC 96-153, at Paragraphs 20-21 (April 9,
1996), 61 FR 16432 (April 15, 1996). In response, the Montana
Broadcaster's Association (Montana) filed comments proposing an AM and
FM fee structure based on class of station and relative market size.
However, we decided not to take any action on Montana's proposal until
we had an opportunity to more extensively evaluate its impact on AM and
FM licensees. Assessment and Collection of Regulatory Fees for Fiscal
Year 1996, FCC 96-295, at Paragraphs 23-29, July 5, 1996, 61 FR 36629
(July 12, 1996).
48. We issued a Notice of Inquiry (NOI) to determine if it would be
feasible to utilize both market size and class of station to assess
annual regulatory fees on commercial AM and FM broadcast radio
stations. See Amendment of Part 1 of the Commission's Rules Pertaining
to the Schedule of Annual Regulatory Fees for Mass Media Services, FCC
96-422, released November 6, 1996, 61 FR 59397 (November 22, 1996). In
response to the NOI, Montana filed a proposal which would group radio
markets by Arbitron market size, with the fee for each market group
predicated on the ratios that Congress initially established in Section
9(g) of the Act (47 U.S.C. 159(g)) for assessing fees for licensees of
television stations serving different sized markets. The National
Association of Broadcasters (``NAB'') also submitted a proposal under
which stations would pay a fee determined not only by class, but by
population served, irrespective of the market in which they are
located. However, we identified several problems with each proposal
that needed to be resolved, and our FY 1997 NPRM invited interested
parties to comment on the NAB and Montana proposals, as well as on any
alternative method for assessing radio station fees. All relevant
comments received by the Commission in response to the NPRM support the
NAB or Montana proposal or some variation thereof. As discussed below,
the fee mechanism we are adopting utilizes the best features of the NAB
proposal, while correcting its defects.
49. Neither the Montana nor the NAB proposal provide an ideal
method of assessing radio station fees. For example, the Arbitron
rankings, relied on by Montana, are incomplete for several markets.
Markets are only ranked if a sufficient number of stations located
within the market subscribe to the Arbitron service, and a station may
be placed in a market if it competes with market stations even though
it may not be physically located in a major metropolitan area within
the market, or it may be placed in a market based on data collected
during a promotional programming period which is not reflective of
normal operations. Similarly, NAB's proposal is flawed because the
database on which NAB's fee schedule is based contains more than 800
errors, ommissions, erroneous
[[Page 37416]]
station classes, duplicate records, non-profit or non-commercial
stations (which are exempt from payment of regulatory fees), incorrect
call letters, ``silent'' stations, and Canadian stations.
50. Nevertheless, we fully agree that using population to assess
radio station fees is an improvement over the current method for
assessment of AM and FM fees, assuming a systematic schedule can be
developed using accurate population class of station data. The NAB
proposal to use population within a station's area of coverage offers
greater specificity and flexibility than our current method of
assessing these fees.23 To obtain an accurate data base to
implement such an improved fee methodology, we corrected NAB's
database, using the Commission's own records, including official
station files. The resulting compilation of stations, based on official
Commission records and the population coverage data provided to the
Commission by NAB, provided an accurate starting point for developing
the improved AM/FM fee schedule.
---------------------------------------------------------------------------
\23\ DataWorld MediaXpert Service prepared for NAB a calculation
of the signal coverage for each station, and overlaid this data onto
1990 decennial census population data to estimate the population
contained within each station's signal coverage area. For each AM
station, estimated soil conductivity data was retrieved for each of
360 radial azimuths around the transmitter site, the standard
horizontal plane radiation pattern was calculated and any pertinent
pattern augmentations applied, and the distance to the 1 mV/m field
strength contour for each of the 360 radials was calculated using
the appropriate propagation curves and the FCC equivalent distance
method. For each FM station, terrain averages were calculated from
the USGS/DMA 3 arc second terrain database for each of 360 radial
azimuths, the HAAT was calculated using the height of the center of
radiation AMSL and processed with FM contour calculation software,
pertinent directional antenna information was applied, and the
distance to the 60 dBuV/m contour was calculated using the
appropriate FCC F[50,50] curves. For both AM and FM, the distance to
contour data was applied to population counting software using 1990
census data to determine the total population within each station's
coverage area.
---------------------------------------------------------------------------
51. We next calculated the individual revenue requirements and
resultant fees for each class of station (e.g., AM Class A or FM
Classes C, C1, C2 & B) under our existing methodology for assessing
radio station fees as shown in Attachment E. In order to consider both
population and class of station, we then multiplied that fee by the
population served to determine the weighted population. The weighted
approach also streamlines the schedule by allowing us to combine AM and
FM stations into a single ``radio'' category. The following table is a
representative illustration of how we determined the weighted
population for each station.
1990 census
Computed FY population
1997 fee coverage (not Weighted
Station (from actual data-- population (b)
attachment for times (c)
E) illustration
only)
(a) (b) (c) (d)
----------------------------------------------------------------------------------------------------------------
#1--AM Class A................................................... $1,725 1,000,000 1,725,000,000
#2--AM Class A................................................... 1,725 50,000 86,250,000
#3--AM Class B................................................... 950 1,000,000 950,000,000
#4--AM Class C................................................... 390 50,000 19,500,000
#5--AM Class D................................................... 480 100,000 48,000,000
#6--FM Group I................................................... 1,725 5,000,000 8,625,000,000
#7--FM Group II.................................................. 1,150 7,500,000 8,625,000,000
#8--FM Group II.................................................. 1,150 5,000 5,750,000
----------------------------------------------------------------------------------------------------------------
52. Our next step was to sort the data by compiling a list of every
AM and FM station in descending order by weighted population. The
following illustration indicates how the stations represented by each
group in the above chart would be ranked by weighted average:
1990 census
Computed FY population
1997 fee coverage (not Sorted weighted
Station (from actual data-- population (b)
attachment for times (c)
E) illustration
only)
(a) (b) (c) (d)
----------------------------------------------------------------------------------------------------------------
#6--FM Group I................................................... $1,725 5,000,000 8,625,000,000
#7--FM Group II.................................................. 1,150 7,500,000 8,625,000,000
#1--AM Class A................................................... 1,725 1,000,000 1,725,000,000
#3--AM Class B................................................... 950 1,000,000 950,000,000
#2--AM Class A................................................... 1,725 50,000 86,250,000
#5--AM Class D................................................... 480 100,000 48,000,000
#4--AM Class C................................................... 390 50,000 19,500,000
#8--FM Group II.................................................. 1,150 5,000 5,750,000
----------------------------------------------------------------------------------------------------------------
53. Next, we determined actual fees for each station. The simplest
method appeared to be one which used a ``per population'' average cost
applied to the weighted populations. To test this approach, we divided
the sum of all the individual revenue requirements (from Attachment E
as applied to each station like the ones in column (b) in the table
above) by the sum of all the individual populations. This ``per pop''
cost factor was then multiplied by each weighted population to
calculate a unique fee for each station. Unfortunately, this particular
methodology resulted in an unwieldy and unacceptable range of fees. On
a pure per weighted population basis, fees would range from a high of
$34,435 for a Class B FM station in New York, with the highest weighted
population, to a low of $0.06 for a Class
[[Page 37417]]
A FM station in Ludlow, CA, with the lowest weighted population.
54. Therefore, as an alternative to a pure weighted population fee
assessment methodology, we designed a schedule, similar to the Montana
and NAB proposals, which would place stations in wide bands with
different fees for each band. We established the ranges for the
schedule by first deciding on minimum and maximum fee amounts. In
setting a minimum fee, we decided that it should be no less than the AM
Construction Permit fee which we calculated in Attachment E to be $195.
Therefore, we set the lowest radio fee at $200. In setting a maximum
fee, we compared the maximum radio fee contained in Public Law 103-66
for FY 1994 ($900) and the total revenue requirement for FY 1994 ($60.4
million) to the current FY 1997 revenue requirement ($152.5 million),
and calculated that a station which paid $900 in 1994 would now be
subject to a fee of $2,272. Because this would represent an
unacceptably large increase in fees for many fee payers, we decided to
limit the maximum fee to $2,000. At the same time, we decided to expand
the number of actual fee classifications from the existing six (four AM
and two FM) to ten. This allowed us to establish fee classifications in
$200 increments, with each increment containing the same number of
stations, resulting in a more equitable fee schedule while keeping the
size of the schedule relatively manageable.24 The resulting
schedule of regulatory fees for radio stations (both AM and FM) is:
---------------------------------------------------------------------------
\24\ The number of stations is not exactly divisible by 10,
leaving group 10 with one less station than the other groups.
------------------------------------------------------------------------
Number of
Classification group stations Fee
------------------------------------------------------------------------
1............................................. 1019 $2,000
2............................................. 1019 1,800
3............................................. 1019 1,600
4............................................. 1019 1,400
5............................................. 1019 1,200
6............................................. 1019 1,000
7............................................. 1019 800
8............................................. 1019 600
9............................................. 1019 400
10............................................ 1018 200
------------------------------------------------------------------------
55. This schedule, which we adopt today, results in: (1) Same class
stations in different size cities generally having different fees, (2)
different class stations in the same city generally having different
fees, and (3) same class stations in the same city generally having the
same fee. In addition, it is generally true that in using this
methodology: (1) Larger stations and those located in larger
metropolitan areas tend to be assessed higher fees and (2) small
stations and those located in rural areas tend to be assessed lower
fees. This fee schedule we have adopted thus achieves the objectives of
both the NAB and Montana proposals by assessing fees based on class of
station and populations served, thereby providing a fair and equitable
means of distinguishing between stations located in metropolitan areas
and those located in rural areas. Moreover, if a licensee believes that
it has been improperly placed in a particular fee classification group
or that it will suffer undue financial hardship from the fee
assessment, our rules provide for waiver, reduction or deferral of a
fee as described in Sec. 1.1166 of our rules. 47 U.S.C 1.1166.
56. This methodology also requires that the Commission inform radio
station licensees as to their exact fee obligation. A Public Notice
listing each station's call letters, location, population, and the
required fee will be mailed to each licensee. The same information will
also be available at our internet web site (http://www.fcc.gov).
Interested parties may also obtain their applicable fee amount for FY
1997 by calling the FCC's National Call Center at 1-888-225-5322. We
have also provided detailed payment information for each radio station
as Attachment K to this Report and Order and will publish this list in
the Federal Register upon completion of this rulemaking.
3. Personal Communications Service (PCS)
57. Our FY 1996 Report and Order deferred assessing a regulatory
fee upon licensees in the Personal Communications Service (``PCS'')
because PCS was in a very early start-up phase of operations. See FY
1996 Report and Order at Appendix F, Paragraph 15. However, in our
NPRM, at Paragraph 38, we proposed to initiate the PCS fee since
sufficient PCS systems are now in operation to justify inclusion of PCS
licensees among those licensees assessed a Commercial Mobile Radio
Services (CMRS) fee for FY 1997. We received no comments specifically
addressing whether or not PCS licensees should be subject to a
regulatory fee for FY 1997. Since PCS systems now are in operation, we
have decided to require PCS licensees to submit regulatory fees in FY
1997, as described below.
4. Commercial Mobile Radio Services (CMRS)
58. In our FY 1996 Report and Order, we discussed a proposal
submitted by Destineer, Inc., a PCS licensee, that we establish a CMRS
Messaging Service fee category to replace our CMRS One-Way Paging fee
category. See FY 1996 Report and Order at Paragraph 22. Destineer
stated that, with the exception of two-way paging services, our CMRS
Mobile Services fee category includes only broadband services which
provide two-way interactive voice communications. Destineer recommended
establishing a CMRS Messaging Service to include all narrowband
services, including two-way paging services. We invited interested
parties to file comments on Destineer's proposal or to propose
alternative methods to assess CMRS fees for FY 1997. We were
particularly interested in the number of estimated payment units
associated with any alternative proposal and the impact the proposed
change would have on projected revenues. See FY 1997 NPRM at Paragraph
39.
59. In its comments, RAM Mobile Data USA Limited Partnership (RMD)
supports establishing a new CMRS Messaging Service fee category and
urges that the distinction between our CMRS fee categories rest on
whether the licensee provides voice services or non-voice services.
Paging Network, Inc. (PageNet) also supports establishing a CMRS
Messaging Service, recommending that narrowband PCS services be
included in the new fee category along with paging and similar
services. The Personal Communications Industry Association (PCIA),
supported by Arch Communications Group, Inc. (Arch), requests that two-
way paging and other services similar to paging services be assessed
the same regulatory fee as one-way paging. No party submitted estimates
of the number of payment units subject to a CMRS fee.
60. We are persuaded from the comments that a revision of our CMRS
fee categories to distinguish broadband mobile services from narrowband
services would serve the public interest. Therefore, we will amend our
fee schedule to replace our CMRS One-Way Paging fee category with a new
CMRS Messaging Services fee category. The distinguishing characteristic
between the CMRS Mobile Services fee category and the CMRS Messaging
Services fee category will be the amount of bandwidth that we have
authorized. Our bandwidth distinction is consistent with the fee
schedule enacted by Congress and by our own prior fee schedules that
assess fees based upon the quality of the channels provided to
licensees. See 47 U.S.C. 159(g).
61. Specifically, Congress in its statutory fee schedule
distinguished between licensees that we authorized to provide exclusive
use services and those we authorized to provide only shared
[[Page 37418]]
use services. Section (g) assesses a higher fee upon licensees of
exclusive use spectrum than upon licensees of less valuable shared use
spectrum. Similarly, the statutory fee schedule established fees for
broadcast licensees that consider the type of service and class of
service authorized. Moreover, since we established the fee program, our
fee schedules have adhered to Congress' principle that our fee
categories are to be based on the authorization provided to a licensee
rather than the use a particular licensee makes of its authorized
spectrum. As such, our fee schedule for CMRS will not consider the
particular use made of a licensee's spectrum and will consider the
nature of services offered only to the extent that services offered on
broadband spectrum and services offered on narrowband spectrum will be
subject to different categories of fee payment. Thus, licenses
authorizing operations on broadband spectrum will be subject to the
CMRS Mobile Services fee, regardless of the services offered on that
spectrum by the licensee. Further, licenses authorizing the provision
of services on narrowband spectrum will be subject to the CMRS
Messaging Services fee, regardless of the services offered on that
spectrum. It should also be noted that our NPRM inadvertantly placed
CMRS licensees operating in the 220-222 MHz and interconnected Business
Radio Services in the CMRS Mobile Services fee category. Both should be
included in the CMRS Messaging Services fee category. See Attachment H,
paragraph 15.
62. In implementing this revision, we must recompute the revenue
requirements and fees attributable to the two CMRS categories. Revenue
required from narrowband services (PCS and two-way paging) must be
subtracted from the CMRS Mobile Services category and added to the one-
way paging category (to be renamed the CMRS Messaging Services
category). The required calculations to achieve this result are shown
below:
(1) Determination of revised payment unit estimates
(a) CMRS Mobile Services payment units (from Attachment C) =
47,300,000
Subtract: Reclassified Narrowband PCS/Two-way Paging payment units
= 150,000 25
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\25\ Based on Commission estimates.
---------------------------------------------------------------------------
Equals: Revised CMRS Mobile Services payment units = 47,150,000
(b) CMRS One-Way Paging payment units (from Attachment C) =
40,850,000
Add: Reclassified Narrowband PCS/Two-way Paging payment units =
150,000
Equals: Revised CMRS Messaging Services payment units = 41,000,000
(2) Determination of revised revenue requirements
(a) CMRS Mobile Services revenue requirement (from Attachment E) =
$11,352,000
Subtract: Reclassified Narrowband PCS/Two-way Paging revenue
requirement (150,000 payment units x $ .24) = $36,000
Equals: Revised CMRS Mobile Services revenue requirement =
$11,316,000
(b) CMRS One-way Paging revenue requirement (from Attachment E) =
$1,225,500
Add: Reclassified Narrowband PCS/Two-way Paging revenue requirement
(from 2(a) above) = $36,000
Equals: Revised CMRS Messaging Services revenue requirement =
$1,261,500
(3) Determination of revised fee amount
(a) CMRS Mobile Services fee = revised revenue requirement/revised
payment units (i.e., $11,316,000/47,150,000 units) = $ .24/unit (no
change in fee)
(b) CMRS Messaging Service fee = revised revenue requirement/
revised payment units (i.e., $1,261,500/41,000,000 units) = $ .03/unit
(no change in fee)
63. Finally, RMD, Pagenet and PCIA contend that CMRS licensees that
have converted from private to commercial service should not be
required to pay regulatory fees twice for the same time period, once as
a PMRS licensee and again as a CMRS licensee. The parties note that our
NPRM did not address the issue of refunds and ask for clarification in
order to avoid double payments by certain CMRS licensees.
64. In our FY 1996 Report and Order at Paragraph 21, we stated that
our rules provide that a licensee is entitled to a refund of an advance
payment, upon request, whenever we ``adopt new rules that nullify a
license or other authorization.'' 47 CFR 1.1159(2)(i). Therefore, any
licensee that has converted from PMRS to CMRS and has paid fees in
advance for a period of years may file a request for refund, pro-rated
for the number of remaining years in the initial PMRS license term.
Detailed refund procedures will be issued separately by public notice,
by the Managing Director pursuant to delegated authority.
5. Intelsat and Inmarsat Signatories
65. In our NPRM, we proposed to charge a Signatory fee to cover the
costs for FY 1997 of Commission regulatory activities associated with
Comsat's role as U.S. Signatory to INTELSAT and INMARSAT. On May 30,
1997, the United States Court of Appeals for the District of Columbia
vacated our decision to charge Comsat a Signatory fee for FY 1996.
COMSAT Corporation v. Federal Communications Commission, Case No. 96-
1325 (May 30, 1997 D.C. Cir.). Accordingly, we will not, at this time,
assess a fee to recover the costs of our regulatory activities in
connection with Comsat's role as U.S. Signatory. 26
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\26\ Signatory oversight activities represent approximately 7.8%
of all international costs.
---------------------------------------------------------------------------
6. Non-Common Carrier International Bearer Circuits
66. International bearer circuit fees have been assessed upon
domestic and international common carriers only. In its comments
responding to proposals contained in our FY 1996 NPRM, Comsat contended
that payment of international bearer circuit fees should be expanded to
non-common carriers providing international bearer circuits directly to
end users. In our FY 1996 Report and Order, we declined to expand
collection of international bearer circuit fees to these entities
because we lacked appropriate data required to calculate a fee
applicable to bearer circuits provided directly to end users over non-
common carrier domestic and international facilities. We, therefore,
proposed in our FY 1997 NPRM to assess the international bearer circuit
fee only on domestic and international common carriers in FY 1997.
However, we invited interested parties to comment on Comsat's proposal.
We were especially interested in information concerning the number of
bearer circuits provided directly to end users over non-common carrier
domestic and international facilities.
67. We received comments from Comsat, Columbia and PanAmSat
concerning Comsat's proposal to extend the bearer circuit fee to all
non-common carriers providing international bearer circuits to end
users. Comsat argues that the circuits provided by non-common carrier
satellites are functionally identical to those provided by common
carriers. Comsat further argues that the bearer circuit fee is not
intended to recover the costs of benefits received by particular
entities, but to recover the costs of the FCC's regulatory activities.
As such, the non-common carriers should be required to contribute their
[[Page 37419]]
share to the recovery of such costs. PanAmSat, on the other hand,
argues that, whether or not non-common carrier bearer circuits are
identical to common carrier circuits as a technical matter, they do not
impose equivalent regulatory burdens because they are not subject ``to
the full panoply of Title II regulation.'' Similarly, Columbia argues
that non-common carriers are not regulated and do not impose
administrative costs on the Commission. As a result, Columbia argues
that it is ``axiomatic'' that regulatory fees cannot be charged for
activities that are not subject to the full range of Title II
regulation that applies to common carriers. None of the respondents
provided information concerning the number of circuits the non-common
carriers provided directly to end users.
68. We agree with Comsat that international bearer circuits
provided by non-common carriers are technically identical to bearer
circuits provided by common carriers. We also agree with PanAmSat and
Columbia that the offerings of non-common carrier satellite providers
are not subject to Title II regulation. The same, however, can be said
of operators of non-common carrier undersea cable systems, which are
also exempted from Title II regulation, and even of non-dominant common
carriers that we have exempted from many Title II regulations. Yet non-
common carrier undersea cable operators and non-dominant common
carriers have been subject to the bearer circuit fee since we
established our regulatory fee program. See FY 1994 Report and Order at
Paragraph 98. In addition, regulatory fees, such as the international
bearer circuit fees, are not intended to recover only the costs of
Title II regulation. Those Title II costs are recovered, in part, by
separate fees which recover the costs of processing applications to
provide common carrier services pursuant to Section 214 of the Act and
the costs of our review of tariff filings imposed under Section 8 of
the Communications Act.27 In contrast, Section 9 regulatory
fees, of which the bearer circuit fee is an example, recover the costs
of our enforcement, policy and rulemaking, user information and
international activities.
---------------------------------------------------------------------------
\27\ 47 U.S.C. 158 (1996).
---------------------------------------------------------------------------
69. It is necessary for the Commission to maintain these activities
as part of its overall mission and, under Section 9 of the Act, it is
necessary for the Commission to assess regulatory fees to recover the
cost of those activities. For example, the international bearer circuit
fee is designed to recover many of the costs of the Commission's
International Bureau's enforcement, rulemaking and representation
activities. All entities that engage in international
telecommunications benefit from the fact that the Commission maintains
an enforcement mechanism to protect them from those who violate the
Communications Act. Similarly, all entities that engage in
international telecommunications benefit from the Commission's
rulemaking, public information and international representation
activities. And each must help to defray the Commission's costs in
maintaining the capability to carry out those activities, even though
it is not easy to predict in advance who will specifically benefit from
those activities.
70. It is now appropriate to begin to collect the fee from such
entities. Although non-common carrier systems have not been subject to
Title II regulation, their provision of bearer circuits have imposed,
particularly in recent years, far greater regulatory burdens on the
Commission. We initially exempted non-common carrier satellite
operators from Title II regulation because their proposed service
offerings were sufficiently different from those of common carriers
that they could, in some sense, be said not to be in direct
competition. For example, they proposed not to offer voice services,
but only bearer circuits that would not be interconnected with the
public switched network and that would be offered only on a sale or
long term lease basis. As a result, their initial license prohibited
them, or their customers, from connecting circuits provided over non-
common carrier satellite systems with the public switched telephone
network (PSN).28 In addition, we narrowly limited their
service offerings to the sale or lease of bulk capacity; that is, the
right to use capacity for the life of the satellite or leasing them
capacity for a term of one year or longer--restrictions not imposed on
common carriers.29 Under such restrictions, we concluded
that these carriers would require little Commission regulatory
oversight.
---------------------------------------------------------------------------
\28\ Establishment of Satellite Systems Providing International
Communications, 101 F.C.C.2d 1046 (1985)(``Separate Systems
Decision''), recon., 61 RR2d 649 (1986), further recon., 1 F.C.C.
Rcd 439 (1986).
\29\ Establishment of Satellite Systems Providing International
Communications, 101 F.C.C.2d 1046 (1985)(``Separate Systems
Decision''), recon., 61 RR2d 649 (1986), further recon., 1 F.C.C.
Rcd 439 (1986), 51 FR 44478 (December 10, 1986).
---------------------------------------------------------------------------
71. The operations and offerings of the non-common carrier
satellite providers have in recent years changed significantly,
however, and we expect that these carriers will propose even further
expansions of these types of offerings in the future. For example, we
no longer restrict the number of circuits common carriers can use in
non-common carrier satellite systems.30 The non-common
carrier satellite providers have requested and obtained approval for
the removal of the restriction limiting their provision of capacity on
a sale or long-term-lease basis.31 Finally, we eased the ban
on connecting their circuits to the public switched network and,
effective January 1, 1997, we eliminated the restriction
altogether.32 The net result of these activities has been a
greatly increased demand for these services and operations that
increasingly resemble those of the common carriers with whom they
compete. Thus, the steady expansion of services offered by the non-
common carrier satellite operators has greatly increased the need for
our oversight of their commercial activities and imposed a greater
burden on our staff and other resources. Thus, although we have not in
the past required these providers to pay the international bearer
circuit regulatory fees, we conclude that it is now appropriate to
impose the fee, due to these satellite providers extensive
participation in services once reserved to the common carriers and
private undersea cable operators and, in particular, to the important
role they now play in the provision of international bearer circuits.
---------------------------------------------------------------------------
\30\ See, e.g., Streamlining the International Section 214
Authorization Process and Tariff Requirements, 11 FCC Rcd 12884,
12900-1(1996), 61 FR 15724 (April 9, 1996).
\31\ See 9 FCC Rcd 1282,1286 (1994).
\32\ See, e.g., 7 FCC Rcd 2313 (1992), 57 FR 14798 (April 23,
1992), allowing non-common carrier satellite providers, or their
customers, to interconnect up to 100 64 KB circuits per satellite to
the public switched network (PSN) for international switched
service; see also, 9 FCC Rcd 347 (1994), 59 FR 3100 (January 20,
1994), increasing the number of circuits that may be interconnected
to the PSN to 1,250 per satellite; and 11 FCC Rcd 16387 (1996),
increasing the number to 8,000 per satellite. The Commission's 1992
Order also established an automatic sunset of any restrictions on
interconnection to the PSN on January 1, 1997. See 7 FCC Rcd 2313,
2314 (1992).
---------------------------------------------------------------------------
72. We have noted in the past that we do not have information
concerning the exact number of non-common carrier bearer circuits
offered to the public. Neither Comsat nor the non-common carriers
offered us such information. We do, however, have available data
concerning circuits offered directly to end users by satellite
operators and by Comsat. Based on this information, it appears that
there were approximately 100,000 active circuits offered by non-common
carriers in 1996. We propose to incorporate these estimates into our
payment unit estimates for bearer
[[Page 37420]]
circuits and use them to calculate the bearer circuit regulatory fee
due from both common carriers and non-common carriers. The applicable
calculations are as follows:
Number of Active Circuits
Common Carriers--164,000
Non-common carriers--100,000
Total--264,000
Revenue Requirement
FY 1997 Revenue Requirement (from Attachment E)--$820,000
Fee Computation
Revenue Requirement ($820,000) divided by circuits (264,000) = $3.10
Rounded fee = $5.00
7. Low Earth Orbit Satellite Systems
73. In our NPRM, we proposed that entities authorized to operate
Low Earth Orbit Satellite Systems (LEOS) be assessed a regulatory fee
for any LEO system with one or more satellites upon certification that
it is operating in compliance with the terms and conditions of its
authorization pursuant to Sec. 25.120(d) of the Commission's rules. 47
CFR 25.120(d).
74. Loral Qualcom, Inc. (L/Q) argues that we should not assess the
full LEO fee on a LEO system licensee until the system is commercially
viable, contending that most LEO systems cannot provide commercial
services with a single operational satellite. Instead, L/Q requests
that we assess only a portion of our regulatory fee on a LEO System
until such time that the system initiates actual commercial service.
According to L/Q, a LEO system with a substantial number of satellites
in its constellation is unlikely to provide actual commercial services
prior to launching at least some critical mass of the constellation. L/
Q argues that the requirement to pay the fee once a single space
station is operating is unfair because some LEO systems will be unable
to offset payment of the fee with commercial revenue. In this
connection, L/Q states that a LEO system may require launch of several
satellites in order to test the reliability of commercial services
before providing these services.
75. In response to L/Q's concern, we note that the timing of the
commercial viability of a particular LEO system is outside our control.
Also, the amount of revenue required for commercial viability will vary
from system to system. Since there is no standard time-frame and, as L/
Q maintains, no set number of operational satellites necessary for LEO
systems to achieve commercial viability, we will not approve L/Q's
proposal for partial payments of the LEO regulatory fee. Requiring
payment of the LEO fee following commencement of operations of a
system's first satellite will assure that we recover our regulatory
costs related to LEO systems from licensees of these systems as early
as possible so that other regulatees are not burdened with these costs
any longer than necessary. Therefore, we will retain our requirement
that licensees of LEO systems pay the LEO regulatory fee upon their
certification of operation of a single satellite pursuant to
Sec. 25.120(d). Licensees of LEO systems may obtain a waiver, reduction
or deferment of the fee upon a showing of financial hardship pursuant
to Sec. 1.1160 of the rules. 47 CFR 1.1166.
8. Broadcast Auxiliary Services
76. NAB, in its comments, suggests that the Commission could
improve its fee collection process by more specifically identifying the
broadcast auxiliary licenses for which fees are payable. We are aware
that certain operators of auxiliary equipment have had difficulty in
determining their liability for auxiliary fees. We have, therefore, in
Attachment H, incorporated additional clarifying language to better
enable licensees of broadcast auxiliary services to determine their fee
liability. We will also include this additional information in
materials distributed to broadcasters and other licensees of auxiliary
equipment.
9. Amateur Vanity Call Signs
77. In late-filed comments, the American Radio Relay League (ARRL)
discusses the Commission's implementation of vanity call signs. ARRL
notes that we have established several ``gates'' for the filing of
vanity call sign applications. The FY 1997 fee for an amateur vanity
call sign would result in certain applicants incurring fees, over the
life of the license, two-thirds higher than other applicants who filed
their applications in ``gates'' currently open before the effective
date of the FY 1997 fees. ARRL asks that we suspend implementation of
the higher FY 1997 fee until after the remaining gates have been opened
and applicants have been afforded an opportunity to file. In response
to ARRL's concerns, we expect our remaining vanity call sign ``gates''
to open before the effective date of our FY 1997 regulatory fee payment
requirement. Thus, there should be no impact on new applicants for
vanity call signs in FY 1997 and no need to delay implementation of the
FY 1997 fee. However, applicants are expected to pay the fee applicable
at the time they file.
10. Interstate Common Carriers
78. SBC, an interstate telephone company, claims that our proposed
interstate revenue-based fees are unfair to local exchange companies
because they have no underlying expenses to deduct from gross revenues.
It appears that SBC misunderstands the purpose of the deductions. Our
regulatory fee rules allow long distance carriers to deduct from gross
interstate revenues payments made to underlying carriers where those
payments would be included in the underlying carrier's revenue base.
For example, suppose that a customer could obtain an interstate service
from either SBC or from a reseller for the same price--one dollar. If
SBC provides the service to the customer, it would pay a regulatory fee
based on the entire dollar. If the reseller provides the service, SBC
would pay a regulatory fee only on the portion of the dollar that it
charged as the wholesale rate to the reseller. The reseller, in turn,
would pay a fee based on the dollar less its payment to SBC. The same
total fee would be paid in both circumstances. Thus the fee is
fundamentally fair and creates no competitive distortions.
11. New Filing Requirements
79. We will be proposing in a Further Notice of Proposed Rulemaking
(FNPRM) a revision to our collection procedures relative to non-profit
entities to require these entities to submit or have on file with us
their current IRS Determination Letters or other documentation of non-
profit status. The Commission has also found that the verification of
CMRS fees is very costly and time consuming due to the need to verify
the number of cellular telephones, PCS units and pagers associated with
individual companies. Therefore, the FNPRM will also propose changes to
this process as well as certain additional changes to improve the
efficiency and accuracy of the fee collection process.
F. Schedule of Regulatory Fees
80. The Commission's Schedule of Regulatory Fees for FY 1997 is
contained in Attachment F of this Report and Order.
G. Effect of Revenue Redistributions on Major Constituencies
81. The chart below illustrates the relative percentages of the
revenue requirements borne by major constituencies since inception of
regulatory fees in FY 1994.
[[Page 37421]]
Revenue Requirement Percentages by Constituencies
----------------------------------------------------------------------------------------------------------------
FY 1994 FY 1995 FY 1996 FY 1997
(actual) (actual) (actual) (proposed)
----------------------------------------------------------------------------------------------------------------
Cable TV Operators (Inc. CARS Licenses)..................... 41.4 24.0 33.4 23.3
Broadcast Licensees......................................... 23.8 13.8 14.6 15.2
Satellite Operators (Inc. Earth Stations)................... 3.3 3.6 4.0 3.9
Common Carriers............................................. 25.0 44.5 40.9 45.8
Wireless Licensees.......................................... 6.5 14.1 7.1 11.8
---------------------------------------------------
Total................................................... 100.0 100.0 100.0 100.0
----------------------------------------------------------------------------------------------------------------
H. Procedures for Payment of Regulatory Fees
1. Installment Payments for Large Fees
82. Generally, we are retaining the procedures that we have
established for the payment of regulatory fees. Section 9(f) requires
that we permit ``payment by installments in the case of fees in large
amounts, and in the case of small amounts, shall require the payment of
the fee in advance for a number of years not to exceed the term of the
license held by the payer.'' See 47 U.S.C. 159(f)(1). Consistent with
Section 9(f), we are again establishing three categories of fee
payments, based upon the category of service for which the fee payment
is due and the amount of the fee to be paid. The fee categories are (1)
``standard'' fees, (2) ``large'' fees, and (3) ``small'' fees.
83. We proposed in the NPRM that regulatees in any category of
service with a liability of $12,000 or more be eligible to make
installment payments and that eligibility for installment payments be
based upon the amount of either a single regulatory fee payment or
combination of fee payments by the same licensee or regulatee. However,
statutory constraints requiring notification to Congress prior to
actual collection of the fees prevents us from allowing installment
payments in FY 1997. The payment dates for each regulatory fee category
will be announced by public notice and published in the Federal
Register following termination of this proceeding. However, regulatees
otherwise eligible to make installment payments may pay their fees on
the last date that fee payments may be submitted, as established in our
public notice.
2. Annual Payments of Standard Fees
84. Standard fees are those regulatory fees that are payable in
full on an annual basis. Payers of standard fees are not required to
make advance payments for their full license term and are not eligible
for installment payments. As in the past, all standard fees will be
payable in full on the date we establish for payment of fees in their
regulatory fee category. The payment dates for each regulatory fee
category will be announced by public notice and published in the
Federal Register following termination of this proceeding.
3. Advance Payment of Small Fees
85. As we have in the past, we are proposing to treat regulatory
fee payments by certain licensees as ``small'' fees subject to advance
payment consistent with the requirements of Section 9(f)(2). Advance
payments will be required from licensees of those services that we
identified would be subject to advance payments in our FY 1994 Report
and Order, and to those additional payers set forth
herein.33 Payers of small fees must submit the entire fee
due for the full term of their licenses when filing their initial,
renewal, or reinstatement application. Regulatees subject to a payment
of small fees shall pay the amount due for the current fiscal year
multiplied by the number of years in the term of their requested
license. In the event that the required fee is adjusted following their
payment of the fee, the payer would not be subject to the payment of a
new fee until filing an application for renewal or reinstatement of the
license. Thus, payment for the full license term would be made based
upon the regulatory fee applicable at the time the application is
filed. The effective date of the FY 1997 small fees will be announced
by public notice and published in the Federal Register following
termination of this proceeding.
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\33\ Applicants for new, renewal and reinstatement licenses in
the following services will be required to pay their regulatory fees
in advance: Land Mobile Services, Microwave services, Marine (Ship)
Service, Marine (Coast) Service, Private Land Mobile (Other)
Services, Aviation (Aircraft) Service, Aviation (Ground) Service,
General Mobile Radio Service (GMRS). In addition, applicants for
Amateur Radio Vanity Call Signs will be required to submit an
advance payment.
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4. Standard Fee Calculations and Payment Dates
86. As noted, the time for payment of standard fees will be
published in the Federal Register. For licensees, permittees and
holders of other authorizations in the Common Carrier, Mass Media
34 and Cable Services, fees should be submitted for any
authorization held as of October 1, 1996. As in the past, this is the
date to be used for establishing liability for payment of these fees
since it is the first day of the federal government's fiscal year.
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\34\ Except AM/FM fees.
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87. In the case of other regulatees whose fees are based upon a
subscriber, unit or circuit count, the number of a regulatees'
subscribers, units or circuits on December 31, 1996, will be used to
calculate the fee payment.35 36 As in the past,
we have selected the last date of the calendar year because many of
these entities file reports with us as of that date. Others calculate
their subscriber numbers as of that date for internal purposes.
Therefore, calculation of the regulatory fee as of that date will
facilitate both an entity's computation of its fee payment and our
verification that the correct fee payment has been submitted.
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\35\ Cable system operators are to compute their subscribers as
follows: Number of single family dwellings + number of individual
households in multiple dwelling unit (apartments, condominiums,
mobile home parks, etc.) paying at the basic subscriber rate + bulk
rate customers + courtesy and free service. Note: Bulk-Rate
Customers = Total annual bulk-rate charge divided by basic annual
subscription rate for individual households. Cable system operators
may base their count on ``a typical day in the last full week'' of
December 1996, rather than on a count as of December 31, 1996.
\36\ For FY 1997, AM/FM fees are assessed on licensees holding
licenses as of December 31, 1996.
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5. Minimum Fee Payment Liability
88. Regulatees whose total fee liability amounts to less than $10,
including all categories of fees for which payment is due by an entity,
are exempted from fee payment in FY 1997.
IV. Ordering Clause
89. Accordingly, it is ordered that the rule changes specified
herein are adopted. It is further ordered that the
[[Page 37422]]
rule changes made herein will become effective September 15, 1997,
which is 90 days from the date of notification to Congress.
V. Authority and Further Information
90. This action is taken pursuant to Sections 4(i), 4(j), 9 and
303(r) of the Communications Act of 1934, as amended, 47 U.S.C. 154 (i)
and (j) and 9 and 303(r).
91. Further information about this proceeding may be obtained by
contacting the Fees Hotline at (202) 418-0192.
List of Subjects in 47 CFR Part 1
Administrative practice and procedure, Communications common
carriers, Radio, Telecommunications, Television.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Rule Changes
Part 1 of Chapter I of Title 47 of the Code of Federal Regulations
is amended as follows:
PART 1--PRACTICE AND PROCEDURE
1. The authority citation for Part 1 is revised to read as follows:
Authority: 15 U.S.C. 79 et seq.; 47 U.S.C. 151, 154(i), 154(j),
155, 225, and 303(r).
2. Section 1.1152 is revised to read as follows:
Sec. 1.1152 Schedule of annual regulatory fees and filing locations
for wireless radio services.
------------------------------------------------------------------------
Exclusive use services (per
license) Fee amount Address
------------------------------------------------------------------------
1. Land Mobile (Above 470 MHz,
Base Station and SMRS)(47 CFR
Part 90):
(a) 800 MHz New, Renewal, $10.00 FCC, 800 MHz, P.O. Box
Reinstatement (FCC 600). 358235, Pittsburgh, PA
15251-5235.
(b) 900 MHz New, Renewal, 10.00 FCC, 900 MHz, P.O. Box
Reinstatement (FCC 600). 358240, Pittsburgh, PA
15251-5240.
(c) 470-512,800,900, 220 MHz, 10.00 FCC, 470-512, P.O. Box
220 MHz Nationwide Renewal 358245, Pittsburgh, PA
(FCC 574R, FCC 405A). 15251-5245
(d) Correspondence Blanket 10.00 FCC, Corres., P.O. Box
Renewal (470-512,800,900,220 358305, Pittsburgh, PA
MHz) (Remittance Advice, 15251-5305.
Correspondence).
(e) 220 MHz New, Renewal, 10.00 FCC, 220 MHz, P.O. Box
Reinstatement (FCC 600). 358360, Pittsburgh, PA
15251-5360.
(f) 470-512 MHz New, Renewal, 10.00 FCC, 470-512, P.O. Box
Reinstatement (FCC 600). 358810, Pittsburgh, PA
15251-5810.
(g) 220 MHz Nationwide New, 10.00 FCC, Nationwide, P.O.
Renewal, Reinstatement (FCC Box 358820, Pittsburgh,
600). PA 15251-5820.
2. Microwave (47 CFR Part 101):
(a) Microwave New, Renewal, 10.00 FCC, Microwave, P.O. Box
Reinstatement (FCC 415). 358250, Pittsburgh, PA
15251-5250.
(b) Microwave Renewal (FCC 10.00 FCC, Microwave, P.O. Box
402R). 358255, Pittsburgh, PA
15251-5255.
(c) Correspondence Blanket 10.00 FCC, Corres., P.O. Box
Renewal (Microwave) 358305, Pittsburgh, PA
(Remittance Advice, 15251-5305.
Correspondence).
3. Shared Use Services:
(a) Land Transportation (LT) 5.00 FCC, Land Trans., P.O.
New, Renewal, Reinstatement Box 358215, Pittsburgh,
(FCC 600). PA 15251-5215.
(b) Business (Bus.) New, 5.00 FCC, Business, P.O. Box
Renewal, Reinstatement (FCC 358220, Pittsburgh, PA
600). 15251-5220.
(c) Other Industrial (OI) 5.00 FCC, Other Indus., P.O.
New, Renewal, Reinstatement Box 358225, Pittsburgh,
(FCC 600). PA 15251-5225.
(d) General Mobile Radio 5.00 FCC, GMRS, P.O. Box
Service (GMRS) New, Renewal, 358230, Pittsburgh, PA
Reinstatement (FCC 574). 15251-5230.
(e) Business, Other 5.00 FCC, Bus.,OI,LT,GMRS,
Industrial, Land P.O. Box 358245,
Transportation, GMRS Renewal Pittsburgh, PA 15251-
(FCC 574R, FCC 405A). 5245.
(f) Ground New, Renewal, 5.00 FCC, Ground, P.O. Box
Reinstatement (FCC 406). 358260, Pittsburgh, PA
15251-5260.
(g) Coast New, Renewal, 5.00 FCC, Coast, P.O. Box
Reinstatement (FCC 503). 358265, Pittsburgh, PA
15251-5265.
(h) Ground Renewal (FCC 452R) 5.00 FCC, Ground, P.O. Box
358270, Pittsburgh, PA
15251-5270.
(i) Coast Renewal (FCC 452R). 5.00 FCC, Coast, P.O. Box
358270, Pittsburgh, PA
15251-5270.
(j) Ship New, Renewal, 5.00 FCC, Ship, P.O. Box
Reinstatement (FCC 506). 358275, Pittsburgh, PA
15251-5275.
(k) Aircraft New, Renewal, 5.00 FCC, Aircraft, P.O. Box
Reinstatement (FCC 404). 358280, Pittsburgh, PA
15251-5280.
(l) Ship Renewal (FCC 405B).. 5.00 FCC, Ship, P.O. Box
358290, Pittsburgh, PA
15251-5290.
(m) Aircraft Renewal (FCC 5.00 FCC, Aircraft, P.O. Box
405B). 358290, Pittsburgh, PA
15251-5290.
(n) Correspondence Blanket 5.00 FCC, Corres., P.O. Box
Renewal (Bus.,OI,LT,GMRS) 358305, Pittsburgh, PA
(Remittance Advice, 15251-5305.
Correspondence).
(o) Correspondence Blanket 5.00 FCC, Corres., P.O. Box
Renewal (Ground) (Remittance 358305, Pittsburgh, PA
Advice, Correspondence). 15251-5305.
(p) Correspondence Blanket 5.00 FCC, Corres., P.O. Box
Renewal (Coast) (Remittance 358305, Pittsburgh, PA
Advice, Correspondence). 15251-5305.
(q) Correspondence Blanket 5.00 FCC, Corres., P.O. Box
Renewal (Aircraft) 358305, Pittsburgh, PA
(Remittance Advice, 15251-5305.
Correspondence).
(r) Correspondence Blanket 5.00 FCC, Corres., P.O. Box
Renewal (Ship) (Remittance 358305, Pittsburgh, PA
Advice, Correspondence). 15251-5305.
4. Amateur Vanity Call Signs..... 5.00 FCC, Amateur Vanity,
P.O. Box 358924,
Pittsburgh, PA 15251-
5924.
5. CMRS Mobile Services (per .24 FCC, Cellular, P.O. Box
unit). 358835, Pittsburgh, PA
15251-5835.
6. CMRS Messaging Services (per .03 FCC, Messaging, P.O. Box
unit). 358835, Pittsburgh, PA
15251-5835.
------------------------------------------------------------------------
3. Sec. 1.1153 is revised to read as follows:
[[Page 37423]]
Sec. 1.1153 Schedule of annual regulatory fees and filing locations
for mass media services.
------------------------------------------------------------------------
Fee amount Address
------------------------------------------------------------------------
I. Radio [AM and FM] (47 CFR Part
73:
1. Group 1................... $2,000 FCC, Radio, P.O. Box
2. Group 2................... 1,800 358835, Pittsburgh, PA,
15251-5835.
3. Group 3................... 1,600 ........................
4. Group 4................... 1,400 ........................
5. Group 5................... 1,200 ........................
6. Group 6................... 1,000 ........................
7. Group 7................... 800 ........................
8. Group 8................... 600 ........................
9. Group 9................... 400 ........................
10. Group 10................. 200 ........................
11. AM Construction Permits.. 195 ........................
12. FM Construction Permits.. 950 ........................
II. TV (47 CFR Part 73) VHF
Commercial:
1. Markets 1 thru 10......... 35,025 FCC, TV Branch, P.O. Box
2. Markets 11 thru 25........ 28,450 358835, Pittsburgh, PA
15251-5835.
3. Markets 26 thru 50........ 18,600 ........................
4. Markets 51 thru 100....... 9,850 ........................
5. Remaining Markets......... 2,725 ........................
6. Construction Permits...... 4,800 ........................
III. UHF Commercial:
1. Markets 1 thru 10......... 16,850 FCC, UHF Commercial,
2. Markets 11 thru 25........ 13,475 P.O. Box 358835,
Pittsburgh, PA 15251-
5835.
3. Markets 26 thru 50........ 8,750
4. Markets 51 thru 100....... 4,725
5. Remaining Markets......... 1,350
6. Construction Permits 2,975
IV. Satellite UHF/VHF Commercial:
1. All Markets............... 950 FCC Satellite TV, P.O.
2. Construction Permits...... 345 Box 358835, Pittsburgh,
PA 15251-5835.
V. Low Power TV, TV/FM 220 FCC, Low Power, P.O. Box
Translator,& TV/FM Booster (47 358835, Pittsburgh, PA
CFR Part 74). 15251-5835.
VI. Broadcast Auxiliary.......... 25 FCC, Auxiliary, P.O. Box
358835, Pittsburgh, PA
15251-5835.
VII. Multipoint Distribution..... 215 FCC, Multipoint, P.O.
Box 358835, Pittsburgh,
PA 15251-5835.
------------------------------------------------------------------------
4. Sec. 1.1154 is revised to read as follows:
Sec. 1.1154 Schedule of annual regulatory charges and filing locations
for common carrier services.
------------------------------------------------------------------------
Fee amount Address
------------------------------------------------------------------------
I. Radio Facilities:
1. Microwave (Domestic $10 FCC, Common Carrier,
Public Fixed). P.O. Box 358680,
Pittsburgh, PA 15251-
5680.
II. Carriers:
1. Interstate Telephone .000116 FCC, Carriers, P.O. Box
Service Providers, (per 358835, Pittsburgh, PA.
dollar contributed to TRS
Fund).
------------------------------------------------------------------------
5. Sec. 1.1155 is revised to read as follows:
Sec. 1.1155 Schedule of regulatory fees and filing locations for cable
television services.
------------------------------------------------------------------------
Fee amount Address
------------------------------------------------------------------------
1. Cable Antenna Relay Service... $65 FCC, Cable, P.O. Box
2. Cable TV System (per .54 358835, Pittsburgh, PA
subscriber). 15251-5835.
------------------------------------------------------------------------
6. Section 1.1156 is revised to read as follows:
Sec. 1.1156 Schedule of regulatory fees and filing locations for
international services.
------------------------------------------------------------------------
Fee amount Address
------------------------------------------------------------------------
I. Radio Facilities:
1. International (HF) $390 FCC, International, P.O.
Broadcast. Box 358835, Pittsburgh,
PA 15251-5835.
2. International Public 310 FCC, International, P.O.
Fixed. Box 358835, Pittsburgh,
PA 15251-5835.
II. Space Stations 97,975 FCC, Space Stations,
(Geosynchronous Orbit). P.O. Box 358835,
Pittsburgh, PA 15251-
5835.
III. Low Earth Orbit Satellite.. 135,675 FCC, Space Stations,
P.O. Box 358835,
Pittsburgh, PA 15251-
5835.
[[Page 37424]]
IV. Earth Stations; Transmit/ 515 FCC, Earth Station, P.O.
Receive and Transmit Only (per Box 358835, Pittsburgh,
authorization or registration). PA 15251-5835.
V. Carriers:
1. International Bearer 5.00 FCC, International, P.O.
Circuits (per active 64KB Box 358835, Pittsburgh,
circuit or equivalent). PA 15251-5835.
------------------------------------------------------------------------
Note: Attachments A through L will not appear in the Code of
Federal Regulations.
Attachment A--Final Regulatory Flexibility Analysis
1. As required by the Regulatory Flexibility Act
(RFA),37 an Initial Regulatory Flexibility Analysis
(IRFA) was incorporated in the Notice of Proposed Rulemaking In the
Matter of Assessment and Collection of Regulatory Fees for Fiscal
Year 1997, 62 FR 10793 (March 10, 1997). The Commission sought
written public comments on the proposals in its FY 1997 regulatory
fees NPRM, including on the IRFA. This present Final Regulatory
Flexibility Analysis (FRFA) conforms to the RFA, as
amended.38
---------------------------------------------------------------------------
\37\ 5 U.S.C. 603.
\38\ See 5 U.S.C. 604. The RFA, see 5 U.S.C. 601 et seq., has
been amended by the Contract with America Advancement Act (CWAAA),
Public Law 104-121, 110 Stat. 847 (1996). Title II of the CWAAA is
``The Small Business Regulatory Enforcement Fairness Act of 1996''
(SBREFA).
---------------------------------------------------------------------------
I. Need for and Objectives of This Report and Order
2. This rulemaking proceeding was initiated in order to collect
regulatory fees in the amount of $152,523,000, the amount that
Congress has required the Commission to recover through regulatory
fees in Fiscal Year 1997. The Commission seeks to collect the
necessary amount through its revised regulatory fees, as contained
in the attached Schedule of Regulatory Fees, in the most efficient
manner possible and without undue burden on the public.
II. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA
3. The American Mobile Telecommunications Association, Inc.
(``AMTA'') filed comments in response to the IRFA seeking
clarification of the definition of small entity Specialized Mobile
Radio (SMR) licensees who are subject to regulatory fee
payments.39 AMTA asserts that the IRFA indicates that the
proposed fees in the NPRM apply only to SMR providers in the 800 MHz
and 900 MHz bands that either hold geographic area licenses or have
obtained extended implementation authorizations.40
---------------------------------------------------------------------------
\39\ See comments filed in MD Docket No. 96-186 dated March 25,
1997.
\40\ IRFA at paragraph 48.
---------------------------------------------------------------------------
4. As AMTA points out, this is incorrect. All SMR providers are
subject to payment of regulatory fees, unless qualified for special
exemption (e.g., Public Safety). Private Mobile Radio Services
(PMRS) licensees are subject to ``small'' fees payable in advance
for the entire license term at the time of application for new,
modification or renewal licenses. Commercial Mobile Radio Services
(CMRS) licensees must pay ``standard'' regulatory fees on an annual
basis. (See paragraph 50 infra.)
III. Description and Estimate of the Number of Small Entities to Which
the Rules Will Apply
5. The RFA generally defines ``small entity'' as having the same
meaning as the terms ``small business,'' ``small organization,'' and
``small governmental jurisdiction.'' 41 In addition, the
term ``small business'' has the same meaning as the term ``small
business concern'' under the Small Business Act.42 A
small business concern is one which: (1) Is independently owned and
operated; (2) is not dominant in its field of operation; and (3)
satisfies any additional criteria established by the Small Business
Administration (SBA).43
---------------------------------------------------------------------------
\41\ 5 U.S.C. 601(6).
\42\ 5 U.S.C. 601(3) (incorporating by reference the definition
of ``small business concern'' in Small Business Act, 15 U.S.C. 632).
Pursuant to 5 U.S.C. 601(3), the statutory definition of a small
business applies ``unless an agency after consultation with the
Office of Advocacy of the Small Business Administration and after
opportunity for public comment, establishes one or more definitions
of such term which are appropriate to the activities of the agency
and publishes such definition(s) in the Federal Register.''
\43\ Small Business Act, 15 U.S.C. 632.
---------------------------------------------------------------------------
6. The RFA also includes nonprofit organizations and small
governmental entities within the scope of regulatory flexibility
analysis.44 The definition of a small governmental entity
is one with a population of fewer than 50,000.45 There
are approximately 85,006 governmental entities in the
nation.46 This number includes such entities as states,
counties, cities, utility districts and school districts. There are
no figures available on what portion of this number have populations
of fewer than 50,000. However, this number includes 38,978 counties,
cities and towns, and of those, 37,566, or 96 percent, have
populations of fewer than 50,000.47 The Census Bureau
estimates that this ratio is approximately accurate for all
governmental entities. Thus, of the approximately 85,006
governmental entities, we estimate that 96 percent, or 81,600, are
small entities that may be affected by our rules.
---------------------------------------------------------------------------
\44\ 5 U.S.C. 601(5).
\45\ Id.
\46\ 1992 Census of Governments, U.S. Bureau of the Census, U.S.
Department of Commerce.
\47\ Id.
---------------------------------------------------------------------------
Cable Services or Systems
7. The SBA has developed a definition of small entities for
cable and other pay television services, which includes all such
companies generating $11 million or less in revenue
annually.48 This definition includes cable systems
operators, closed circuit television services, direct broadcast
satellite services, multipoint distribution systems, satellite
master antenna systems and subscription television services.
According to the Census Bureau, there were 1,788 total cable and
other pay television services and 1,423 had less than $11 million in
revenue.49
---------------------------------------------------------------------------
\48\ 13 CFR 121.201, SIC 4841.
\49\ 1992 Economic Census Industry and Enterprise Receipts Size
Report, Table 2D, SIC 4841 (U.S. Bureau of the Census data under
contract to the Office of Advocacy of the U.S. Small Business
Administration).
---------------------------------------------------------------------------
8. The Commission has developed its own definition of a small
cable system operator for the purposes of rate regulation. Under the
Commission's rules, a ``small cable company'' is one serving fewer
than 400,000 subscribers nationwide.50 Based on our most
recent information, we estimate that there were 1,439 cable
operators that qualified as small cable system operators at the end
of 1995.51 Since then, some of those companies may have
grown to serve over 400,000 subscribers, and others may have been
involved in transactions that caused them to be combined with other
cable operators. Consequently, we estimate that there are fewer than
1,439 small entity cable system operators.
---------------------------------------------------------------------------
\50\ 47 CFR 76.901(e). The Commission developed this definition
based on its determination that a small cable system operator is one
with annual revenues of $100 million or less. Implementation of
Sections of the 1992 Cable Act: Rate Regulation, Sixth Report and
Order and Eleventh Order on Reconsideration, 10 FCC Rcd 7393 (1995),
60 FR 10534 (February 27, 1995).
\51\ Paul Kagan Associates, Inc., Cable TV Investor, February
29, 1996 (based on figures for December 30, 1995).
---------------------------------------------------------------------------
9. The Communications Act also contains a definition of a small
cable system operator, which is ``a cable operator that, directly or
through an affiliate, serves in the aggregate fewer than 1 percent
of all subscribers in the United States and is not affiliated with
any entity or entities whose gross annual revenues in the aggregate
exceed $250,000,000.'' 52 The Commission has determined
that there are 61,700,000 subscribers in the United States.
Therefore, we found that an operator serving fewer than 617,000
subscribers shall be deemed a small operator, if its annual
revenues, when combined with the total annual revenues of all of its
affiliates, do not exceed $250 million in the
aggregate.53 Based on available data, we find that the
number of cable operators serving 617,000 subscribers or less totals
1,450.54 We do not request nor do we collect information
concerning whether cable
[[Page 37425]]
system operators are affiliated with entities whose gross annual
revenues exceed $250,000,000,55 and thus are unable at
this time to estimate with greater precision the number of cable
system operators that would qualify as small cable operators under
the definition in the Communications Act. It should be further noted
that recent industry estimates project that there will be a total of
65,000,000 subscribers, and we have based our fee revenue estimates
on that figure.
---------------------------------------------------------------------------
\52\ 47 U.S.C. 543(m)(2).
\53\ 47 CFR 76.1403(b).
\54\ Paul Kagan Associates, Inc., Cable TV Investor, February
29, 1996 (based on figures for December 30, 1995).
\55\ We do receive such information on a case-by-case basis only
if a cable operator appeals a local franchise authority's finding
that the operator does not qualify as a small cable operator
pursuant to Sec. 76.1403(b) of the Commission's rules. See 47 CFR
76.1403(d).
---------------------------------------------------------------------------
10. Other Pay Services. Other pay television services are also
classified under SIC 4841, which includes cable systems operators,
closed circuit television services, direct broadcast satellite
services (DBS),56 multipoint distribution systems
(MDS),57 satellite master antenna systems (SMATV), and
subscription television services.
---------------------------------------------------------------------------
\56\ Direct Broadcast Services (DBS) are discussed in depth with
the international services infra.
\57\ Multipoint Distribution Services (MDS) are discussed in
depth with the mass media services infra.
---------------------------------------------------------------------------
Common Carrier Services and Related Entities
11. According to the Telecommunications Industry Revenue:
Telecommunications Relay Service Fund Worksheet Data (TRS
Worksheet), there are 2,847 interstate carriers. These carriers
include, inter alia, local exchange carriers, wireline carriers and
service providers, interexchange carriers, competitive access
providers, operator service providers, pay telephone operators,
providers of telephone toll service, providers of telephone exchange
service, and resellers.
12. The SBA has defined a small business for Radiotelephone
Communications (SIC 4812) and Telephone Communications, Except
Radiotelephone (4813), to be small entities when they have fewer
than 1,500 employees.58 We first discuss generally the
total number of small telephone companies falling within both of
those SIC categories. Then, we discuss the number of small
businesses within the two subcategories, and attempt to refine
further those estimates to correspond with the categories of
telephone companies that are commonly used under our rules.
---------------------------------------------------------------------------
\58\ 13 CFR 121.201.
---------------------------------------------------------------------------
13. Because the small incumbent LECs subject to these rules are
either dominant in their field of operations or are not
independently owned and operated, consistent with our prior
practice, they are excluded from the definition of ``small entity''
and ``small business concerns.'' 59 Accordingly, our use
of the terms ``small entities'' and ``small businesses'' does not
encompass small incumbent LECs. Out of an abundance of caution,
however, for regulatory flexibility analysis purposes, we will
consider small incumbent LECs within this analysis and use the term
``small incumbent LECs'' to refer to any incumbent LECs that
arguably might be defined by the SBA as ``small business concerns.''
60
---------------------------------------------------------------------------
\59\ See Implementation of the Local Competition Provisions in
the Telecommunications Act of 1996, First Report and Order, 11 FCC
Rcd 15499 (1996), 61 FR 45476 (August 29, 1996), motion for stay of
the FCC's rules pending judicial review denied, Implementation of
the Local Competition Provisions in the Telecommunications Act of
1996, Order, 11 FCC Rcd 11754 (1996), 61 FR 54099 (October 17,
1996), partial stay granted, Iowa Utilities Board v. FCC, No. 96-
3321, 1996 WL 589204 (8th Cir. 1996) at paragraphs 1328-1330 and
1342.
\60\ Id.
---------------------------------------------------------------------------
14. Total Number of Telephone Companies Affected. The United
States Bureau of the Census (``the Census Bureau'') reports that, at
the end of 1992, there were 3,497 firms engaged in providing
telephone services, as defined therein, for at least one
year.61 This number contains a variety of different
categories of carriers, including local exchange carriers,
interexchange carriers, competitive access providers, cellular
carriers, mobile service carriers, operator service providers, pay
telephone operators, personal communications services providers,
covered specialized mobile radio providers, and resellers. It seems
certain that some of those 3,497 telephone service firms may not
qualify as small entities or small incumbent LECs because they are
not ``independently owned and operated.'' 62 For example,
a PCS provider that is affiliated with an interexchange carrier
having more than 1,500 employees would not meet the definition of a
small business. It seems reasonable to tentatively conclude that
fewer than 3,497 telephone service firms are small entity telephone
service firms or small incumbent local exchange carriers.
---------------------------------------------------------------------------
\61\ United States Department of Commerce, Bureau of the Census,
1992 Census of Transportation, Communications, and Utilities:
Establishment and Firm Size, at Firm Size 1-123 (1995) (1992
Census).
\62\ 15 U.S.C. 632(a)(1).
---------------------------------------------------------------------------
15. Wireline Carriers and Service Providers. The SBA has
developed a definition of small entities for telephone
communications companies except radiotelephone (wireless) companies.
The Census Bureau reports that, there were 2,321 such telephone
companies in operation for at least one year at the end of
1992.63 According to the SBA's definition, a small
business telephone company other than a radiotelephone company is
one employing fewer than 1,500 persons.64 All but 26 of
the 2,321 non-radiotelephone companies listed by the Census Bureau
were reported to have fewer than 1,000 employees. Thus, even if all
26 of those companies had more than 1,500 employees, there would
still be 2,295 non-radiotelephone companies that might qualify as
small entities or small incumbent LECs. We do not have information
on the number of carriers that are not independently owned and
operated, and thus are unable at this time to estimate with greater
precision the number of wireline carriers and service providers that
would qualify as small business concerns under the SBA's definition.
Consequently, we estimate that there are fewer than 2,295 small
telephone communications companies other than radiotelephone
companies.
---------------------------------------------------------------------------
\63\ 1992 Census, supra, at Firm Size 1-123.
\64\ 13 CFR 121.201, SIC Code 4812.
---------------------------------------------------------------------------
16. Local Exchange Carriers. Neither the Commission nor the SBA
has developed a definition for small providers of local exchange
services (LECs). The closest applicable definition under the SBA
rules is for telephone communications companies other than
radiotelephone (wireless) companies.65 The most reliable
source of information regarding the number of LECs nationwide is the
data that we collect annually in connection with the TRS Worksheet.
According to our most recent data, 1,347 companies reported that
they were engaged in the provision of local exchange
services.66 We do not have information on the number of
carriers that are not independently owned and operated, nor what
carriers have more than 1,500 employees, and thus are unable at this
time to estimate with greater precision the number of LECs that
would qualify as small business concerns under SBA's definition.
Consequently, we estimate that there are fewer than 1,347 small
incumbent LECs.
---------------------------------------------------------------------------
\65\ 13 CFR 121.201, SIC Code 4813.
\66\ Federal Communications Commission, CCB, Industry Analysis
Division, Telecommunications Industry Revenue: TRS Fund Worksheet
Data, Tbl. 1 (Average Total Telecommunications Revenue Reported by
Class of Carrier) (December 1996) (TRS Worksheet).
---------------------------------------------------------------------------
17. Interexchange Carriers. Neither the Commission nor the SBA
has developed a definition of small entities specifically applicable
to providers of interexchange services (IXCs). The closest
applicable definition under the SBA rules is for telephone
communications companies except radiotelephone (wireless)
companies.67 The most reliable source of information
regarding the number of IXCs nationwide is the data that we collect
annually in connection with the TRS Worksheet. According to our most
recent data, 130 companies reported that they were engaged in the
provision of interexchange services.68 We do not have
information on the number of carriers that are not independently
owned and operated, nor have more than 1,500 employees, and thus we
are unable at this time to estimate with greater precision the
number of IXCs that would qualify as small business concerns under
the SBA's definition. Consequently, we estimate that there are fewer
than 130 small entity IXCs.
---------------------------------------------------------------------------
\67\ 13 CFR 121.201, SIC 4813.
\68\ TRS Worksheet.
---------------------------------------------------------------------------
18. Competitive Access Providers. Neither the Commission nor the
SBA has developed a definition of small entities specifically
applicable to providers of competitive access services (CAPs). The
closest applicable definition under the SBA rules is for telephone
communications companies except radiotelephone (wireless)
companies.69 The most reliable source of information
regarding the number of CAPs nationwide is the data that we collect
annually in connection with the TRS Worksheet. According to our most
recent data, 57 companies reported that they were engaged in the
provision of competitive access services.70 We do not
have information on the number of carriers that are not
independently owned and operated,
[[Page 37426]]
nor have more than 1,500 employees, and thus are unable at this time
to estimate with greater precision the number of CAPs that would
qualify as small business concerns under the SBA's definition.
Consequently, we estimate that there are fewer than 57 small CAPs.
---------------------------------------------------------------------------
\69\ 13 CFR 121.201, SIC 4813.
\70\ TRS Worksheet.
---------------------------------------------------------------------------
19. Operator Service Providers. Neither the Commission nor the
SBA has developed a definition of small entities specifically
applicable to providers of operator services. The closest applicable
definition under the SBA rules is for telephone communications
companies except radiotelephone (wireless) companies. 71
The most reliable source of information regarding the number of
operator service providers nationwide is the data that we collect
annually in connection with the TRS Worksheet. According to our most
recent data, 25 companies reported that they were engaged in the
provision of operator services.72 We do not have
information on the number of carriers that are not independently
owned and operated, nor have more than 1,500 employees, and thus are
unable at this time to estimate with greater precision the number of
operator service providers that would qualify as small business
concerns under the SBA's definition. Consequently, we estimate that
there are fewer than 25 small operator service providers.
---------------------------------------------------------------------------
\71\ 13 CFR 121.201, SIC 4813.
\72\ Id.
---------------------------------------------------------------------------
20. Pay Telephone Operators. Neither the Commission nor the SBA
has developed a definition of small entities specifically applicable
to pay telephone operators. The closest applicable definition under
SBA rules is for telephone communications companies except
radiotelephone (wireless) companies.73 The most reliable
source of information regarding the number of pay telephone
operators nationwide is the data that we collect annually in
connection with the TRS Worksheet. According to our most recent
data, 271 companies reported that they were engaged in the provision
of pay telephone services.74 We do not have information
on the number of carriers that are not independently owned and
operated, nor have more than 1,500 employees, and thus are unable at
this time to estimate with greater precision the number of pay
telephone operators that would qualify as small business concerns
under SBA's definition. Consequently, we estimate that there are
fewer than 271 small pay telephone operators.
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\73\ 13 CFR 121.201, SIC 4813.
\74\ TRS Worksheet.
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21. Resellers (including debit card providers). Neither the
Commission nor the SBA has developed a definition of small entities
specifically applicable to resellers. The closest applicable SBA
definition for a reseller is a telephone communications company
except radiotelephone (wireless) companies.75 However,
the most reliable source of information regarding the number of
resellers nationwide is the data that the Commission collects
annually in connection with the TRS Worksheet. According to our most
recent data, 260 companies reported that they were engaged in the
resale of telephone service.76 We do not have information
on the number of carriers that are not independently owned and
operated, nor have more than 1,500 employees, and thus we are unable
at this time to estimate with greater precision the number of
resellers that would qualify as small entities or small incumbent
LEC concerns under the SBA's definition. Consequently, we estimate
that there are fewer than 260 small entity resellers.
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\75\ 13 CFR 121.201, SIC 4813.
\76\ TRS Worksheet.
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22. 800 Subscribers.77 Neither the Commission nor the
SBA has developed a definition of small entities specifically
applicable to 800 subscribers. The most reliable source of
information regarding the number of 800 subscribers is data we
collect on the number of 800 numbers in use.78 According
to our most recent data, at the end of 1995, the number of 800
numbers in use was 6,987,063. We do not have information on the
number of carriers not independently owned and operated, nor have
more than 1,500 employees, and thus are unable at this time to
estimate with greater precision the number of 800 subscribers that
would qualify as small business concerns under the SBA's definition.
Consequently, we estimate that there are fewer than 6,987,063 small
entity 800 subscribers.
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\77\ We include all toll-free number subscribers in this
category, including 888 numbers.
\78\ Federal Communications Commission, CCB, Industry Analysis
Division, FCC Releases, Study on Telephone Trends, Tbl. 20 (May 16,
1996).
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International Services
23. The Commission has not developed a definition of small
entities applicable to licensees in the international services.
Therefore, the applicable definition of small entity is the
definition under the SBA rules applicable to Communications
Services, Not Elsewhere Classified (NEC). This definition provides
that a small entity is expressed as one with $11.0 million or less
in annual receipts.79 According to the Census Bureau,
there were a total of 848 communications services, NEC in operation
in 1992, and a total of 775 had annual receipts of less than $9,999
million.80 The Census report does not provide more
precise data.
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\79\ 13 CFR 120.121, SIC Code 4899.
\80\ 1992 Economic Census Industry and Enterprise Receipts Size
Report, Table 2D, SIC 4899 (U.S. Bureau of the Census data under
contract to the Office of Advocacy of the U.S. Small Business
Administration).
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24. International Broadcast Stations. Commission records show
that there are 20 international broadcast station licensees. We do
not request nor collect annual revenue information, and thus are
unable to estimate the number of international broadcast licensees
that would constitute a small business under the SBA definition.
However, the Commission estimates that only six international
broadcast stations are subject to regulatory fee payments.
25. International Public Fixed Radio (Public and Control
Stations). There are 15 licensees in this service. We do not request
nor collect annual revenue information, and thus are unable to
estimate the number of international broadcast licensees that would
constitute a small business under the SBA definition.
26. Fixed Satellite Transmit/Receive Earth Stations. There are
approximately 4200 earth station authorizations, a portion of which
are Fixed Satellite Transmit/Receive Earth Stations. We do not
request nor collect annual revenue information, and thus are unable
to estimate the number of the earth stations that would constitute a
small business under the SBA definition.
27. Fixed Satellite Small Transmit/Receive Earth Stations. There
are 4200 earth station authorizations, a portion of which are Fixed
Satellite Small Transmit/Receive Earth Stations. We do not request
nor collect annual revenue information, and thus are unable to
estimate the number of fixed satellite transmit/receive earth
stations may constitute a small business under the SBA definition.
28. Fixed Satellite Very Small Aperture Terminal (VSAT) Systems.
These stations operate on a primary basis, and frequency
coordination with terrestrial microwave systems is not required.
Thus, a single ``blanket'' application may be filed for a specified
number of small antennas and one or more hub stations. The
Commission has processed 377 applications. We do not request nor
collect annual revenue information, and thus are unable to estimate
of the number of VSAT systems that would constitute a small business
under the SBA definition.
29. Mobile Satellite Earth Stations. There are two licensees. We
do not request nor collect annual revenue information, and thus are
unable to estimate of the number of mobile satellite earth stations
that would constitute a small business under the SBA definition.
30. Radio Determination Satellite Earth Stations. There are four
licensees. We do not request nor collect annual revenue information,
and thus are unable to estimate of the number of radio determination
satellite earth stations that would constitute a small business
under the SBA definition.
31. Space Stations (Geostationary). Commission records reveal
that there are 37 space station licensees. We do not request nor
collect annual revenue information, and thus are unable to estimate
of the number of geostationary space stations that would constitute
a small business under the SBA definition.
32. Space Stations (Non-Geostationary). There are six Non-
Geostationary Space Station licensees, of which only one system is
operational. We do not request nor collect annual revenue
information, and thus are unable to estimate of the number of non-
geostationary space stations that would constitute a small business
under the SBA definition.
33. Direct Broadcast Satellites. Because DBS provides
subscription services, DBS falls within the SBA definition of Cable
and Other Pay Television Services (SIC 4841). This definition
provides that a small entity is expressed as one with $11.0 million
or less in annual receipts.81 As of December 1996,
[[Page 37427]]
there were eight DBS licensees. However, the Commission does not
collect annual revenue data for DBS and, therefore, is unable to
ascertain the number of small DBS licensees that could be impacted
by these proposed rules. Although DBS service requires a great
investment of capital for operation, we acknowledge that there are
several new entrants in this field that may not yet have generated
$11 million in annual receipts, and therefore may be categorized as
a small business, if independently owned and operated.
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\81\ 13 CFR 121.201, SIC 4841.
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Mass Media Services
34. Commercial Radio and Television Services. The proposed rules
and policies will apply to television broadcasting licensees and
radio broadcasting licensees.82 The SBA defines a
television broadcasting station that has $10.5 million or less in
annual receipts as a small business.83 Television
broadcasting stations consist of establishments primarily engaged in
broadcasting visual programs by television to the public, except
cable and other pay television services.84 Included in
this industry are commercial, religious, educational, and other
television stations.85 Also included are establishments
primarily engaged in television broadcasting and which produce taped
television program materials.86 Separate establishments
primarily engaged in producing taped television program materials
are classified under another SIC number.87 There were
1,509 television stations operating in the nation in
1992.88 That number has remained fairly constant as
indicated by the approximately 1,550 operating television
broadcasting stations in the nation as of August, 1996.89
For 1992,90 the number of television stations that
produced less than $10.0 million in revenue was 1,155
establishments.91 Only commercial stations are subject to
regulatory fees.
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\82\ We tentatively conclude that the SBA's definition of
``small business'' greatly overstates the number of radio and
television broadcast stations that are small businesses and is not
suitable for purposes of determining the impact of the proposals on
small television and radio stations. However, for purposes of this
Policy Statement, we utilize the SBA's definition in determining the
number of small businesses to which the proposed rules would apply,
but we reserve the right to adopt a more suitable definition of
``small business'' as applied to radio and television broadcast
stations or other entities subject to this Policy Statement and to
consider further the issue of the number of small entities that are
radio and television broadcasters or other small media entities in
the future. See Report and Order in MM Docket No. 93-48 (Children's
Television Programming), 11 FCC Rcd 10660, 10737-38 (1996), 61 FR
43981 (August 27, 1996), citing 5 U.S.C. 601(3). We have pending
proceedings seeking comment on the definition of and data relating
to small businesses. In our Notice of Inquiry in GN Docket No. 96-
113 (Section 257 Proceeding to Identify and Eliminate Market Entry
Barriers for Small Businesses), FCC 96-216, released May 21, 1996,
we requested commenters to provide profile data about small
telecommunications businesses in particular services, including
television, and the market entry barriers they encounter, and we
also sought comment as to how to define small businesses for
purposes of implementing Section 257 of the Telecommunications Act
of 1996, which requires us to identify market entry barriers and to
prescribe regulations to eliminate those barriers. Additionally, in
our Order and Notice of Proposed Rule Making in MM Docket No. 96-16
(In the Matter of Streamlining Broadcast EEO Rule and Policies,
Vacating the EEO Forfeiture Policy Statement and Amending Section
1.80 of the Commission's Rules to Include EEO Forfeiture
Guidelines), 11 FCC Rcd 5154 (1996), 61 FR 9964 (March 12, 1996), we
invited comment as to whether relief should be afforded to stations:
(1) Based on small staff and what size staff would be considered
sufficient for relief, e.g., 10 or fewer full-time employees; (2)
based on operation in a small market; or (3) based on operation in a
market with a small minority work force.
\83\ 13 CFR 121.201, SIC 4833.
\84\ Economics and Statistics Administration, Bureau of Census,
U.S. Department of Commerce, 1992 Census of Transportation,
Communications and Utilities, Establishment and Firm Size, Series
UC92-S-1, Appendix A-9 (1995).
\85\ Id. See Executive Office of the President, Office of
Management and Budget, Standard Industrial Classification Manual
(1987), at 283, which describes ``Television Broadcasting Stations''
(SIC Code 4833) as: Establishments primarily engaged in broadcasting
visual programs by television to the public, except cable and other
pay television services. Included in this industry are commercial,
religious, educational and other television stations. Also included
here are establishments primarily engaged in television broadcasting
and which produce taped television program materials.
\86\ Economics and Statisti
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